What is Payroll?
Payroll may not be at the forefront of everyone’s minds but it’s one of the most important processes of any company, from large corporations with hundreds of employees to a small business with just two staff members. Understanding exactly what payroll involves is crucial to not only keeping your staff happy by paying them accurately and on time, but it also fulfils your legal obligations to HMRC.
The importance of accurate payroll
Put basically, payroll is a list of a company’s employees and how much they are paid. However, it goes further than this and often refers to everything from bonuses and taxes to holiday entitlement and pensions. To run payroll properly, it’s important to get the details of your employees correct so that you know you’re paying them what you should be and that they are contributing the right amount of tax and national insurance.
How to calculate payroll
How you calculate an employee’s pay will depend on whether they are paid on a salary, a fixed amount paid over a year, or hourly wage, which is calculated by totalling the number of hours worked within a set time period. Employees’ payslips will need to indicate gross pay, total amount paid within the set period, and net pay, the sum the employee receives after necessary deductions such as tax and student loan payments.
One of the most important responsibilities of an employer is to ensure each employee pays the correct amount of tax and national insurance. This amount will vary from person to person as it is calculated on how much someone earns and their individual circumstances. It is the employer’s responsibility to submit the payment to HMRC each month and on time as late payment can result in a fine.
Payroll options
To manage your payroll, there are a number of options available and your choice will depend on your business priorities. For instance, you can complete payroll by hand, but this is a very time-consuming method and is open to errors. Alternatively, you can hire an accountant who is used to handling large amounts of data, however, this can be very expensive. Another option available is outsourcing, hiring a specialist payroll company to take the burden off your hands, freeing your time and effort up so you can focus on the core of your business.
Essential Payroll, a specialist payroll bureau with extensive experience in many sectors and industries, can relieve you of the stress of payroll with a bespoke payroll package. To learn more about our payroll solutions, please contact us on 02382 023223 and we’ll be happy to answer any questions.