A Quick Guide To Small Business Payroll

Having a small business now is very common. Since the pandemic, things have changed for us all. Many businesses closed down, and unemployment rates soared. Thus, many people turned to the option of starting up their own businesses. But, when a business is successful, eventually they will need to start employing employees to help out with the smooth running of the business. This prevents you from getting burned out. But, what does this mean for you? Well, this means that you are now an employer, and you need to start considering small business payroll for your new employees.

Payroll is legal and essential to successful business management, there are many ways you can do this, you can consider outsourced payroll for accountants, you can look into doing it yourself, although this is time-consuming, and so on. Let’s look over some of the options you have.

The Meaning Of Payroll For Small Businesses

We will keep this simple. At the most basic level, payroll will give with one hand, and it takes away with the other.

You have got to pay your employees the correct amount at the correct time, each and every time. It must be in compliance with their contract of employment and in accordance with government law.

You should also be making the correct and accurate deductions from their pay for things such as their tax, national insurance, and their pension.

There are loads of rules for payroll, and you will need to comply with the requirements in place set by the government, and there are a lot of them you need to consider.

Payroll Compliance

So, what do you need to be doing to comply with government rules and regulations?

Well, you need to be making the correct and accurate deductions, providing your employee with a detailed payslip that will show what you have done on their payroll. You also need to file and pay taxes on time.

You will also need to pay in other accurate deductions, this can include pensions to the correct place.

And do not forget to hold onto those records of their payroll for 3 years, at least.

For this, we will assume you know how to calculate the pay of your employees. But, just in case, we will give you a walk-through on making those accurate deductions.

What Are The Deductions From Payroll?

The deductions from your employee’s paycheck is any money taken from their earnings before paying them, this means things such as pension scheme contributions, income tax, benefits tax, and also child maintenance, or national insurance.

Your employees might have also arranged for some deductions to come directly as well, this could be likely if they are paying back a student loan, making charitable donations, and so on.

You Need To Report To HMRC

Hiring employees makes you an employer, and you now need to collect taxes from your employees for the tax office. These taxes will need to be handed over when they are scheduled to be, and reports need to be filed to the tax office on a regular basis These reports will show them that you are paying and taxing your employees properly.

When payday hits you will need to send HMRC an FSP report using payroll software. This will show the details of payments that have been made to employees and the deductions that have been made.

You will also need to report the expenses from the employee(s) and what benefits there are via your payroll system, this should be done on its own at the end of each financial year in April.

What Are Your Options?

The fewer the employees you have the easier it will be, the more you have, the more complicated it will get for you, especially if you have more employees on salaries and hourly wages.

If you have some contractors, commission staff, overtime, expenses, allowances, leave, and sick pay your payroll can get super complicated.

It is up to you how you choose to handle it, however, there are 4 options that we recommend, in ascending order of assistance. Starting with the most simple, and best for very small businesses, and finishing with the most pricey but also best for a large small business.

• You could use spreadsheets, or handwrite these. This is ideal for businesses with only a few employees.
• You can use DIY software or apps that can calculate and pay deductions and even do tax forms.
• Payroll providers, outsourcing your finances to an expert, some will do everything, others will only help.
• Finally, you can use accountants or bookkeepers who will do the whole thing for you.