When you become an “employer” and start taking on employees directly rather than using contractors, you take on more responsibility for ensuring the tax and social security of those you employ is calculated correctly and paid over to the HM Revenue & Customs on time.
You also take on additional requirements to pay social security and provide your employees with other benefits.
As an employer, you will need to set up a payroll scheme. This can be done relatively easily and quickly on the HMRC website. Once you have set up this payroll scheme, you can then start paying your employees through the payroll.
As an employer you are responsible for the following:
- Ensuring you pay your employees above the National Minimum Wage
- Checking your employees have the legal right to work in the UK
- Undertaking any necessary checks on your employees as required (eg a DBS check if they are working in security or with vulnerable people)
- Getting employer liability insurance
- Ensuring you have employment contracts in place for all employees
- Ensuring as an employer you follow the appropriate employment law requirements on Health & Safety in the workplace, Working Time Regulations and the provision of statutory holidays and leave (eg sick leave, maternity). You will need to ensure your staff contracts and employment handbook cover these areas and are compliant with UK employment law. An employment lawyer will be able to assist you in this area
Running a payroll
As an employer, when you run a payroll you are also responsible for ensuring:
- Tax and National Insurance is correctly calculated and deducted from your employees’ gross pay
- Any other deductions where necessary are calculated and included in their pay (eg student loan deductions, pension contributions)
- Your employees are paid their net (after deductions) salaries on the agreed pay date
- You pay over to HMRC the deductions made as well as your Employers National Insurance contribution for the period
- You file online payroll reports with HMRC for each payday
- You notify and file reports with HMRC for any new joiners or leavers and also file annual payroll and benefit reports
A lot of employers will outsource the running and management of their payrolls to accountants or payroll providers. This will mean their provider will calculate all the necessary deductions, file the reports needed with HMRC, provide employees with payslips and let the employer know what payments they need to make to employees and also to HMRC.
Some providers will also provide a payment option whereby the employer makes one lump sum payment to the payroll provider and they then make all necessary payments to employees and HMRC on behalf of the employer.
Running a payroll, certainly when you have a number of employees, can be time consuming and difficult and so outsourcing this to experts is often a much more efficient and effective way for an employer to handle the compliance and administrative burden of this.
As an employer, you will also need to provide your employees with a workplace pension. Each employer will have a different staging date whereby they will need to have a pension plan set up for their employees and from when they will also need to make contributions.
However, by early 2018 all employers will need to have this in place and, under the current rules, the employer will have to pay at least 3% into their employees’ pension plans once the new pension regulations are fully in force.
Have a question for one of our Startup Surgery ‘doctors’? Submit it now.