By Ashley Preen
December 17, 2020
If you have employees, or even if you just want to pay yourself in your limited company, you need to run payroll before disbursing any money.
Running payroll before the boom of digital services was usually an overwhelming, time-consuming monthly process. This is true of all accounting tasks.
Now, however, much of the legalities regarding running payroll are automated for you when you use accounting software such as Xero, Quickbooks or FreeAgent.
The word “payroll” itself means “a list of a company's employees and the amount of money they are to be paid.”
That says nothing for the current connotations of the term, specifically when used in the phrase “running payroll”.
Running payroll means the monthly procedure that deducts an employee’s tax (PAYE), National Insurance contributions as well as any other monthly deductions that must be made to HMRC before paying that employee.
If these deductions are not made properly or HMRC is not paid in a timely manner, it is the employer that is at fault.
Let’s be blunt: Doing payroll manually is not only a hassle, but it’s also risky. There is simply too much legislation that must be complied with to do it properly, and human errors can lead to costly penalties for employers.
Here’s what you need to do when running payroll:
Did we forget something? Probably.
Since the beginning of the digital revolution, there have been companies engaged in making payroll easier.
Payroll is so involved and so intricate that many providers dedicate their entire offering to this service alone.
Whereas, say, Quickbooks integrates payroll into their accounting and bookkeeping system, companies like BrightPay have dedicated payroll software which takes care of all the myriad tasks you need to know about when running payroll. BrightPay also integrates with Quickbooks, Xero and FreeAgent.
There are other tools around as well. The UK government has a list on its website of all the payroll software that it has officially sanctioned for use. Errors in payroll can be costly, so it’s vital to only use software that has been properly accredited and validated.
Hiring an accountant just makes sense, even if you’re a sole trader.
But the need is increased tenfold if you are a limited company and need to run payroll every time you want to get paid, or if you have employees.
Even though many aspects of running payroll happen “automagically” as a result of integrated software that does the job for us, having an accountant on board who can look over the numbers can result in:
Depending on the number of employees you have under your umbrella, hiring an accountant might be the best possible solution to running payroll at your office.
You need to know that payroll is best done using efficient software. And you also need to know that this software doesn’t replace the need for skilled and knowledgeable humans.
If you do use automated tools to run payroll, make sure you have someone who knows the subject inside out to look over the figures and forms at the end of the day. This can either be an accountant or an in-house employee.
The ideal strategy for a successful business could be said to be: Do what you know and delegate the rest.
Payroll is one of those things that is best delegated to: