IntroductionPayroll is a business-critical operation for every organisation - people must be paid accurately and on time. It is therefore essential to train staff properly, and implement procedures and disaster recovery plans to ensure payroll system continuity.
This guide explains the process of choosing a payroll system and the steps needed to prepare for your new employee's payday. Choosing a payroll system
Operating the payroll manually
You may find it practical to organise the payroll yourself, particularly if you're starting with a single employee.
What you need
Everything you need to run your payroll manually is in the New Employer's Starter Pack including:
·details of PAYE and National Insurance (NI) rates, and help books explaining how to use them
·tables to simplify the process of working out PAYE and NI deductions
·form P11 - the deductions working sheet - which you can use to record details of employees and deductions
You don't have to use the P11 to record deductions - you can create your own form if you prefer. Whatever records you keep, however, must include the details shown on the P11.
Choosing a payroll system
Using payroll software
A computerised payroll will almost certainly be more convenient and less time-consuming to operate than carrying out manual calculations, particularly if you're going to employ a number of people.
What will the payroll software do?
You'll have to record the employee's details initially, using information from the form P45 or form P46. However, once you've done this, the software will:
·calculate income tax, National Insurance contributions (NICs) and student loan deductions every payday
·calculate the NICs you have to pay as an employer
·produce pay statements for your employees
·keep records of payments and deductions
The software will also produce the figures you'll need at the end of the tax year, and help you deal with other payroll-related events, for example if an employee leaves.
Your software provider will send updates as and when necessary - for example, if a tax rate changes following the Budget. Make sure you install these updates so that all calculations are carried out correctly.
Choosing your software
If you buy a payroll software package, make sure that it meets the HM Revenue & Customs (HMRC) Payroll Standard - look out for the Payroll Standard logo. This means that the software has been officially tested and approved for payroll purposes.
