Here at eBOS, payroll is something we are often asked about by our small business customers. We don’t blame them, it can be an incredibly complicated process to set up and it requires attention at regular intervals – which means training and check-ups to ensure everything is running correctly.  Many small businesses wonder if they really need to set up and run payroll at all, especially if they are simply a one or two-man band. But payroll isn’t just a useful tool for businesses that employ people, it’s a legal requirement, so it’s important that you understand what it means.

Do I Need Payroll?

If you are a sole trader or a partner in a partnership for a business with no employed staff, you are part of the small group of people who don’t need to worry about payroll. Because you aren’t an employee, you are the business, and this exempts you from payroll. Breathe a sigh of relief and put the kettle on. However, if you employ anyone – even if it’s just one person, even on a part time basis – you are legally required to run payroll. This is true even if you are the sole director of a limited company, because directors are by nature employees of the limited company, which is a separate entity. If you are paid a salary by your limited company then the company is the employer, and you are its employee.

How Do I Set Up Payroll?

How you set up your payroll largely depends on the approach you decide to take. Many business owners choose to outsource their payroll to an external company, as this ensures they will always be up to date and regulated, allowing them to carry on with their day‑to‑day job. Some people will choose to run their payroll in‑house using free or subscription software, an option that often leaves business owners drowning in paperwork (especially at the end of the tax year) and too busy to dedicate enough of their attention to the business. Either way, you will need to get in touch with HMRC and register as an employer before the first payday of your employees. You can’t register as an employer more than two months before you start paying people, so the window to get this done is pretty small. However, most employers can register online through the link above, so it shouldn’t take much time. From there you will need to consult your software or get in touch with a payroll expert to get started.

Why Is Payroll Important?

Payroll is a small term that encompasses a huge amount of tasks – the main one being ensuring your employees are paid the correct amounts on time. This makes payroll an incredibly important aspect of your business. Your employees need to be able to rely on being paid on a consistent basis without delays. Failure to do so could result in lower morale, especially in smaller businesses where employees tend to be more aware of the company’s financial stability. Payroll also helps you ensure benefits such as bonuses, insurance and pensions are applied correctly and not over or under awarded. Running an effective payroll also allows you to ensure your payments to HMRC of tax and NI are paid on time, reducing the risk of penalties for late or incomplete payments. If you operated your payroll effectively over the year, this will help ensure you have everything you need to provide accurate reports to HMRC at the end of the tax year. Overall, payroll keeps your business running smoothly in the background, and prevents you from having some extremely upset, unpaid employees.

But the major drawback of running payroll is its time consuming nature. Payroll needs to be run anywhere from once a month to once a week, depending on your pay schedules, and this can leave you with remarkably little time to do the rest of your job. That’s why so many businesses choose to outsource their payroll systems to experts like us, freeing up their time and giving them peace of mind about their payroll obligations. For more information get in touch with the eBOS team for your free consultation.