Paying Employees Through PAYE
All employees that are paid some form of compensation for the work they carry out on behalf of an employer should be enrolled on to a payroll system. All employers should be registered with HM Revenue and Customs (HMRC) and inform this organisation whenever they take on a new employee, as failure to do so may result in penalty action be taken. A payroll processing company can provide all necessary tax forms that are legally required when an employee begins or leaves a company, ensuring the day to day running of a business isn’t disrupted in the process.
Employers must pay all employees that earn £112 a week or more (£486 a month or £5,824 a year) through PAYE. On the other hand, self-employed employees are not required to be paid through this system. However, records of pay should still be kept by both the individual and the employer, to avoid discrepancies that may occur later down the line.
There are several ways to determine if an individual is employed by the company or self-employed. Generally, someone is employed if they work for an organisation, but do not have any of the associated risks of business ownership. A self-employed individual is someone that runs their own business and has the responsibility of making it a success. A self-employed individual will also have to incur any charges that come with the failure of a business. The HMRC offers a guide for individuals which allows them to decipher the employment status of each person working within a company. If an employment status of a worker is found to be incorrect, extra tax, National Insurance, interest and a penalty charges may apply. A dedicated Northampton payroll company will work alongside a business and be able to easily spot any discrepancies in payments being made out. Many businesses prefer to outsource their payroll needs so they can avoid the time consuming process of training in this area of accounting, and solely focus on their products, aims or services.
Temporary workers that are classified as employees are also required to be paid through the PAYE system, if they are paid directly. Many temporary employees are paid via an agency working on their behalf, and when this is the case the PAYE system does not need to be operated. However, it should be noted that when a temporary workers’ agency is based abroad and does not have a branch in the UK, they will need to be compensated through PAYE.
Payroll systems should be kept as up to date and accurate as possible at all times, and a Northampton payroll company will able to efficiently manage the payment process of one off payments to employees, bonuses, hourly rates, salaries and all other types of payment that needs to be processed by a payroll department. Due to the complex system of payroll, many businesses are choosing outsource this task to specialist companies. Investing in payroll software and equipment can be a costly exercise, and by delegating this task to dedicated businesses, such as a Northampton payroll company, companies can keep the head count of their company as low as possible.