Running Payroll and PAYE

Any business type can hire employees even Sole Traders, but employing might come with a lot of administration that you might not be prepared to do!

PAYROLL AND PAYE

As an employer you have to run payroll even if you are exempt of running PAYE (Pay As You Earn) which means none of your employees is paid £112 or more a week, gets expenses and benefits, has another job or gets a pension.

Payroll records to keep:

  • what you pay your employees and the deductions you make
  • reports and payments you make to HM Revenue and Customs (HMRC)
  • employee leave and sickness absences
  • tax code notices
  • taxable expenses or benefits
  • Payroll Giving Scheme documents, including the agency contract and employee authorisation forms

REGISTRATION

You have to register before the first payday as an employer with HMRC even if you are a Director and employing nobody else just yourself or if you using subcontractors for construction work.

EMPLOYING PEOPLE

It is your responsibility as employer:

  • To pay your employees at least the National Minimum Wage
  • Whether they have the legal right to work for you
  • Apply DBS check if it is required
  • Get Employers’ liability insurance
  • Give your employees written statement of employment (employing for more than 1 month)
  • Check if you need to pay them through PAYE
  • Get employee information (P45/HMRC Starter Checklist – old P46)
  • Get Student Loan information, Court order information, any entitlement you have been provided a certificate for by the employee.
  • Register the employee with HMRC (FPS)

RUNNING PAYROLL and PAYE

  • Record employees’ salaries, wages, statutory payments, expenses, benefits, tips and other payments (bonuses, commissions, holiday payment etc.)
  • Calculate deductions (tax, NI, student loan, pension contributions, Payroll Giving, child maintenance etc.)
  • Produce payslips for every employee
  • Report to HMRC by sending Full Payment Submission for deductions and/or Employer Payment Summary for reductions in special circumstances
  • Pay HMRC by the 19th by post, by 22nd electronically (check the official number of days for each payment method if you unsure)
  • Report employee changes, payday frequency changes if you pay less frequent.

ANNUAL RESPONSIBILITIES

What you need to do When
Send your final payroll report of the year On or before your employees’ payday
Update employee payroll records From 6 April
Update payroll software From 6 April
Give your employees a P60 By 31 May
Report employee expenses and benefits By 6 July

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