Payroll Operation

Payroll is the facility for paying Employees or directors of a Business.

An Employee or Director of a business will be paid an agreed salary. The salary is agreed gross i.e. before any deductions of PAYE tax and National Insurance.

Prior to Paying the employee or Director, PAYE and National Insurance contributions are calculated. These deductions are dependent upon that individual’s specific PAYE code. Once these taxes have been calculated, they are deducted from the individuals Gross Salary and they are then paid the Net amount by the business.

The difference between the individuals Gross Salary and the Net Amount they receive i.e. their taxes, is paid by the business to HMRC. HMRC then credit these contributions to the individual so that the correct contributions are made for their statutory benefits i.e. state pension. Also, the business is liable for employer’s national insurance contributions. This rate is currently 13.8% of the gross amount and is payable when earnings exceed £150 per week.

A basic flow diagram (amounts approximate):

payroll flow diagram

Following the introduction of Real Time filing, there is the mandatory requirement to file the payroll information and pay any NIC/Paye liability no later than by the 19th of every month. Failure to do so will result in penalties for the company. The procedure to pay these liabilities will vary from business to business and you should confirm with Central Accountancy how this will be managed.

A benefit of running payroll is that the gross salary is classed as an overhead on the profit and loss account, and therefore goes to reduce the net profit of the business and so in turn reducing the amount of tax payable.

Automatic Enrolment

Under a law introduced in 2012, all employers must eventually offer a workplace pension scheme and automatically enrol eligible workers in it.

Different business will have different staging dates.

Our integrated payroll software is 100% compliant with revenue requirements; and able to submit the necessary documents to HMRC every month, in a timely manner.

This takes the headache out of Auto enrolment, helping to keep your business compliant with current legislation, without causing you unnecessary worry.