How to Manage Payroll in UK?
United Kingdom is known for its easy business policy; also the legal process involved in setting up a new business is relatively simpler as compared to its counterparts; however setting up a business in UK does involve several steps and one need to be clear and meticulous in order to be on the right side of the law. Not to mention that Brexit has created an air of uncertainty around the economic situation of the country, however UK still remains a favorite destination and a powerhouse for various global companies.
UK has its unique employment guidelines according to which if anyone is interested in starting his or her own company in the country, then it is important, rather mandatory for the person to follow those guidelines. For a business operation to start in UK, a company has to first decide its official name, a valid and registered office address, liability structure, nature of the company i.e. whether it is a private limited company or a public one, statement of capital, list of its managers, directors and shareholders etc. Normally, a company can be registered in the United Kingdom within 24 hours. There is no second doubt to the fact that the United Kingdom is nothing but a global financial hub and the government agency which governs and formulates all rules and regulations and all aspects of registering as an employer and setting up payroll operations is known as Her Majesty’s Revenue and Customs (HMRC).
As per the guidelines of HMRC, all companies registered in the United Kingdom have to register for PAYE i.e. Pay As You Earn which means that as per the PAYE scheme
, income tax and national insurance (NI) will be deducted from your employee’s salary and will be paid to the HMRC and thus PAYE is nothing, but a system established by the HMRC in order to collect Income Tax and National Insurance from the established and registered employment. In order to follow the PAYE guidelines, you as an employer have option to operate PAYE either by:
- Managing payroll by yourself using a payroll software, or
- Outsource a payroll provider to do it for you
is on top of every business. Running an effective payroll basically involves calculation of salary of your employees and deducting applicable tax from the same and reporting that information to the HRMC in real time in compliance with the tax guidelines and regulations. In theory payroll sounds simple and easy task, however it should not be taken lightly in any way because an incorrect report could be very expensive and this is the reason why small business owners and new start-ups are more careful and mindful while dealing with the payroll management.
Payroll, as described above, is a key area of the business and in order to have an effective payroll management, it is important to understand the process and the very step in this direction is to know if you need to run a payroll or not? Needing a payroll depends on factors such as if you are a sole trader or partnerships and if that is the case then you don’t need to run the payroll for yourself but for your employees.
Payroll management is one of major concerns of small business owners and newly established start-ups. There are two ways to do the payroll management i.e. through payroll software or by outsourcing a payroll provider who can do the payroll management for you.
Outsourcing to the Payroll Provider
While many of the employers opt for doing the payroll management through payroll software, majority of them go for outsourcing a payroll provider who does the payroll management for them and get paid in return. It is an effective way to deal with the payroll management if you have a large business and don’t want to spend your time and resources on a task as tedious as payroll management is. Also, the fact that your payroll is managed by a specialist gives you peace of mind and is a pretty comforting thought. However, what needs to keep in mind here is the cost involved in outsourcing the payroll provider and in order to save yourself from going over-budget, the cost involved in outsourcing a payroll provider should be balanced against the financial costs and the risk involved with communication errors, which is the case with complex payroll.
When you hire or outsource a payroll provider, you need to have a clear communication with him on your expectations and deliverables and who is responsible for what. For instance: You as an employer is responsible for collecting all records of your employees and handover the same to your payroll service provider, who in turn will run the payroll for you. If you expect your payroll service provider to collect and keep the employee records and details, then apart from inviting a major disappointment for yourself, you will also jeopardize your business relations with the service provider. In some cases, service providers offer more support, however it is better to be clear with him well in advance in order to have a better support and an effective payroll management.
In-House Payroll Management
Another way to manage the payroll is to manage it in-house by installing a payroll software. However, before you start doing it by yourself, you first need to complete certain tasks to set up payroll and pay your employees, including registering yourself as an employer with the HMRC and update them about your employees such as no of employees, their salaries etc. As per the guidelines of HMRC, you are exempted from online reporting of payroll if you fall in one of the below mentioned criteria:
- If you cannot use the computer based on religious grounds.
- If you are getting support services or care either for yourself or for a member of your family.
- If you are not able to send the reports electronically because you are disabled, elder or you cannot access the internet.
Basic Steps to run Payroll yourself by using a Payroll Software
Basic steps involved in running the payroll yourself by using a payroll software are as below:
- First and foremost step is to register as an employer with the HMRC and get your logging details for PAYE Online.
- Second step is most important step. In order to have and run an effective payroll in-house either by yourself or by a designated individual or a team, it is very important to choose right software for the same. The payroll software should be able to record employee’s details, calculate their salary and deductions such as Income Tax and National Insurance and submit the report to the HMRC.
- Third step involves collecting and keeping the records of the employees.
- Next step is to tell and update the HMRC about your employees.
- The payroll software should be able to record the salary of the employees, make necessary deductions and send the report to the HMRC on or before the first payday.
- The last and another important step is to pay HMRC the tax and National Insurance.
Why Choose Nomisma Payroll Software?
If you are not running the payroll software by yourself and have appointed either an individual or a team, then the person needs to have a thorough knowledge of the workings of the PAYE tax system and the returns that are to be sent to the HMRC. Rules concerning taxes change more frequently than season, it is important to keep your payroll software up-to-date and thus it is important to choose the payroll software wisely in order to have an effective payroll management.
A basic payroll software will be restricted to one computer system, which needs be kept secure and backed up all the time so that there is no chaos in case of any emergency, whereas an online payroll system stores the data remotely and can be accessed from any computer by using your logging details. Also, the selected payroll software needs to be compatible with your accounting system. Thanks to innovations in the world of technology, there is no dearth of payroll software in the market, however there are few of them which are quite hit amongst its users.
Nomisma Payroll Software is one such example, especially for the small business owners. As mentioned above, payroll management is a subject of concern for small business owners because of the cost involved with an incorrect report to the HMRC. Nomisma Payroll Software helps them to record and track employees working hours, attendance and leaves taken and thus helps in having an effective payroll management. It has all the features which effective payroll software should have, namely:
- It calculates mandatory or voluntary payments.
- It has auto payroll feature i.e. it simplifies fixed payments.
- It eliminates the need to store the data manually because the all run payroll gets automatically posted to the bookkeeping module.
- It has a dashboard where you can get a quick glance of important payroll tasks.
- It also allows you to download Pay slips/P45/P60.
It is a fully HMRC compliant payroll software
and submits the records to the HMRC well before the deadline.
Try Nomisma Payroll Software
In order to decide if Nomisma Payroll Software is the right one for your business or not, you can try its 14 day trial package which is free of cost. With the help of its trial package, you can have a detailed overview of the software including features such as tracking of employees working hours, leave management, processing of their salaries, generating reports and submitting them to the HMRC etc.
Irrespective of how you manage your payroll, its effective management is very important because mistakes can be pretty expensive and thus it is important to choose a solution based on your business because while for one kind of business, outsourcing a payroll provider might work whereas for another, an online system works better. Try Nomisma