Did you know that there are now over 4.5 million private sector businesses in the UK? That’s businesses just like yours, that are privately owned and often run by one person, or a small group of people. The shares aren’t open to the public, and you run your business as you see fit. Most of those businesses are one man bands, who don’t hire in any staff and just work for themselves. But around 1.2 million of those businesses do hire some people in, and that means they need to pay them. Unfortunately, it’s not as easy as just doing a bank transfer every month. HMRC requires a fair amount of paperwork to be done for payroll, with records to be kept in case the tax man comes a ‘calling. You will also need to work out tax and NI contributions for each person, and pay those too. All of this comes under the heading of ‘payroll’. For small businesses, there are a few different options when it comes to managing payroll obligations.
In-House Management
A common option for many smaller businesses is to manage their payroll in house. But while this can be a good way to save money, it will also take a considerable amount of time, not to mention a dedicated member of staff to take care of everything effectively. In smaller companies a director will usually take this on, and while the business is very small this is OK. But as you grow, you may be able to expand this to a dedicated team. Whoever’s in charge of running payroll needs to have up to date knowledge of PAYE tax systems, returns, NI and other forms that will need to be sent to HMRC. They will also be responsible for informing HMRC when an employee starts and leaves. Payroll is a complex job that requires a lot of knowledge and an aptitude for numbers, so bear this in mind when selecting your payroll manager in house.
Digital Payroll Systems
Very much an ‘in-the-middle’ solution, digital payroll systems take on a large chunk of the manual labour involved in the payroll process, making it a much more manageable task. Digital payroll systems can do a fair amount – for example, they will be able to do calculations based on the data you put in, produce payslips, send returns to HMRC, print P45’s, P60’s and any other forms for employees, to name a few things. These solutions are available as cloud based software, or downloaded and tied to a single machine. But one of the biggest issues we have with these systems is that transferring the data from them into accounting software is rarely simple and straightforward. Some are designed to be compatible with certain accounting packages, but not all of them, so you need to be careful what you buy.
Outsourced Solutions
And of course, there is always the option to outsource it. If numbers aren’t your thing, or you simply don’t have time to handle everything, there are plenty of businesses out there who do nothing but handle payroll for other businesses. Businesses like us, for example. It can be an enormous weight off your shoulders to know that your payroll is in the hands of a specialist, and it is often preferred by fast growing businesses who have many other things to focus on. By choosing to outsource, you can also be safe in the knowledge that your payroll is being handled by professionals with in-depth, up to date knowledge of all the legal requirements and best practices attached to payroll. But if you do choose to use an outsourced company, you need to be prepared to communicate with them. For example, if someone leaves, your payroll company need to know to stop paying them. If someone is promoted, they need to know how much to increase payments by.
However you choose to set up and manage your payroll systems, you need to make sure it’s the right option for you. Not only will it be easier to keep up long term, but mistakes with payroll can cost your business a lot of time and money to fix. At Cove Accountancy Services, we work with small businesses to help them understand and outsource their payroll, leaving them free to work on their business instead. For more information, or to find out more about our payroll services, just get in touch with us today.