Whether you’re a sole trader, partnership or limited company there will (hopefully) come a time when you start taking on employees. This is a big step for any business and one that needs some preparation. Before you add a workforce to your enterprise you’ll need to make sure your business is ready to cope with employees.
Registering your payroll scheme
It’s not difficult to register a payroll scheme if you’ve decided to do this yourself. You’ll need to register with HMRC as an employer and you can do this online. The timing of registration is crucial – you won’t be able to register more than two months before you first start paying employees. However, you must be up and running before it’s time to pay salaries and it can take anywhere up to two weeks to do that.
If you’re going to run your own payroll then you’ll need software to help you do it. You’ll need payroll software that can report PAYE information to HMRC and do this in real time. It should keep a record of employee details, work out pay and deductions, calculate how much is due to HMRC and report to HMRC. Make sure the software that you choose enables you to produce pay slips and has the flexibility to pay different people in different ways, as well as to handle the full range of benefit payment requirements, from maternity leave to pensions.
When you set up as an employer you need to get used to obtaining certain data from employees you take on. You’ll need to get their employee information (e.g. from a P45) so you can work out their tax code and then you’ll need to register the employee with HMRC on a Full Payment Submission. If your employee is earning £113 or more a week then they will need to be paid via PAYE. Finally, you’ll need to make sure you find out whether there will be student loan deductions to be made.
Although you should already be keeping records and books, all this changes considerably once you have employees. If you’re building a workforce then you need to start maintaining records of pay and deductions, sick leave, tax code notices, the reports you make to HMRC, as well as the payments, and the taxable expenses and benefits that your business is offering to its employees.