As a business owner in the Droitwich and Worcester areas, you may need to employ staff to grow your business. This can be an exciting time but also a little daunting, particularly when sorting out payroll.
You can set up and manage the process yourself as an employer, although many prefer to outsource it to experienced payroll processors such as JRMA.
To help you make that decision, we have written the following guide on setting up payroll and auto enrolment for your employees.
Setting up payroll and auto enrolment for employees is a fundamental responsibility for employers. It involves understanding the intricacies of registering with HMRC's Pay As You Earn (PAYE) scheme and managing the auto enrolment pension scheme.
PAYE is how HMRC collects income tax and national insurance contributions directly from employees' wages. Before paying your employees, you must register with HMRC for PAYE as an employer.
You can register online through HMRC's payroll website. The process requires information about your business and employees. Once registered, you'll receive your unique employer PAYE reference number and an office number, which you will need for future correspondences with HMRC.
Once your registration is complete, you have several responsibilities, including deducting tax and national insurance contributions from employees' pay, reporting payroll information to HMRC, and paying the deducted amounts.
Once you have set up your payroll with HMRC, you must use payroll software recognised by HMRC. This streamlines the payroll process, enabling PAYE to be calculated and the correct reports to be submitted to HMRC. Some software offers additional features like generating payslips and managing pension contributions.
Auto enrolment is a government policy designed to help more people save for retirement through workplace pension schemes. It was first introduced in the UK in 2012 and is a legal requirement for all employers to implement.
At the same time as setting up the payroll for your employees, you must also carry out the following steps which relate to your employees' pensions:
Determine which employees are eligible for auto enrolment. Employees aged between 22 years old and the state pension age earning over £10,000 per year must be automatically enrolled.
Select a pension scheme that qualifies for auto enrolment. It should meet specific criteria set by The Pensions Regulator.
You must automatically enrol eligible employees into the pension scheme. You must also inform them about the scheme, how auto enrolment works, and their rights, including the option to opt out.
Employees not eligible for auto enrolment can request to opt in. However, they are not entitled to receive a pension contribution from you (their employer) unless you are happy to do so. Those who have been auto enrolled have the right to opt out within one calendar month of being enrolled on the pension scheme. As the employer, it is your responsibility to process these requests accordingly.
Employers are required to contribute to the employees' pensions. As of the latest guidelines, the minimum contribution is 3% of the employee's earnings, while the total contribution (employer and employee combined) must be at least 8%.
You must keep accurate records of your auto enrolment activities, including information about employee enrolment, opt in, and opt out requests, and pension contribution payments.
Adhering to deadlines is crucial in both PAYE reporting and auto enrolment contributions. Late submissions or payments can result in penalties from HMRC or The Pensions Regulator. As an employer, you should familiarise yourself with the regular reporting schedules and contribution deadlines to avoid such penalties.
Setting up payroll and managing auto enrolment pension schemes are vital components of being an employer. By following the steps to register with HMRC for PAYE and understanding the auto enrolment process, you can ensure your business complies with UK law, contributes to your employees' financial well-being, and avoids potential fines. Staying informed about changes to legislation or contribution rates is also essential to maintain compliance and support your employees effectively.
Many business owners find setting up payroll, auto enrolment, and administering the process a little scary. However, at JRMA, we do this weekly for businesses of all sizes and sectors. We are happy to advise you in the first instance to help you set up the systems yourself, or we can handle the whole process for you.
Not only do we ensure everything is set up correctly, but we also work closely with you to ensure each employee's payroll is calculated accurately. We take into account any allowances and deductions that need to be made, such as statutory sick pay, maternity pay, etc., and when employees leave or new people join the business, we can quickly and efficiently process their details and the necessary paperwork.
To learn more about our payroll service and how it can save you time and relieve you of an additional task, please contact us at 01905 796512 or email info@jrma.co.uk.
