Are you a sole director looking to be paid by your company? Are you thinking about hiring your first employee? 

You’ve perhaps come across payroll and wondered what it meant for you and your business. You’ve also perhaps wondered whether you need a payroll system or not. The answer is, invariably, yes. 

In this post, we’ll discuss what payroll is and highlight three reasons why small UK businesses need to have a system in place. A proper payroll system: 

  1. Ensures employees are paid properly 
  1. Ensures your business stays compliant with HMRC 
  1. Frees up time and resources to be spent elsewhere 

So, let’s dive into what payroll is and why it’s vital to have one for your small business. 

What is payroll? 

Payroll is a method of paying employees, tracking wage expenses, and calculating the right amount of tax needed to pay HMRC. Whether you have one employee or one hundred, a payroll system enables you to make sure they are paid the right amount on time. Payroll also functions as a list of in-house staff who are paid by your business (discounting outsourcing and freelancers). If, you want to make sure your employees are paid fairly, you must have a proper payroll system. 

Payroll can either be managed through software or run by a specialist accountant. Whichever way you choose to manage your payroll, make sure it’s accurate! For more information on how payroll should work, visit the Gov.uk website. 

Two people looking at a computer and discussing payroll

3 reasons why payroll is essential for small UK businesses 

1. It ensures employees are paid properly 

People like to be paid on time and fairly. There’s a very special feeling seeing that wage packet drop into your account. When you’re not paid on time, it can sour your mood and harm your mental health. 

So why leave that to chance? Having a payroll system ensures that employees are paid the right amount on time. Your employees will be happy and more loyal to your business because you made sure they were paid properly. It’s the simple things that matter in this case!  

Even better, it won’t leave you panicking on payday as you struggle to pay your employees’ wages promptly – more on that later. 

2. It ensures that businesses stay compliant with HMRC 

Proper payroll systems send information regarding PAYE payments to HMRC directly. This is known as Real Time Information (RTI), which maintains a record of all payments made to employees and makes the necessary tax and pension amendments. This information is then sent to HMRC directly every time an employer pays an employee. 

Even if a business with employees has one sole director and no tax to be paid, the information must be sent to HMRC regardless to avoid penalties. In this way, the business can maintain their compliance with an effective payroll system. 

3. Reliable payroll systems free up time and resources 

An efficient system will be automated or at least managed by a professional accountant/payroll specialist. This means you won’t need to worry about making sure your employees are paid on time, if they’ve been paid the right amount, or if they have been sent properly through RTI. You’ll have more time and resources available to spend working on your business. 

Summing up 

Having a working payroll system is vital for any small business with employees, whether they have one or one hundred. Payroll systems make sure that: 

  1. Your employees are paid properly. 
  1. Your business stays compliant with HMRC. 
  1. You have more time and resources to spend on your business. 

Do you need to have a working payroll system for your business? Contact us to learn more about how we can help your business grow and stay tax compliant.  

Or, if you want to learn more about payroll and how it can benefit you, subscribe to get exclusive updates and blog posts straight to your inbox.