How to Run Payroll

How to Run Payroll? A Beginner’s Guide

Whenever you heard the word payroll, you may only think of it as number crunching. Although calculations are part of it, but it is not limited to it. So, if you are a business owner, employ staff or plan to do so, you need to understand how to run payroll. It includes all the activities involved in paying employees, tax agencies and other entities.

Running a payroll can be complex, yet it is essential, as you are legally obliged to do it as an employer. There are various accounting firms offering these services. Still, you need to learn how to run payroll for your business. Here is the breakdown of the things you need to know:

  • What is payroll?
  • What information is needed to run payroll?
  • How to run payroll?
  • What to do after running a payroll?


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What is Payroll?

To put it simply, payroll is the list of your employees and the salary or wage you pay them. It also includes bonuses, allowances and benefits. Making deductions is also part of payroll. As a whole, payroll is the process of managing employees’ pay. Here are the typical activities involved in payroll:

  • Calculating, managing and issuing the benefits, bonuses and wages of employees
  • Woking out pay for sickness, holiday, maternity or any other leave
  • Making deductions from employees’ salaries like tax and National Insurance
  • Maintaining financial records as evidence for all these things

Running a payroll can be daunting for small businesses too, as it makes a lot of work to do. It is crucial, as it needs to be reliable and accurate. For this reason, many businesses prefer to outsource their payroll functions to specialists, like our accountant.


What Information is Needed to Run Payroll?

Here is the information required to run payroll:

  • Details of the employees
  • How many hours do they work?
  • The way through which they are paid
  • Tracking benefits, tax and deductions

You need to complete the following tasks before you pay your employees for the first time:

  • Register as an employer with HMRC and get a login for PAYE Online.
  • Select a payroll software to record details of the employees, calculate pay and make deductions, and report to HMRC.
  • Collect and keep records
  • Inform HMRC about your employees
  • Make deductions, record pay and report to HMRC on or before the first payday
  • Pay tax and NI to HMRC you owe


How to Run Payroll?

There are various ways to run payroll for your employees. These include:


How to Run Payroll


1) Do it Manually

One of the viable and cost-effective options to run payroll is to do it manually. You can do it through a spreadsheet, or by pen or paper. In addition, you need to ensure whether your local tax agencies accept these documents to report taxes.


2) Use a Payroll Software

If you don’t have the time and skill to manage your payroll by hand or manually, you can use payroll software. To use the software, you need to pay a small fee. While using the payroll software, check whether it suits your needs and ensure to put the correct data into your software to get accurate results.


3) Outsource to a Payroll Specialist

The best way to run payroll is to hire an accountant or an accounting firm to manage your payroll. Professionals have in-depth knowledge of the deductions and while payroll processing, they ensure compliance with the local tax laws. So, they run your payroll accurately, efficiently and in the minimum time.


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What to do After Running a Payroll?

Once have run payroll, you need to fulfil the following responsibilities:

  • Send a report to HMRC about your employees’ pay and deductions made from that pay
  • Make sure that all the deductions (like taxes) are transferred to their place
  • Tracking records of the pay for at least 3 years, even after the employee left the job


Need Help with Payroll!

We hope you have got a better understanding of how to run payroll. Our accountants and payroll experts are here to reduce your administrative burden of running payroll and dealing with HMRC on your behalf so that you can focus on your core business operations without worrying about accounts, taxes and payroll concerns. We have an in-depth understanding of the payroll processes and we use the best ways to streamline your payroll and reduce the cost involved. Ready to kickstart with us. Contact us now!


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Disclaimer: This post is just written for informational purposes and should not be taken as expert advice.

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