Growing your small business to a size where you need to hire employees to help manage your operations is a huge achievement. But with great achievements comes great responsibility, and managing payroll is undoubtedly one of the key responsibilities that can't be overlooked.
Payroll is not just about paying your employees; it encompasses tax obligations, compliance with employment laws, and accurate record-keeping. Neglecting payroll can lead to legal repercussions and unhappy employees, both of which could spell disaster for a small business striving to establish itself.
Simplifying payroll preparation
Simplifying payroll involves using streamlined processes and software to manage it more efficiently.
Establish a clear payroll schedule
Here's a quick look at different payroll frequencies and what might suit your small business best:
- Weekly: Ideal for businesses with hourly or part-time employees, keeping a closer eye on short-term cash flow.
- Bi-Weekly: Strikes a balance between regular pay and manageable administrative tasks. Common and often preferred for its simplicity.
- Monthly: Typically suits salaried employees and businesses with stable cash flow. Less administrative hassle but requires careful budgeting.
Use a payroll software
Payroll software takes away the hassle of manual calculations. It does the maths for you, making sure every pay cycle is accurate and error-free.
But, it's not just about numbers; payroll software simplifies your entire process:
- Save time: Let the software handle repetitive tasks, giving you more time to focus on growing your business.
- Easy record-keeping: No more paperwork. Access and manage your payroll data effortlessly.
Consider these user-friendly options for small businesses:
- QuickBooks Payroll: Easy to use with comprehensive features.
- Xero Payroll: Flexible and great for businesses on the move.
Xero and QuickBooks can also be integrated with your Capital on Tap account!
By using payroll software, you automate tasks, improve accuracy, and make payroll a breeze. Check out these options to find what works best for your small business.
Centralise payroll data
By centralising your payroll data and automating tasks, you not only make your life easier but also contribute to a smoother and more efficient work environment for your small business.
- Electronic timesheets: Replace paper timesheets with electronic versions for real-time tracking of work hours.
- Digital payslips: Move away from paper payslips. Go digital for easy distribution and accessibility.
- Cloud storage: Securely store your payroll data in the cloud. Accessible from anywhere, it eliminates the need for physical storage space.
- Automated tax filing: Let technology handle the complicated tax filing process, reducing the risk of errors and ensuring compliance.
- Automated payments: Simplify tax payments by setting up automated processes. This ensures timely and accurate payments, eliminating the stress of manual transactions.
Staying compliant with payroll regulations
Ensuring your payroll practices align with regulations is crucial for business success. Let's dive into staying compliant with payroll regulations.
Understand payroll taxes
Payroll taxes refer to income tax and national insurance contributions concerning employment.
- Income taxes: Deducted based on how much employees earn and the UK tax rates.
- National Insurance Contributions (NICs): Contributions from both employees and employers, based on earnings
Other deductions may include:
- Student loan repayments: If your employees are paying back student or postgraduate loans you’ll need to deduct this from their pay. The amount deducted depends on how much the employee earns and the repayment plan they've chosen.
- Pension contributions: If your employees meet a qualifying criteria, you’ll have to enrol them into a workplace pension. Both the employer and the employee then regularly put money into this pension as part of the workplace benefits.
File payroll taxes on time
Make sure to file your payroll taxes on time to avoid penalties and keep things running smoothly for your employees and your small business. This includes:
- Submitting payroll information to HMRC on time
- Paying taxes to HMRC on time
Maintain accurate payroll records
Keep detailed records of employee hours, wages, deductions, and taxes to ensure everything is in order.
Store these securely: Keep your payroll records in a secure place to protect sensitive information.
Follow guidelines: Make sure you keep payroll records for the required duration. In the UK, this is 3 years.
Outsourcing payroll services
You can get someone else to handle your payroll – it's accurate, saves time, ensures compliance, and makes your workload lighter.
Advantages of outsourcing payroll
- Saving money: Getting an outside service for payroll is usually cheaper than doing it in-house. Doing it yourself often means buying software, and training. You also need to keep up with tax rules and deadlines, or it could cost you.
- Focus on main business: Letting experts handle payroll means you can concentrate on your main business tasks like helping customers, making sales, and marketing. It saves time and resources for what really matters.
- Time saver: Whether you have a small or big team, doing payroll internally takes a lot of time. Outsourcing prevents unexpected time losses from mistakes or surprise audits.
- Expert help: Outsourcing gives you instant access to experts, especially if your business operates in different places. They know the local rules and keep you compliant.
- Follow the rules: Payroll rules can be tricky. Outsourcing to a trusted service means you're following all the laws, reducing the risk of penalties or audits.
The bottom line
Simplifying payroll is essential for the success of your small business. Whether through software, centralising data, staying compliant, or outsourcing, choosing the right approach can lead to smoother operations, compliance with regulations, and ultimately, the growth and success of your business.
If you’re looking to enjoy enhanced cash flow, simplified expense tracking, the potential for rewards, the opportunity to build your business credit profile, and control over employee spending, apply for a Capital on Tap Business Credit Card in under 2 minutes today.
This does not constitute financial or tax advice. If you want to understand payroll in detail, contact your financial advisor or accountant.