UK Payroll | A guide for start-ups and companies expanding to the UK
The UK is a great country to do business in, so it’s no wonder that, according to GOV.UK, each year between 500,000 and 700,000 new businesses are established in the UK. Before entering into this world of business, it’s important that you do your research, and a key area for businesses is payroll. How do you ensure your employees are paid correctly and on time, whilst making sure your business is compliant with relevant legislation? Our simple guide will get you started.
Register as an employer - PAYE reference number
The first step we recommend is informing HM Revenue and Customs (HMRC) about your intention of placing employees on your payroll. HMRC will issue you a PAYE reference number as a unique identifier for them to track payments of tax and National Insurance owed by you and your staff members. It comes in two parts, in the format 123/AB12345.
You can register for a PAYE number via the HMRC’s online portal or by simply giving them a quick call. Remember that you must register for a PAYE reference number before the first pay day or two months before you want to begin paying staff, and bear in mind that it will take up to five days to receive your number.
Outsourced or in-house payroll?
This is an extremely important step; payroll is an essential part of your business, but it can also take a lot of time and effort to ensure it is done properly. For many start-ups, the simplest and possibly most effective way to handle this step is by outsourcing. Outsourcing allows you to ensure payroll is done correctly and on time; it means you’ll avoid mistakes and the risk of fines for payroll being done incorrectly.
For those companies setting up in the UK for the first time, outsourcing to local experts like Quinton Oakes means you don’t have to dedicate resources or a set up a department dedicated to this function, therefore avoiding what could be a very costly exercise. Quinton Oakes offers a fully outsourced managed payroll services, our team of payroll experts will ensure your payroll is done correctly and your employees paid on time.
Salary/wages - how much will you pay your employees?
The UK government reviews minimum wage annually and changes it every April in line with the beginning of the new financial year. Minimum wage is a legal requirement in the UK and is set by the government to protect workers – failing to meet this requirement could land you in civil court and comes with penalties from the HMRC. Apprentices and employees aged 16 to 22 are entitled to a national minimum wage and those aged 23 or over are entitled to a national living wage (we explore the different rates in our ‘What is Minimum Wage’ blog).
Pension – auto-enrolment
In 2008 the UK introduced the Pensions Act 2008, which saw the initiation of auto-enrolment. Since then, all eligible staff in the UK must be automatically placed into a pension scheme by their employer and the employer is legally required to contribute to this pension scheme, unless the employee decides to opt out. Even if you employ only one person, you are an employer and must comply.
Leave - maternity, sick and holiday pay
Statutory pay is a requirement in the UK and must be paid by employers if their employees are sick, on maternity leave or take leave for holiday. For example, maternity pay is paid for up to 39 weeks: the employee gets 90% of their average weekly pay for the first 6 weeks and then £151.97 or 90% of your average weekly earnings (whichever is lower) for the next 33 weeks.
These rates differ according to the different types of leave and can also be affected by other factors, including the length of time the employee is off work and the employee’s salary.
In general, payroll can be complicated, and we have only touched the surface to get you started. There are plenty of other key areas, including employment law, that you need to consider. Our best advice is to leave the set up and running of your payroll to the experts whilst you focus on running and growing your business. Quinton Oakes can help with employment law, setting up your payroll and the day to day running of payroll. With our extensive experience in payroll, we can be your trusted partner of choice.