Expert article
Payroll for UK Small Businesses: More Than Just Paying Your Team
For many small business owners, payroll feels simple: work out what people are owed and pay them. In reality, running payroll in the UK makes you a tax collector for HMRC, a pensions administrator and a keeper of legal records, and each of those comes with deadlines and penalties.
What payroll actually involves
- PAYE and National Insurance: deducting the right Income Tax and employee National Insurance using each person's tax code, and calculating employer National Insurance on top.
- Real Time Information (RTI): sending a Full Payment Submission (FPS) to HMRC on or before every payday, and an Employer Payment Summary (EPS) where you need to claim allowances or report no payments.
- Paying HMRC: the tax and National Insurance you deduct is paid over monthly (or quarterly for very small employers), usually by the 22nd of the following month when paying electronically.
- Payslips: every employee is legally entitled to an itemised payslip, including hours for those paid by the hour.
Workplace pensions
Every employer has automatic enrolment duties. You must assess your staff, enrol eligible workers into a qualifying pension scheme, pay employer contributions, and complete a declaration of compliance with The Pensions Regulator. Missing these duties is one of the most common and costly payroll mistakes we see.
Minimum wage and statutory payments
National Minimum Wage and National Living Wage rates rise every April, and underpaying (even by accident, for example through uniform costs or unpaid training time) can lead to arrears, penalties and being publicly named. Payroll also has to handle Statutory Sick Pay, maternity, paternity and shared parental pay correctly.
Starters, leavers and year end
- New starters: right-to-work checks, a P45 or starter checklist, and the correct tax code from day one.
- Leavers: a P45 and final pay, including any holiday owed.
- Year end: P60s to all employees by 31 May, and P11D forms for benefits in kind by 6 July.
Why outsourcing payroll pays for itself
Errors in payroll hurt twice: they damage staff trust, and they bring HMRC penalties and interest. An outsourced payroll service means your team is paid correctly and on time, every RTI submission is filed, and pension duties are handled, without you learning the rules yourself.
JZ Consultants runs weekly, fortnightly and monthly payroll for businesses across London and the UK. See our payroll service or book a free consultation.