Summary of Key Points
- File submissions to HMRC on or before the date you pay staff.
- Operate monthly or four-weekly payslips.
- Operate workplace pensions.
All employers must submit payroll data electronically every pay period to HMRC. Requirements:
- Obtain full name, address, date of birth and NI number for all staff. This can be done now, no need to wait until April!
- Identify the “normal working hours per week” of each employee.
- Report gross pay, deductions and net pay for each employee on or just before pay day each month. Normally this will be when you produce the payslips from your payroll system.
The only exception to this is if every staff member every pay period is paid below the Lower Earnings Limit, which is £123 per week or £6,396 for the year for tax year 2023-24.
Why Monthly or 4-weekly Pay is a “No Brainer”
There are various reasons why converting weekly paid staff to monthly or 4-weekly paid is a “no brainer”:
- You’ll be doing 12 or 13 payslips instead of 52 per year.
- This reduces the cost if you are using an external payroll supplier. For example, if you have 5 monthly paid staff the annual charge from Oaktree is £225 plus VAT – but it is £600 plus VAT if they are weekly paid.
- Late submissions could get a £100 penalty, so give HMRC 12 or 13 opportunities per year and not 52!
- It greatly simplifies operating auto enrolment pensions.
Over the past few years, Oaktree has collectively saved clients over £3,000 in accountancy fees by converting staff from weekly to monthly payslips.
Information must be supplied electronically to HMRC on or before the payment date in respect of each payslip run. The HMRC jargon for this is Real Time Information (RTI).
This is a one-pager, so no space for maternity pay, paternity pay, benefits in kind and the reams of detailed stuff you can find on the HMRC website. The regular item you should think about from day 1 is holiday pay. All staff are entitled to 28 days per year, or the pro-rata amount in respect of part-time staff. Oaktree clients have three options for doing this:
- Some clients keep tack of holidays themselves and just provide the hours to pay.
- Holidays can also be recorded on the face of payslips. Clients provide the hours worked, plus the hours of holiday to pay.
- Some clients prefer to just add 12.07% (which is the equivalent of 28 days) on top of gross pay, as a separate line item on each payslip.
Workplace Pensions - Auto-Enrolment (AE)
Under AE every employer must:
- Assess staff in various categories and communicate this to them in writing.
- Pay a minimum 3% - into a pension fund for each staff member.
- Deduct 5% (gross, 4% net) from each staff member through their payslips.
- Sort out a suitable pension fund, or funds, to administer the investment of this money.
This all begins on the date of employment of each new staff person.
You can read what HMRC has to say about RTI for payroll here:
Moneysoft is the UK market leader for payroll software, fully accredited for RTI (http://www.moneysoft.co.uk/).
Payroo is a free to use (but with advertisements!) fully accredited system. Oaktree uses the paid for “big brother” version of this, Able Internet, for all clients in order to be able to offer clients support in using Payroo.
Over the years Oaktree has helped several clients set up and successfully run their own payroll systems, for a one-off fee of between £100 plus VAT and £250 plus VAT depending on the size of the business.