Taking on your first employee is both exciting and daunting! You are excited because your business has grown enough for you to employ someone else, this means you are doing well! But it is also daunting, the extra admin and making sure you are doing things correctly can be stressful. But don’t panic, we are here to help!
Registering with HMRC as an employer
The first step you will need to take once you have recruited your employee is to register with HMRC as an employer. You need to register at least one week before the first payday. It usually takes up to 5 working days for your employers PAYE reference number to arrive and it makes it easier to run your first payroll if you have this number first.
You can register here: https://www.gov.uk/register-employer
Choosing a payroll software
There are a variety of software providers available for payroll with a variety of different prices! You will need to work out which one works best for your business.
My personal favourite is Sage, it has some brilliant functionalities. However some smaller businesses may find this a costly option and wont receive the full benefit of the functionalities until they are employing a larger amount of people.
HMRC offer a basic payroll software for free if you have fewer than 10 employees. This is great for starting out, but it is what is says on the tin – basic. There are a few other free payroll software providers, you can see a list here.
Other paid for providers worth mentioning are Quickbooks, Xero & Clear Books. These are all great payroll providers with various functionalities to suit multiple businesses. There is a full list of payroll providers on HMRC’s website, you can access this here.
It is important to find one that works for you and that you are comfortable with.
Collecting and Keeping Records
You need to keep records of:
- Employee details, such as Name, address, NI no, DOB, right to work in the UK
- What employees are paid and any deductions made within each pay period
- Reports you send to HMRC and any payments you make to them
- Employee leave and sickness
- Tax code notices
- Taxable expenses or benefits
Employees are registered using FPS (full payment submission) that is sent to HMRC each pay period. You will need to collect information from your employee to set them up correctly. You need the information mentioned above, along with either the employees P45 from their previous role or you will need to ask the employee to complete HMRC’s starter checklist. You can find this here.
Input the information you have collected into your payroll software and once you have processed the payment you can send the FPS to HMRC, this is how employees are registered.
Your payroll software will record pay made to your employees. You will need to keep copies of reports from each pay period. You need to send the FPS to HMRC on or before each payday. Keep records of your FPS submissions. If you need to claim back any statutory payments or claim and small business relief you will need to send an EPS to HMRC before the 19th of each month.
You will have to pay tax and national insurance to HMRC.
You can log into your employers account on the 6th of each month and view the tax and NI due. This must be paid by the 22nd of each month.
Your payroll software may have a report you can run to check the amount HMRC have requested against the figures within your payroll software.
Other Things to Consider
You will also need to consider your business insurance, you will need employers liability insurance. You will also need an employee contract, it will be worth your while contacting a HR support company and having one created for you, professionals really are worth their weight in gold!
How We Can Help
Bright bookkeeping services offer a comprehensive payroll support package from just £25.00 per process date for the first 3 employees and then an additional £5 per process date for any additional employees.
Have a look at the payroll section on our website here: https://www.brightbookkeepingservices.com/services/payroll/ Or send an email to email@example.com