There has been a surge in new company formations in the last few years, as entrepreneurs develop new and exciting business ideas and bring them to market.
While many businesses may initially rely solely on the work of their founder, there comes a time when operations grow so much that they need to consider hiring their first employee.
Taking this step can lighten your workload, but employing people is a serious responsibility and brings with it various new tax and payroll requirements.
If you have previously been one of the 4.2 million businesses in the UK with no employees, other than yourself, and you are looking to bring in a new worker, here are our top tips for putting your best foot forward.
Inform HM Revenue & Customs
Before you can hire someone, you need to register as an employer with HMRC. By doing so, you will obtain an employer PAYE reference number so you can manage your payroll.
Registration must be completed within four weeks of your new employee’s first day; whilst the process is fairly quick, receipt of your PAYE reference number can take up to two weeks, so you should bear this in mind.
Establish effective payroll processes
You will need to manage your payroll online each month, report this information to HMRC and make the correct payments of tax and National Insurance, as well as paying into any benefit schemes or pensions offered to your employees.
As such, you will need to implement processes and payroll software systems that enable these things to happen.
You may already have existing systems in place that manage your personal payroll, but you should consider whether these will still be sufficient when you grow your headcount.
It is also worth remembering that there are a whole host of different deductions that you may have to make from employees’ pay; for example, student loan repayments, pension contributions, Payroll Giving donations and child maintenance payments.
The weekly or monthly administration of your payroll can be time-consuming and is often complicated by regular changes to the rules surrounding pay, which is why many businesses choose to have a dedicated payroll bureau manage it for them.
Ensure an auto-enrolment compliant pension scheme is in place
If any of the workers that you hire are eligible for a workplace pension you will need to set up and manage a scheme for them. You must automatically enrol your staff into a pension scheme and make contributions to their pensions if all of the following criteria apply:
- They are classed as a worker
- They are aged between 22 and the State Pension age
- They earn at least £10,000 per year
- They usually (‘ordinarily’) work in the UK.
You will also need to calculate and make an employer’s contribution of at least three per cent each month to the scheme and ensure that an overall minimum contribution of eight per cent is made.
The additional five per cent is usually made up of an employee contribution, but both you and an employee can offer to contribute more should you wish to.
Your employees can choose to opt out and leave the scheme, but you will still need to re-enrol them every three years.
Pay the correct National Minimum Wage
You are legally required to pay your employees at least the correct National Minimum Wage (NMW) or National Living Wage (NLW) for those aged 23 and above. Failing to do so could result in you being fined and publicly named and shamed.
The current NMW rates, as of April 2022, are as follows:
|23 and over||21 to 22||18 to 20||Under 18||Apprentice|
|April 2022-March 2023||£9.50||£9.18||£6.83||£4.81||£4.81|
Consider outsourcing payroll
Outsourcing your payroll can eliminate the administrative headaches that come with trying to run it yourself, and the consequences associated with getting it wrong, whilst streamlining this vital part of your operation.
At GH Payscheme, we operate a BACS-approved payroll bureau, and pay advice service, that supports businesses in Bedfordshire, Cambridgeshire, Hertfordshire, and throughout the UK.
Running your payroll compliantly and ensuring that your employees and HMRC are paid accurately and on time need not be a concern. We can process your payroll, no matter your headcount, and ensure your PAYE liabilities are met.