What is payroll?
So whats really payroll? And when or why do you need it? So let’s say your startup or agency is in the process of expansion. Expansion in the form of a bigger team, maybe a bigger office, bigger clients and so on amidst all this the most important factor where payroll arises in the team.
From managing weekly or monthly payments, ensuring the payments are given on time, tax reductions, payments handled in correspondence to HMRC, including holiday pay and so on.
Let’s take a look at what payroll is in detail and why you need it for your business.
What is payroll?
Payroll basically involves the employees of a company listed out and the wages given to them and the record of all such transactions.
Payroll would be essential for the following:
- To determine the salaries of the employees.
- To determine how much NIC and tax needs to be deducted from the gross pay of an employee.
- Details to be reported to HMRC.
Various components of Payroll
There are various details that are needed to carry out the payroll the following are the various components of payroll.
Before you are able to carry out payroll you will need the details of the employee such as name, address, salary and National Insurance number.
So this basically involved recording the number of hours the employee has worked for which the payment needs to be carried out. The hours are normally recorded through punch in machines, card readers or to the simplest method on a register. The number of hours from these mechanisms is then collected either on a weekly or monthly basis and the salaries are then given out using this data.
Sick leaves and overtime needs to be included in the salary as well when carrying out the payment.
Wages, salaries/Net/gross pay
Whether an employee is on an hourly pay or salary needs to be determined as this will conclude the calculation of their pay.
A salary is a payment package that is paid to an employee on a monthly basis. This is split into 12 yearly fees and paid in 12 individual amounts.
As per your profession, you may wish to either pay wages or salary to your employees. So a wage is basically the amount you pay your employees for every hour, this amount is then paid by multiplying the number of hours with the wage given for one hour.
Net pay and gross pay need to be mentioned on the payslips given to employees wherein gross pay is the total amount that is paid to the employee in that particular period and net pay the amount the employees receive after tax and other necessary deductions.
The payroll will have to take into account the commission/tips that need to be added on top of the basic pay with regards to the Industry he/she is based in.
Tax and reductions
It’s very much important that employee’s pay National Insurance and tax from their total gross pay depending upon the salary they receive, whatever be the case the amount needs to be paid to HMRC before the end of every month unable to do so may lead you to a fine.
An attractive benefits package can be given to the staff all this to ensure that your employees are motivated and also to promote a good culture within the company.this could involve a pension package, employee or discounts, and private healthcare.its vital that these factors should be included in payroll as some of these could affect the amount that’s paid to the employees each time.
Different methods of running payroll
Here we’ll take a look at some of the options of carrying out the payroll in your organization or company.
This is by far the cheapest option that’s available but extremely time-consuming as you would need to ensure that all the calculations along with tax reductions are well-considered failure to consider this would lead to an unwanted fine.
You’ll also need to ensure that retention levels are maintained as failure to do this would attract a terrible fine.
Hire an accountant
As long as you have the finance needed to hire an accountant the costs getting an accountant on board shouldn’t be a problem however it would save you a lot of time as well. Accountants are highly trained and skilled workers who would accurately and efficiently be able to handle large sums of data.
The best option to save on time and money would be to inculcate software to handle your company’s payroll. However, before you decide on the software your business needs it’s equally important to consider what all features would best suit your workarounds with the payroll.
- Are payslips produced by the software?
- Can PAYE be reported through the software?
- Can pension payments be recorded and paid through the software?
Finally, it’s vital that you consider all factors and give it a max priority when selecting how you wish to carry out the payroll for your company as paying employees on time is a crucial part of the process when running your own firm.
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