Understanding payroll services: A guide for new businesses

Managing payroll is one task that can quickly waste your time. Getting it right from the start is essential for new businesses to avoid penalties and unhappy employees. At P B Syddall & Co., we understand that payroll can feel overwhelming, so here’s a clear guide to help you understand what’s involved and why outsourcing might make sense for you.

What payroll services include

Payroll isn’t just about paying wages. It covers a range of responsibilities, including:

  • Tax calculations: Ensuring PAYE, National Insurance (NI) contributions and pension deductions are accurate.
  • Payslips: Issuing digital or printed payslips for every employee.
  • Compliance: Staying on top of HMRC regulations and meeting deadlines.
  • Year-end reporting: Submitting P60s and P11Ds.
  • Pensions: Handling auto-enrolment duties and making sure contributions are correct.
  • Statutory payments: Calculating sick pay, maternity/paternity pay, and holiday pay.

These tasks are essential, but they’re also time-consuming. Mistakes can lead to fines or HMRC audits, disrupting your business.

Benefits of outsourcing payroll

Outsourcing payroll can give you more time to focus on running your business. Here are a few benefits:

  • Saves time: Payroll takes up hours every month. Handing it over to professionals frees you up for other priorities.
  • Reduces errors: Payroll providers have the expertise to avoid costly mistakes.
  • Ensures compliance: Legislation changes regularly. Staying compliant can be tricky if payroll isn’t your main focus.
  • Scales with your business: As your team grows, so do payroll requirements. Outsourced services can handle increasing complexity without slowing you down.

For small businesses, outsourcing is often more cost-effective than hiring in-house staff to manage payroll. You pay for the service you need without taking on another salary.

Key payroll responsibilities and legal obligations in the UK

As an employer, you have several responsibilities to ensure payroll is handled correctly:

  • Register as an employer with HMRC: This must be done before your first payday.
  • Report to HMRC through RTI (Real Time Information): Every time you pay staff, you must submit a Full Payment Submission (FPS) detailing pay, tax, and deductions.
  • Meet minimum wage requirements: The National Minimum Wage and National Living Wage are updated every April. In 2024/25, the National Living Wage applies to workers aged 21 and over.
  • Manage pension auto-enrolment: Eligible employees must be automatically enrolled into a workplace pension, with contributions deducted from their salary.
  • Provide accurate records: You need to keep payroll records for at least three years.

Failure to meet these obligations can lead to penalties, so staying informed is important.

How to choose the right payroll provider

Choosing a payroll provider isn’t just about cost. You need to find someone reliable, experienced, and able to scale with your business. Here’s what to look for:

  • Experience with businesses of your size: A provider used to handling payroll for 500 staff may not be the best fit if you have five employees.  A payroll provider experienced in working with smaller businesses is more likely to offer a personalised service, ensuring your needs are met without unnecessary add-ons or complexity.
  • Transparent pricing: Make sure there are no hidden fees. Understand exactly what the service includes.
  • Customer support: When issues arise, you want fast, helpful support.
  • Up-to-date with regulations: Your provider should stay informed about payroll legislation and ensure your business remains compliant.
  • Integration with your systems: Payroll software should work with your existing accounting tools.

At P B Syddall & Co., we offer payroll services tailored to your business needs. This ensures you stay compliant and avoid unnecessary stress.

Common payroll pitfalls to avoid

Payroll mistakes can be costly. Here are some common pitfalls to watch out for:

  • Missing deadlines: Late submissions to HMRC can result in fines.
  • Incorrect tax codes: Using the wrong tax code can lead to underpaying tax.
  • Failing to update employee details: Changes in address, bank details, or work hours should be reflected immediately.
  • Ignoring holiday pay: All employees are entitled to paid leave. Failing to calculate this correctly can lead to disputes.
  • Not keeping records: Accurate records are essential for audits and queries.

A payroll provider can help you avoid these issues by ensuring everything runs smoothly behind the scenes.

Wrapping up

Payroll is essential to running a business, but it doesn’t have to be a headache. Whether you’re managing it in-house or outsourcing, getting it right will save you time and money. Working with a trusted provider like P B Syddall & Co. makes you feel confident that your payroll is handled accurately and on time. We’re here to take the hassle out of payroll so you can focus on what you do best – growing your business.

If you’re considering outsourcing payroll or need advice on where to start, get in touch with us today. We’re happy to talk you through your options and provide a solution that fits your business needs.