In this section we look at some general considerations around setting yourself up as an employer, as well as providing more detail about certain key aspects – registering as an employer, your payroll filing options and understanding the way PAYE works.
You should also start planning for automatic enrolment because as soon as you take on your personal assistant (PA), your workplace pension duties will set in. You can find out more in our auto-enrolment section.
What does it mean to be an employer?
What is a payroll?
Using a payroll provider
How can this site help me run my payroll myself?
I have decided to run my own payroll. Where do I start?
Becoming an employer means that you have various responsibilities. This is the case whether you employ someone on a full time, part time or casual basis.
First things first though: it is important to be sure that the PA you are taking on is definitely your employee, rather than self-employed. See our tax employment status section for help on how to decide whether your PA is employed or self-employed.
As an employer, one of the main things you may need to do is register with HMRC so that a PAYE system can be set up. The main purpose of the PAYE system is for employers to account for and collect tax and National Insurance (NIC) from their employees’ wages and this is done as part of running your payroll.
You can find more information on registering with HMRC in our section on registering as an employer.
GOV.UK has a useful guide to PAYE and payroll. We also look in more detail at what is involved in running a payroll below.
For information on the areas of employment law you will need to think about if you are an employer, see our employment law section.
‘Payroll’ refers to everything to do with the payment of employees. This includes calculating wages but also paying any tax and NIC due on those wages to HMRC.
The following are some of the main payroll tasks that you may need to carry out. You can click on the links to find out more.
- Collect information about your new employee, e.g. National Insurance number, tax code.
- Operate PAYE to collect income tax and NIC on your employee’s pay.
- Potentially deal with benefits and/or expenses and auto-enrolment.
- Send details of the payments made to your employee to HMRC at regular intervals.
- Pay any employer NIC due (after the Employment Allowance has been deducted).
- Pay the tax and NIC to HMRC at the correct time.
- Pay statutory payments where they apply (such as Statutory Sick Pay, Statutory Maternity Pay and Statutory Paternity Pay).
- Collect Student Loan repayments and/or other types of deductions from pay, for example those ordered by a court.
- Give your employee a payslip with each payment.
- Give your employee an annual statement on form P60.
- Take any action required at the end of the tax year and when an employee leaves.
- Keep good records of employees and the payments you make.
The main way of operating your payroll is electronically (or ‘online’) using payroll software. HMRC strongly recommend you use an electronic payroll system as it is quick and easy and you are much less likely to make mistakes. In fact for many employers, it is obligatory to use an electronic system.
There are certain groups however, such as people who take on PAs (called care and support employers by HMRC), who may still use a manual paper system. We explain the difference between the two ways of doing payroll in our filing options section.
Please note that you can choose to use an accountant or payroll bureau to do the work for you but you may have to pay for their services. You can find out more about using a payroll provider below.
Payroll is an essential part of employing someone so it is important that it is done right. If you are hesitant to take on the responsibility or paperwork that goes with operating a payroll, or are anxious about getting things wrong then that is totally understandable.
Your Independent Living adviser/centre or the direct payments team in your Local Authority (or other part of Government) may be able to advise you where else you can get help to deal with your payroll. There’s a variety of support available ranging from advice and information to practical help.
Some will even be able to point you in the direction of in-house payroll support services, or a local provider that they have outsourced their support to (although often there will be a charge).
Another starting point to finding a payroll provider would be to use the Association of Taxation Technician’s ‘find a technician’ tool. Click the button ‘I am looking for tax advice’ and then select ‘Payroll’ as the specialism.
If you can afford to pay an payroll provider to help you run your payroll, then you may choose to do this because of the time you will save by reducing admin/paperwork. They can look after all or some of the necessary calculations, reporting and record keeping.
The exact payroll service you receive will depend on the provider that is chosen and the contract that is agreed with them.
When talking with an accountant, payroll bureau or other provider, you should be clear about what level of support you will need – e.g. do you need them to provide payslips to employees, make payments to HMRC on your behalf or deal with payroll related queries from your employees?
There are payroll providers of all shapes and sizes and you should choose who you want to assist you carefully. When deciding between payroll providers, you should do your research and think about:
- Whether they provide a simple service or a more detailed/managed service?
- Whether they are experienced with your type and size of employer
- Their costs – both ongoing costs and set up costs
- Whether they are recognised by your local authority or a member of a professional institute
- If their payroll software is endorsed by HMRC
- The terms of their contract – e.g. will you be reimbursed if it is clear that they are at fault for failing to do something but you get charged a penalty by HMRC? Are you clear on what tasks you will do and they will do?
It is important that you are aware that even if you use a payroll provider, you are ultimately still responsible for ensuring that your obligations are met, including checking and recording employee information, calculating and recording any additions, reporting your payroll information and making your payments to HMRC.
One point to note is that Value Added Tax (VAT) is chargeable on payroll services, even payroll services provided by charities to disabled employers. This less than ideal situation is discussed further in this Independent Living article and we will post any updates to this website.
You may want to try and run your payroll yourself to save money or because you fancy the challenge. If you have relatively simple payroll arrangements (e.g. you only have one payroll), have one type of pay period (e.g. weekly or monthly) and your PA has straightforward pay arrangements (e.g. hours worked or a fixed salary) then there is no reason why you shouldn’t!
Running a payroll yourself may seem like a daunting prospect, but in our paying wages section we highlight the key requirements to be aware of, and link to the relevant detailed information already available in places like GOV.UK (which can sometimes be hard to find). We also provide tools to help you.
For example, if you choose to do your payroll ‘online’, we explain the main processes in the Real Time Information (RTI) section of our website and guide you to some free payroll software that is available, including HMRC’s own, Basic PAYE Tools.
We have also produced a free payslip tool that can be used with HMRC's payroll software to produce payslips for your employee, as the HMRC software does not have this function.
The first step is to familiarise yourself with the basics of becoming an employer and running a payroll. HMRC have lots of general help for new employers, including webinars, e-learning, emails and videos on employing people – see GOV.UK for further details.
You may find it useful to read our section ‘how the Pay As You Earn system works’ as this will give you some useful background on tax and NIC for employees and employers and the type of payments that you will have to operate PAYE on.
Our paying wages section then explains in more detail, what you need to do to run your payroll, whether online or manually.