If your business employs staff, you are legally required to operate payroll correctly. Payroll ensures your employees are paid the right amount on time, while also keeping your business compliant with HMRC rules.
What is PAYE?
Pay As You Earn (PAYE) is HMRC’s system for collecting Income Tax and National Insurance from employee wages. As an employer, you deduct tax and contributions each time you pay your staff and send this information to HMRC.
Payroll Responsibilities for Employers
When running payroll, you must ensure:
- Employee Records – Keep accurate details of staff and their pay.
- Tax and NIC Deductions – Deduct the correct amount each pay run.
- Payslips – Provide employees with a payslip every payday.
- Real Time Information (RTI) – Submit payroll details to HMRC on or before each payday.
- Pensions – Enrol eligible staff into a workplace pension scheme and make contributions.
Payroll Options
Employers can choose between:
- In-House Payroll – Using payroll software to calculate pay and submit directly to HMRC.
- Outsourced Payroll – Hiring accountants or payroll providers to manage everything on your behalf.
Common Payroll Challenges
- Calculating tax codes and deductions correctly.
- Keeping up with changes to tax and employment law.
- Managing statutory payments (sick pay, maternity/paternity pay).
- Meeting filing deadlines to avoid penalties.
Why Payroll Matters
Payroll isn’t just about paying wages — it builds trust with your employees and keeps your business compliant. Getting it wrong can damage staff relationships and result in fines. Getting it right keeps your team motivated and your business running smoothly.