How to set up your payroll
- 1 Ensure that you are registered as an employer with HM Revenue & Customs (HMRC) and register for PAYE Online.
- 2 Decide who will be responsible for managing PAYE; consider whether you will operate PAYE yourself, use the services of a payroll agency or your accountant.
- 3 Invest in appropriate payroll software: check it is compatible with HMRC’s ‘Real Time Information’ reporting requirements and how it could be linked into your accounting system.
- 4 Set up a payroll timetable include the dates for making payments to employees and HM Revenue & Customs, and handling year-end PAYE filings and employee documents.
- 5 Clarify the legal rules, and your contractual agreements, covering sick pay and maternity, paternity and adoption pay, pension contributions and deductions from pay.
- 6 Check employees’ data is accurate and complete; gather any missing information ready for submission to HMRC.
- 7 Establish a system for dealing with new employees, employees leaving, sickness, maternity, paternity and adoption leave.
- 8 Implement a system for calculating additional pay (eg bonuses and commission) and any taxable perks (eg company cars).
- 9 Decide how expenses will be handled.
- 10 Put security measures in place to protect the confidentiality of payroll information and guard against fraud.
- 11 Make contingency plans (eg if your computer system fails) to allow you to handle payroll and filings on time.
- 12 Use your payroll system to generate useful management information (eg employee costs, individual employees records).
- 13 Keep up to date with payroll rules by reading HMRC mailings; if necessary, contact the employers' helpline or your professional adviser.
- use HMRC-recognised payroll software
- timetable key payroll events
- produce useful management information
- make contingency plans
- file or pay late
- forget to record taxable benefits
- ignore updates to PAYE rules and procedures