Depending on the type of business which you are running, then you might be starting to wonder if you need to employee any staff, or if you will be ok “going it alone”.
If you are in the consultancy industry for example, and you are able to do your work remotely, then you might be more than capable of carrying out the required level of work without any assistance. You might need someone to make you a cuppa every now and then, but probably not worth paying someone full time for this role!
If you are in the construction business on the other hand, then you might not be able to run the back office and be on site at the same time, and so you might need to hire some admin assistance, or a contractor (depending on where your expertise lies)
Working in the construction industry means that there are different rules etc surrounding employments, and it is likely that you will look to take on a subcontractor rather than an employee – we'll cover this soon on the blog – today we're going to focus on employed staff
Can I just give someone money?
In short, no! As an employer, you are responsible for deducting any tax and national insurance (PAYE) from your employee's wages as and when it is due.
Every time you make a payment to someone, you have to show that you have considered this, and calculated the correct amount to deduct from their salary. The net amount needs to be paid to the staff member, and the tax and NIC needs to be paid to HMRC
The simplest way to do this is to record the amounts using payroll software or HMRC's online tool.
You will then be able to give your employees the payslips and P60 which they will need for their own personal records
No deductions are needed - do I still need a payroll scheme?
Not necessarily… you will only need a payroll scheme if one of the following applies:
- You are paying someone £116 or more a week
- Your staff get expenses and/or benefits
- They have another job or pension income
However, you still need to keep payroll records, and you might still wish to have a payroll scheme in case your employee requests payslips/P60.
What about RTI?
If you have a payroll scheme, then you will need to submit Real Time Information to HMRC before/on every payday – most payroll software providers have this function built in, so it should just be a case of pressing an extra few buttons!
Please note that if it's submitted after the payday then the RTI is deemed to be late, and HMRC now issue late filing penalties.
So, What's the next step?
If you've appointed us as your agents then we will be able to guide you through the following, so no need to worry!
If not, then you can register as an employer via this online link
You will then receive 2 codes in the post from HMRC – these will be send to the correspondence address which you specify when you set the scheme up online, which doesn't need to be the same as your business address.
The codes which you will receive are:
- an Employers PAYE Reference
- an Accounts Office Reference
Keep both of these safe, as they will be needed for different things, such as making payments to HMRC.
Great, I have a scheme set up…
Now you can pay people! Well, first you need to work out how much you're going to pay them, how often you are going to pay them and how much tax and NIC to deduct from their gross wages.
If you employ someone aged 25 or over then you have to pay them the National Living Wage (NLW) – this is £8.21 per hour from April 2019
If you employ someone who is between school leaving age and 24, then it's the National Minimum Wage (NMW) which applies
Full details of minimum hourly rates can be found here
You can choose to pay weekly, monthly or even 4-weekly, but just remember that RTI submissions will need to be done before/on every payday (so that's 52 submissions a year if you pay someone weekly!)
In terms of calculating the PAYE due – there are lots of programmes out there which you could use. Some will be standalone programmes, but some online accounting programmes such as Xero have a payroll function within them (although this may be at an extra cost.)
You could also choose to use the HMRC software, which is free.
The choice is yours!
Payroll can be quite a complex area, but hopefully the above information is enough to get you started. We will look to cover other aspects such as Auto Enrolment in future blog posts.
As ever, if you have any queries then please get in touch!