Paying employees for the first time: A small business checklist
Have you started the business you’ve always dreamed of? It’s an exciting time but as I’m sure you know, there is a lot to figure out. When you throw tax, employment law and pensions into the mix, it can feel overwhelming.
When you’re under pressure to get going, spending time figuring out how payroll works, may feel frustrating. However, running payroll yourself will help keep overheads down, which is something every new business owner is interested in. It’s essential you get it right and if you get it right from the beginning, it can make your life a lot easier in the long term.
Here’s a quick checklist to ensure you don’t fall foul of HMRC or end up having some very unhappy employees.
How do I run my own payroll?
- First, register as an employer with HMRC to receive your employer PAYE reference number. You’ll need to do this even if you are the only employee of the company.
- Choose an RTI and HMRC recognised payroll software such as BrightPay Payroll to run your payroll and report to HMRC on. Using BrightPay payroll software can help you fulfil your legal obligations as an employer, make processing payroll much quicker, while also offering useful HR solutions.
- Add your employees’ information to your payroll software. Importantly, you need to enter the employee’s tax code for the year, choose the appropriate National Insurance rate to use, and include any deductions the employee is liable to (e.g. student loan).
How do I set up auto enrolment for a new business?
Once you decide to hire an employee, you need to ensure you are ready to comply with the workplace pension law. Your legal duties begin on the day your first member of staff starts work. This is known as your duties start date.
- Upon hiring, assess whether your employees are eligible jobholders and are entitled to be put into a pension scheme. BrightPay payroll automatically assesses employees for enrolment, and if they meet the criteria to be enrolled in a pension scheme, on-screen alerts will appear.
- As soon as possible, choose a pension scheme that can be used for automatic enrolment. Your payroll software may provide direct integration with a number of pension providers which will save you a significant amount of time. View BrightPay’s API integrations with pension providers here.
- Within 6 weeks of your duties start date, use your payroll software to send letters informing your employees of auto enrolment and how it applies to them. With BrightPay, auto enrolment letters are automatically created and customised for each individual employee.
- Complete a declaration of compliance to the Pensions Regulator within 5 months after your duties start date.
How do I pay my employees?
- Once you’re happy that all the payroll information is correct, you’re ready to run your first payroll. Once finalised, the employees' payslips need to be sent to them. With BrightPay, payslips can be printed or emailed directly to employees, or if you use BrightPay Connect, payslips are automatically sent to the employee’s smartphone via the self-service app.
- Next, you’ll need to actually pay your employees. You can do this either by cash, cheque or direct debit. If your payroll software offers it, you can also pay directly from the software using a direct payments method. This eliminates the need to create bank files associated with direct debits and allows you to pay employees in a fast and secure way.
Reporting and paying HMRC for the first time:
- Make sure you register your employees with HMRC. This can be done by including their details (pay and deductions) on a Full Payment Submission (FPS) the first time you pay them. Going forward, an FPS must be sent to HMRC on or before each pay day, notifying HMRC of a payment made to that employee.
- Pay HMRC the tax and National Insurance (and any other deductions) you owe as reported on your FPS.
- You can pay HMRC a number of ways but a simple way of doing it is through your payroll software. See Pay HMRC through payroll software for more information.
Interested in learning more?
If you would like to learn more about BrightPay payroll software and how it can help you get ready for running your first payroll, speak to a member of our team today.