As your business grows you’ll probably need to increase the size of your team by hiring people.
The UK operates a system called PAYE (pay as you earn), this means that employers are responsible for deducting tax from their employees. This means that if the correct amount of tax isn’t deducted then HMRC will ask you to pay it unless you can prove you’ve followed the rules.
In the majority of cases this will mean that you’ll need to get us to set your business up on a payroll system, file monthly returns, provide payslips and let you know how much to pay your staff and how much to pay HMRC.
To make things easier for yourself, you’ll want to try and have monthly pay dates and agree an annual salary before tax with your employees. It can complicate things and create more work by paying weekly, 4 weekly or agreeing to a take home pay.
There are some really good take home pay calculators online (link below), if you want to get an idea of what your staff member will end up taking home.
We’ll put through the pre-agreed salary for your staff unless you send us an email to change the amount, this will need to be done 48 hours before you make the payment as the law requires a payroll return to be submitted on or before the day of payment.
Every month, you’ll receive a summary which shows how much you need to pay your staff after we’ve calculated tax. The summary will also show you how much to pay HMRC and provide some bank account details and a reference number to use in the payment.
Payments to HMRC are due by the 22nd of the same month as the payroll quarter ends: 5th July, 5th October, 5th January and 5th April.
This means that for the 6th April to the 5th July quarter, payment would be due by the 22nd July. That said, it’s actually easier just to pay HMRC monthly at the same time you pay your staff and that way you won’t forget.
You may be aware that employees need to pay national insurance but as an employer you may also need to pay employer’s national insurance at 13.8% on anything they earn above £8,424 (2018-19). Luckily the government have introduced an employment allowance which wipes out the first £3k of this bill for you, we’ll apply for this automatically.
Employers NIC’s are worked out on the gross amount of the employee’s salary, this is a tax on you as an employer and shouldn’t affect their take home pay.
Holidays, Sick Pay, Statutory Maternity/Paternity
You’re required as an employer to give any staff you hire at least a statutory minimum amount of holiday every year, this is usually 28 days including bank holidays. The calculation of this can be complex if your staff work irregular hours or overtime, so it’s worth asking for help if you need it.
Staff who are off sick are entitled to statutory sick pay after a period of at least 4 days, this unfortunately is no longer reimbursed by the government and will need to be paid out of your business.
You may also have staff going on maternity or paternity leave and you will need to pay them while they’re away. The government will reimburse the statutory minimum amount but it’s worth factoring in that your staff will still build up holiday during this time and you’ll need to check their eligibility and to make sure the right documents have been received as proof.
National Minimum Wage (NMW)
There are various different minimum wage rates depending on the age of your employee and type of employment you’re offering, it’s a legal requirement to pay this. If you’re offering someone a basic wage plus commission or tips, then you’d need to make sure that there aren’t any months where the total pay doesn’t fall below the NMW.
If you have staff, then there may be situations where they want to give up some of their salary and have you pay for certain expenses out of the company e.g. health insurance, gym memberships. This can be worthwhile as it can save them having to pay national insurance and also sometimes save your company the employers national insurance element as well depending on the benefit, talk to us about the options.
You may be tempted to hire people as self-employed workers in order to save on holiday, sickness, national insurance and pension costs. This can be a risky area as employers are responsible for collecting tax from their employees and HMRC will look at the nature of the work rather than the self-employed definition you’ve agreed with the worker.
It’s often the case that HMRC lose out on tax during self-employed engagements compared to employments, this means that if your working practices amount to what they call disguised employment, they can ask you for any tax they’ve lost out on. It’s worth talking to us about how to minimise the risks involved to your business.
You may be aware of the requirement for employers to provide a pension and automatically enrol workers on one regardless of if they want it. This is called autoenrollment and needs to be handled as per the government regulations with the necessary letters being provided to employees and declarations filed with the pensions regulator.
Autoenrollment is something we can support you with but for it to work, you will need to respond to our emails and provide the information we need. The Pensions Regulator penalties for noncompliance start at £400 and increase so it’s got to be dealt with.
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