By Stacey Watkinson
One of the most important yet complex responsibilities for small business owners in the UK is managing payroll. There are added pressures in payroll from understanding tax codes to handling employee pension contributions. There is a lot to get right, and even more at risk if you get it wrong.
In this blog, I’ll walk you through the basics of small business payroll and explain how outsourcing your payroll can save time, money, and stress.
1. What Is Payroll?
Payroll refers to the process of calculating and distributing wages to your employees. This includes:
- Calculating gross pay
- Deducting taxes, National Insurance (NI), and pension contributions
- Issuing payslips
- Submitting reports to HMRC
- Making payments to employees and HMRC
Whether you have one employee or hundreds, it is a legal requirement to manage payroll correctly.
2. Registering as an Employer with HMRC
Firstly, you must register with HMRC as an employer before you can pay your first employee, and this can take up to 5 business days, therefore it is best to get ahead.
Unless you are using contractors or freelancers, you’ll need to use PAYE (Pay As You Earn) to report employee payments and deductions.
👉 Register as an employer with HMRC
3. Key Payroll Responsibilities
Once you’re set up, here’s what you’ll need to stay on top of:
- Employee Records: Keep detailed records of wages, working hours, tax codes and holiday leave.
- Payslips: A payslip must be provided to an employee before or on the same day they get paid.
- Reporting to HMRC: Submit Real-Time Information (RTI) each time you pay employees.
- Paying Deductions: Send income tax, NI contributions, and student loan deductions to HMRC monthly.
4. Understanding Statutory Pay
Small businesses must also account for statutory payments, including:
- Statutory Sick Pay (SSP)
- Statutory Maternity/Paternity Pay
- Holiday Pay
Failure to comply can result in penalties or legal action.
5. Automatic Enrolment & Pensions
Every UK employer must offer a workplace pension and automatically enrol eligible employees.
The current minimum contributions are:
- 5% from the employee
- 3% from the employer
Learn more here 👉 Workplace pensions and auto-enrolment
6. Software vs Outsourcing Payroll
A lot of small businesses begin with payroll software, however, this can quickly become overwhelming as their business grows. That’s why thousands are choosing to outsource their payroll to experts.
Benefits of outsourcing include:
- Ensuring compliance with HMRC regulations
- Avoiding costly payroll mistakes
- Saving admin time and resources
- Getting professional advice and support
7. What to Look for in a Payroll Partner
If you’re considering outsourcing, choose a provider that offers:
- Transparent pricing
- Experience with small businesses
- Full HMRC compliance
- Support for pensions, sick pay, and holiday management
👉 Check out our Payroll Services for Small Businesses to see how we can help.
Final Thoughts
Payroll isn’t just about paying staff. It’s a critical business function that affects your legal standing, employee satisfaction, and financial health. Ensuring you get it right from day one will help your business stay compliant and build a solid platform for growth.
Let our experts handle it for you. Contact us today to find out how we can streamline your payroll and take the stress off your plate.
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