How to set up your payroll

  1. 1 Ensure that you are registered as an employer with HM Revenue & Customs (HMRC) and register for PAYE Online.
  2. 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. 3 Invest in appropriate payroll software: checkit is compatible with HMRC’s ‘Real Time Information’ reporting requirements and how it could be linked into your accounting system.
  4. 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. 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. 6 Check employees’ data is accurate and complete; gather any missing information ready for submission to HMRC.
  7. 7 Establish a system for dealing with new employees, employees leaving, sickness, maternity, paternity and adoption leave.
  8. 8 Implement a system for calculating additional pay (eg bonuses and commission) and any taxable perks (eg company cars).
  9. 9 Decide how expenses will be handled.
  10. 10 Put security measures in place to protect the confidentiality of payroll information and guard against fraud.
  11. 11 Make contingency plans (eg if your computer system fails) to allow you to handle payroll and filings on time.
  12. 12 Use your payroll system to generate useful management information (eg employee costs, individual employees records).
  13. 13 Keep up to date with payroll rules by reading HMRC mailings; if necessary, contact the employers' helpline or your professional adviser.

Cardinal rules

Do:

  • use HMRC-recognised payroll software
  • timetable key payroll events
  • produce useful management information
  • make contingency plans

Don't:

  • file or pay late
  • forget to record taxable benefits
  • ignore updates to PAYE rules and procedures

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