Outsourcing is the simplest way to manage your payroll. But what happens if you decide to do it yourself?
No stage of business is simple. When you’re a one man band there’s the challenge of juggling too much work with not enough time. When you begin to grow you have more people to cover more of the work, but all of sudden you have a payroll to manage (amongst lots of other things).
For many business owners, payroll is something that creeps up on them. No entrepreneur ever had the payroll down as a great motivating factor for launching their business. It’s just one of those elements that, like corporation tax, NI contributions and sick pay, is a business fact of life.
So you start managing the payroll. But what does that mean exactly? And what happens when you can’t manage?
What’s involved in managing payroll yourself?
- Pay and PAYE
If you’ve been operating solo until recently, you won’t have had to deal with PAYE. PAYE is, of course, Pay As You Earn, and it ensures that, unlike sole traders, directors and companies, employees pay tax as they go, with deductions for tax and NI made throughout the year, rather than presenting each employee with a hefty tax bill at the end of it.
There’s plenty of software to help you with this, but if you’re managing the payroll yourself, you’ll still need to learn the system, input the data correctly (i.e. salary details, pay frequency (monthly, 4 weekly etc), overtime etc) and find the time to do it.
It’s not just tax and NI you’ll need to account for each month. Assuming you’re enrolled in a pension scheme, your payroll will need to incorporate deductions for that and all of the following:
- Student loans payments
- Union subscriptions
- Sports or social group subscriptions
- Voluntary pension top-up payments
- Holidays, sickness and maternity
Whether your company has its own policy for holiday, sick and maternity pay, or you pay statutory rates, they’ll all need processing. Statutory sick pay, for example, should be paid to qualifying workers for 28 weeks. And to clarify, it is the company that pays, not the government, so it falls on you to manage the process.
One of the biggest challenges in managing a payroll is keeping abreast of changes. At the simplest level, every budget issued by the Chancellor could alter the basic or higher rates of tax, NI contributions or the minimum wage.
Occasionally, more profound changes such as pensions automatic enrolment appear and demand wholesale change in the way you process payroll.
At best, keeping on top of legislation is challenging and time consuming, and there’s always the risk that you miss something. At worst, there’s the effect of actually missing something, which could be a significant fine for non-compliance.
- Expenses and benefits
Does your sales team drive cars supplied by work? Are they required to pay certain expenses out of their own pocket which you then reimburse? All expenses and benefits in kind will be processed via payroll.
Payslips aren’t simply a monthly courtesy. According to the Employment Rights Act 1999 section 8, they’re a legal requirement, with every employee entitled to a pay slip that should as a minimum, include the following:
- Gross pay
- Deductions (tax, NI, pensions, student loan payments)
- Net pay
- Method of payment
You don’t have to issue a paper payslip – electronic is fine – but it still needs issuing, and issuing securely.
What if I can’t manage my payroll?
For many growing businesses, the payroll is a task too many. It can demand too much time, absorb too much resource, and, without real expertise, can open a business to the risk of fines and legal action for non-compliance, and upsetting staff should pay arrive late.
So if you can’t – or simply prefer not to – manage your payroll, outsource it. Outsourcing payroll removes virtually all of the above tasks at a stroke. Which leaves you free to concentrate on growing your business.
To find out how talk to us now.