Start-up businesses – what about payroll and pensions?
Setting up your own business is a hugely exciting prospect. It gives you the opportunity to do something that you really love, you can share your knowledge and experience with others, and of course you can be your own boss!
Having a business plan is important, and part of this plan might be that you’ll be taking on employees, either immediately or at some point in the future. So in terms of payroll and pensions, what do you need to think about when you take on your first employee?
First of all, you’ll need to set up a PAYE scheme with HMRC so that you can calculate and pay your employee’s wages and report the pay, tax and national insurance due for each employee to HMRC. You can set up your PAYE scheme online on the .GOV.UK website.
Then you’ll need to appoint a payroll administrator, or you’ll need to buy some payroll software and learn how to use it – get up to speed with the law around minimum pay requirements, tax calculations and statutory pay. To keep your costs down I would recommend that you run monthly payrolls rather than weekly.
There’s an additional cost to the employer over and above the employee’s salary which you might not be aware of, and that’s the employer’s national insurance (NI) contributions, which are 13.8% of an employee’s pay over and above the current NI threshold of over £8,840
You’ll need to tell HMRC about the tax and national insurance due to HMRC each pay period by sending a Full Payment Submission on or before pay day, and then paying the amount due to HMRC by the 19th of the following month.
Turning to your pension responsibilities, your pension duties will start from the date that you employ your first employee – this is called your Duty Start Date. Assuming your employee is eligible (they must be aged between 22 and State Pension age and earn over £833 per month), you’ll need to set up a workplace pension - we do offer a Simply Confirm service for this. You can postpone the enrolment of your employee into your workplace pension for up to three months, we will provide you with the relevant statutory letters needed.