As a small business owner, it’s crucial you stay on top of your payroll. One of your core responsibilities as an employer is ensuring you calculate your workers’ pay correctly and pay the correct amount in deductions such as National Insurance and income tax.
But it can be complicated – especially when payroll legislation changes. Luckily, payroll software makes it easier than ever to stay on top of any changes and run payroll correctly.
What is payroll?
Before we get into payroll compliance, here’s a quick refresher on what payroll is.
Payroll refers to the process of calculating how much a worker is paid. This includes not just their salary and wages, but any bonuses, allowances and benefits the worker is entitled to. It also covers any deductions you make from their pay – things like income tax, pensions and National Insurance contributions (NICs).
HMRC collects Income Tax and National Insurance through the Pay as You Earn (PAYE) system. If your business employs people, you should be operating PAYE.
The payroll process can be broken down into three simple steps:
Calculating how much your workers get paid and paying them
Calculating any deductions payable to HMRC
Accurately collecting this information and reporting it to HMRC