How to set up your payroll

Let’s face it, people won’t work for free.

But running payroll can seem intimidating – there's a reason why people outsource their payroll to specialist companies.

Does that mean it’s impossible? No, but you need to know your stuff.

The good news is that we’ve covered the basics, breaking down how to set up your payroll so you can start paying people.

1) Get registered with HMRC

The first thing you need to do – before even running your first payday – is to register as an employer with HM Revenue and Customs (HMRC).

HMRC oversees everything concerning tax, payments and regulations, including the National Living Wage (NLW), National Minimum Wage (NMW) and National Insurance (NI).

After you’ve registered as an employer with HMRC, you will receive your Pay As You Earn (PAYE) reference number.

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What is Pay As You Earn (PAYE)?

This is the system used by HMRC to deduct Income Tax and National Insurance from your employees’ pay.

Its online system, PAYE Online, enables you to check what you owe HMRC, pay your bills, see your payment history and access tax codes and notices about your employees.

Top tip: when you register, your PAYE reference number can take up to five working days, so ensure you allow enough time before your first payday.

2) Put good payroll software in place

The PAYE Online system requires Real-Time Information (RTI), meaning you report to HMRC electronically before making any payments to employees. 

To report employee data in real-time, you need payroll software which ticks off the essentials, such as recording employee details, determining pay/deductions, reporting to HMRC, providing payslips and calculating statutory payments.

There’s a lot of software on the market, so when looking, give yourself enough time to research, explore your needs and ultimately find the one that suits you.  

Essential guide for business growth: payroll

Our complete guide to getting payroll right is out now!

It’s part of our special IRIS SuccessKit resource, covering everything from running your payroll to the various obligations you need to consider.

Essential guide for business growth: Payroll

Download here