If you鈥檙e running a business, payroll is something that you can鈥檛 afford to get wrong. Quite literally. Employees expect to be paid on time and correctly. So even if it鈥檚 just you and a small team with a handful of employees, it鈥檚 still worth using a payroll system.
Aside from paying salaries, they can help with a lot of other things. Filing taxes, calculating employee benefits and making sure that your business is compliant. Trying to do all of that manually could easily lead to mistakes and would definitely cause some headaches.
Companies that offer payroll software in the UK include:
So if you鈥檙e wondering how to get started with a payroll system and what you need to do beforehand, keep reading.
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How Do Payroll Systems Work?
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Essentially, payroll systems automate the entire process of working out employee pay and deducting the relevant taxes. They will then pay your staff and tax authorities directly.
All you need to do manually is provide the required information such as employee salaries, their working hours, benefits and tax codes. From there, the system takes over and does all the work for you.
Modern systems are also able to create payslips, update tax records when needed and send you reminders about tax filing. It鈥檚 like having a mini HR department on your computer to take one less thing off your to-do list.
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Getting Started With A Payroll System
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There鈥檚 no doubt that a payroll system can greatly simplify your life, which business owners will appreciate. But before you get going, there are a couple of things that need to be in place first.
Whether you鈥檝e just started your own business or wanting to make the switch from manual payroll, here is a step-by-step guide on how you can get up and running with your system.
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Make Sure Your Business Is Registered For Payroll
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Before you can start using an automated payroll system, your business needs to be legally allowed to hire and pay staff which means it needs to be registered. This step will make sure that you are compliant with the relevant employment and tax laws in your country.
If you are based in the UK, you can register with Companies House. They will issue you with a business tax ID number and register you for Pay As You Earn (PAYE). After this has been done successfully, you can move on to the next step.
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Compile The Required Information For Each Employee
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A payroll system is only efficient when it has the correct and updated information. This will include each employee鈥檚 name, address and contact details, tax and banking details, salary, contract type as well as any benefits and deductions.
Every employee also needs to fill out a tax form which is a P45/P60 in the UK.
Just the smallest error here can end up with your business being fined or unhappy employees so getting this step right is crucial.
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Find The Right Payroll System
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There are plenty of payroll systems on the market so you鈥檒l need to find the one that suits your company鈥檚 needs. This will be based on what your budget is, how big your team is and the automation features you want. You can also choose between desktop or cloud-based software.
Most will offer you a free trial so you can test it out before making a commitment.
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Set Up Your Payroll Software
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After you have picked a system, it will need to be setup. In this step, you can load your business details and employee information, choose payment schedules and add your payment methods.
This step takes the most time but don鈥檛 rush it. Getting the setup done correctly from the start will save you a lot of hassles down the road.
Once the setup is completed, you can run the first payroll. Don鈥檛 forget to double check the information before you approve it, most systems have a preview setting so this is where you can check it.
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Keep The Payroll Updated
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This step is often forgotten but it needs to be done on an ongoing basis. If your team鈥檚 salaries, bank details or roles change, they need to be updated accordingly. As employees come and go, remember to update the system.
Some systems have self-service portals so your employees could update their own information as needed, which reduces the admin on your part.
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Additional Payroll System Features You Could Use
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Modern payroll systems come with extensive features beyond handling salaries and taxes. Depending on what your business is and how large your team is, some of them could be pretty useful.
Things like holiday and sick leave tracking, payslip branding, time-tracking and integrations with account software aren鈥檛 essential but they definitely would make your life easier if you have big teams.
