Frequently Asked Questions in Payroll 

What Every Employer Needs to Know 

Managing payroll isn’t just about paying your staff on time; it’s also about staying compliant with HMRC regulations, processing tax deductions correctly, and keeping accurate records. Whether you’re a small business or a growing organisation, understanding payroll basics is essential for your business to thrive. 

Here are the most frequently asked questions in payroll, along with our answers to help you stay compliant and confident. 

1. What Is Payroll? 

Payroll is the process of calculating and distributing employee wages, taxes, and deductions. This includes determining gross pay, minusing income tax, National Insurance, and other deductions, and paying staff their net pay. It also involves some key reporting to HMRC (HM Revenue & Customs) through RTI (Real Time Information), which is critical to avoid penalties. 

2. What Information Do I Need to Process Payroll? 

To run payroll accurately, you must collect the following information: 

• Employee name, address, and National Insurance number 

• Start date and tax code 

• Pay rate and hours worked or salary details 

• Bank details for BACS payments 

• Any deductions (e.g. pensions, student loans, benefits, etc.) 

Keeping this information up to date will help you stay compliant and avoid HMRC penalties. 

3. How Often Should I Run Payroll? 

Employers typically run payroll either weekly or monthly, depending on their contracts issued to employees. Monthly is most common for salaried employees, while weekly is preferred in industries like hospitality or construction. It doesn’t matter if you pay weekly, fortnightly or monthly, just make sure your pay frequency is clearly outlined in contracts and follows employment law. 

4. What Is PAYE and How Does It Work?

PAYE (Pay As You Earn) is the system HMRC uses for collecting Income Tax and National Insurance from employees. Employers deduct these amounts from each pay packet and report them via RTI submissions. An employer must also pay National Insurance contributions and possibly other deductions like pensions.  

5. Can I Do Payroll Myself or Should I Use Software? 

You can run payroll manually; however, many businesses use payroll software to reduce errors and automate RTI reporting. Software also helps when calculating pensions, creating payslips, and staying compliant with changing tax rules. 

6. What Happens If I Make a Payroll Mistake? 

Payroll errors, such as underpaying staff or using the wrong tax code, may lead to fines, employee dissatisfaction, or HMRC scrutiny. If you spot an error, correct it in the next payroll run or submit an FPS (Full Payment Submission) adjustment. Always communicate clearly with staff when resolving issues, to ensure transparency and maintain a trusting working relationship. 

7. How Long Should I Keep Payroll Records?

Payroll records must be kept for at least 3 years (some recommend 6 years). This includes payslips, P60s, tax code notices, RTI submissions, and pension contributions. HMRC may request these records for audits or even compliance checks. 

8. Do I Need to Offer a Workplace Pension? 

Yes, under automatic enrolment, eligible employees must be enrolled into a workplace pension scheme, and both employer and employee must contribute. Payroll software often integrates pension contributions. 

9. What Reports Do I Need to Submit to HMRC? 

Every time you run payroll, you must send a Full Payment Submission (FPS) to HMRC. You may also be required to submit an Employer Payment Summary (EPS) if you’re reclaiming statutory payments or not paying any staff in a period. 

At year-end, you’ll need to issue P60s to staff and submit P11D forms for any benefits in kind. 

10. How Does Payroll Impact Employee Satisfaction? 

Getting payroll right boosts employee trust and morale. Consistent, timely, and accurate payments show professionalism and reliability. Mistakes or delays, on the other hand, can damage reputation and increase staff turnover. 

Payroll doesn’t have to weigh you down. With the right systems, knowledge, and support, employers can manage payroll smoothly, stay compliant with HMRC, and keep their employees happy. Whether you’re handling payroll in-house or through a provider, staying informed is your first step to success. 

For more information or if you have other questions not mentioned in our above Frequently Asked Questions in Payroll blog, reach out today via our contact form.