Payroll for the small business can be one of the biggest challenges. Most business owners don’t have experience dealing with this tricky aspect of accounting.

We’ve had a few queries recently asking us for tips on payroll for the small business. We’ll start by saying this is an area where we always recommend getting professional help.

Even if you decide to do your own bookkeeping, accounting and tax returns, we’d advise outsourcing payroll. For a small fee, a professional accountant will take the job off your hands.

You can’t afford to make mistakes with payroll. If you mess up a salary payment, you will have an angry employee in your office on Monday morning. And HMRC take a very dim view of late filing or missed PAYE payments.

However, if you decide to do your own payroll, this article is for you. We’ll recommend software and give you our top tips.

Payroll Software

The first thing to do is choose some software to make the payroll process more efficient. There are a number of platforms available:

  • Xero payroll
  • QuickBooks payroll
  • Sage cloud payroll
  • BrightPay
  • MoneySoft
  • Payroo

Although we recommend Xero for most of our accounting clients, we actually recommend Payroo for payroll. it has a number of features that make it a great payroll option for a small business:

  • At the end of each pay run, the HMRC returns are done automatically (including FPS, EPS, NVR & EYU)
  • It combines payroll and Auto Enrolment into one process
  • It’s cloud-based so you can access it anywhere and it’s always up to date
  • They have a mobile app
  • It can handle: salary sacrifice, pensions, training, health benefits etc
  • Employees can log in and check the accounts and payments

Payroll Basics

Staying on top of payroll comes down to three things:

  • Making the correct payments to your employees
  • Ensuring that payments to HMRC are correct and on time
  • Sending the necessary reports to HMRC at month end

Payment to staff starts with salary. From there, add on any bonuses or commission. Then make the necessary deductions. These will usually comprise:

  • National Insurance – Typically assessed at 12%, although this usually has to be paid only once an earnings limit is exceeded.
  • PAYE – Income tax. The tax rate depends on the salary. It is deducted from the paycheck rather than being paid at the end of the tax year (as for companies or the self-employed).
  • Pension Contribution – There is a statutory minimum, but the exact amount will depend on the particular contract.

The company will also have to make National Insurance contributions to HMRC. You will also usually make contributions towards the employee’s pension.

Once you have calculated what is owed to HMRC, make sure you pay promptly and complete the necessary returns. Your accountant or payroll software will explain how to do this properly.

If you’d like our help and advice on payroll for the small business, please get in touch. We have hundreds of years combined experienced working with small businesses just like yours.

We can take away all the stress of managing your payroll. Let us do the heavy lifting so you can focus on running your business.

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