If you employ staff in the UK or want to pay yourself a salary you will need to know how to set up and process your payroll. We have outlined the steps you need to set up and run your first months payroll:
Setting up a PAYE scheme:
The first thing you need to do if you want to start processing pay for your employees, is set up a PAYE scheme with the HMRC:
- There are two ways to register for a PAYE scheme:
- You can register online with the HMRC (https://www.gov.uk/register-employer)
- You call them on the employer’s helpline (0300 200 3200)
The application usually takes around 10 working days and once completed the HMRC will issue you with the companies PAYE reference and Accounts office reference. You will need these references when you make submissions to the Revenue each month. Once you have the scheme references you can set up your payroll and calculate payments to employees.
Processing payroll:
Once you have the PAYE scheme in place the next step is to set up and process the payroll each period. Calculating employees pay using payroll software usually means that the system will work out how much Tax, NI and deductions need to be processed and will ensure the final net payment for each employee is correct. There can be lots of variances to payroll each month that you might need to consider, such as:
- Salary changes
- Bonuses, additional payments and benefits
- Calculating pay for time off (e.g. sickness, holidays, maternity leave and other statutory payment)
- Attachment of earnings orders
- Managing auto enrolment pension contributions
Submitting returns to the HMRC:
When you have completed your monthly payroll and you have checked the employee’s salary calculations you must submit this information to the HMRC using real-time reporting. This is known as your Full payment submission or FPS and must be made on or before the employees’ payday to avoid penalties for late reporting.
Finally, if you have any statutory payments on the payroll, you will also need to submit a second return to the HMRC known as the Employer payment summary (EPS). This return will let the HMRC know any information that will affect the amount of PAYE due. Your PAYE payment to the HMRC is always due by the 22nd of the following month.
If you choose to outsource your payroll, we can offer a fully managed service that covers setting up your PAYE scheme and managing employee pay, deductions and reporting to the HMRC.
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