When it comes to running a small business, there are a lot of plates to keep spinning. Between trying to manage expenses, prospect for new customers and actually doing the work, it can be difficult to keep it all straight and working correctly. And it only gets more complicated when you add payroll into the equation. Handling payroll for your small business can be confusing, especially when you’re trying to remember all of the tax implications and laws that go with it. But don’t worry, it’s not all doom and gloom! Today, we have 4 tips to help you manage your payroll a little better, and make the whole process simpler.
Make Sure Your Workers Are Properly Classified
When you’re putting your payroll together or adding someone new, this is an essential step to get right, as is could significantly impact your tax, NI payments and the employee’s take-home pay. You also need to be careful of any contractors you use. Thanks to IR35, if you hire a contractor who only services your business, with no other clients on their books, then you can’t pay them as a contractor. Instead, they are considered as an employee, and should be paid as such through the payroll process. If you pay them as a contractor, then both you and the contractor could get into serious legal trouble. So, when you’re handling payroll, make sure everyone is properly classified and in the right place.
Salary Or Hourly?
In your business you may pay your employees a yearly salary, or you might pay them an hourly wage instead. You might even pay some members of staff a salary, like full-time employees, while part-time workers are on an hourly wage. Different industries tend to lean in different ways regarding pay structure, and there is no right or wrong way to do this. The only thing to note is that you need to have each employee set up within payroll with the right pay structure. Hourly employees should not receive a salary, and vice versa. You can of course change it later on, if someone is promoted into a salaried position or if you choose to change the way you pay people. This is also important when calculating things like overtime, since salaried employees aren’t entitled to pay for this, while hourly employees are.
Make Sure Your Payroll Budget Includes Tax
There are certain costs that come with running payroll, with the biggest by far being your employee pay! But when you’re working out how much payroll is going to cost you for the week, month or year, you shouldn’t just leave it there. Aside from wages, you will also need to include any employers tax and NI contributions in your calculations for each employee. This is something new businesses often get wrong, and can cost a small fortune if you haven’t planned for it and find yourself caught short. Instead, work out a rough number for the extra costs of each employee, and make sure you have that amount tucked away in a savings account ready to pay the bills when they come in.
Don’t Forget Auto-Enrolment
Since it was first announced in 2016, auto-enrolment has been yet another thing business owners need to remember. And while it’s technically classed as pensions, it does have an impact on your payroll. If your employees have not opted out of your auto-enrolment plan (and are eligible) then you will need to include the contributions to pensions in your payroll. This means working out how much each employee should be paying, and ensuring that the correct tax relief is calculated. There are plenty of options for doing this – including bespoke software, off the shelf solutions or asking your accountant to handle it for you.
Get Help If You Need It
Payroll isn’t a simple thing, and the more employees you have the more complex it gets. As well as setting up your payroll for the first time, you will need to keep it up to date, ensure it’s accurate and run it every single month. All of which takes some time and know-how. If you don’t feel confident doing it yourself, or don’t have the time, then you should consider outsourcing it to a specialist.
At Cove Accountancy Services, we are experts in all things payroll for small businesses. We offer a fully outsourced payroll solution, or we can work with you to train your staff on how to do it themselves. We do a lot of work with the trades in particular, helping them understand their obligations and stay up to date with their payroll needs. If you would like to know more about our payroll services and how we can help you, just get in touch with us today.