Payroll Explained: A Guide for UK Employers
Payroll is the process of calculating employee pay, making deductions and reporting the results to HMRC. It is not simply transferring wages: employers must follow PAYE, National Insurance, pension and employment rules.
What Does Payroll Include?
A payroll calculation may include:
- Salary, hourly pay, overtime, bonuses and commission
- Income Tax and employee National Insurance
- Employer National Insurance
- Pension contributions
- Student or postgraduate loan deductions
- Statutory payments and other authorised deductions
Employees must receive an itemised payslip on or before payday showing gross pay, deductions and net pay.
PAYE and Real Time Information
Employers normally register for PAYE before the first payday. Each time employees are paid, a Full Payment Submission is sent to HMRC under Real Time Information, usually on or before payday.
An Employer Payment Summary may also be required where the employer is reclaiming statutory payments, claiming the Employment Allowance or reporting that no employees were paid.
PAYE and National Insurance are usually paid electronically by the 22nd of the following tax month. Some small employers can pay quarterly, but payroll submissions are still made whenever employees are paid.
Workplace Pensions and Other Responsibilities
Employers must assess workers for automatic enrolment, provide the required communications and pay pension contributions on time. Minimum wage, holiday pay and statutory payment rules must also be considered.
New employees need correct starter information. When someone leaves, their final pay must be processed and a P45 provided. Payroll records generally need to be retained for at least three years after the relevant tax year.
Directors are employees for payroll purposes when receiving a salary, although their National Insurance calculation can operate differently. Benefits and expenses may also require payrolling or year-end reporting. Employers remain legally responsible for accurate submissions even when software or an external provider processes the payroll.
Regular checks between payroll reports, HMRC balances and the business bank account can identify discrepancies before they accumulate.
Why Outsource Payroll?
Payroll mistakes can lead to incorrect pay, amended submissions and HMRC penalties. Outsourcing may be useful where there are variable hours, multiple pay rates, statutory leave or limited time for administration.
GMS Accountants provides clear, reliable payroll services to employers in Cambridge and Nottingham. We can process payslips, submit RTI reports and explain what must be paid to HMRC. Contact us to discuss your payroll requirements.
