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Becoming employers Hiring your first employee HMRC Start a business

No more paydays!

For years, payroll was a mystery to me.

I knew how to make payments online, of course, but how a company actually made the action of transferring sums of cash into its employees’ accounts was shrouded in the deep unknown.

 

When we took on our first employee, Craig, in July 2016, I looked into finding someone to do the act of payroll for us. I asked around.

Our accountants wanted around ยฃ250/year for the privilege of doing it. And, of course, they strongly advised we took them up on the offer.

But others, both real people and those online, assured me it wasn’t hard at all and there was no reason why I couldn’t do it.

I watched several HMRC YouTube videos which helped explained the process.

The advice team at the Federation of Small Businesses, which we had joined a couple of months previously, were really helpful. (I recommend joining this fabulous organisation if you are considering going into business, if only for the free legal advice line alone).

And so I downloaded HMRC’s free software, Basic PAYE Tools, and got started. It really was quite straightforward. I followed simple steps and suddenly we were away.

Things that had been completely mysterious to me before suddenly started to come clear. A tax code is the bracket each person is put in so HMRC knows how to tax them. The amount of National Insurance and Tax that needs to be paid is clearly outlined to you once you have inputted those details. Payroll is paid when a finger on the hand of a person’s hand presses the ‘Pay’ key. Quelle mystique!

And so we continued. Until things got a little more complicated. Basic PAYE Tools is fabulous, but it doesn’t allow you to print payslips, and, try as I might, I could not find payslip software that worked with Apple Mac.

Then when we registered our new limited company this summer we decided Craig should be dismissed from the partnership business we had previously run, and be immediately hired by the limited company. In an attempt to tidy up the payment process, I set up payroll on Xero, the online accounting system we started to use round about October last year.

It took me some time to get used to Xero but once I did, I found it superb – slick and straightforward. Unfortunately, the payroll section was not quite so clear. Without realising, I made a mistake that meant that Craig’s earnings from the previous financial year were added to his current earnings for this year, and on our October pay day he was taxed heavily.

It was time to let the experts take over!

Our new accountant, Mark, recommended a payroll firm and I made contact with them. Through several long conversations – the one thing you realise is that tax is a complicated subject and even the experts can need to take their time to ensure they have fully understood it – things eventually became clear.

Nothing of course moves quickly in the world of tax and HMRC. For a new accountant to deal with your affairs HMRC needs to send you an authorisation code. You then give it to the new agent and HMRC will then recognise them. It’s all standard security practice, of course, but it doesn’t half take forever when you are anxiously waiting to hear that everything will be restored with the next payday. Craig had taken the disaster pretty well but I knew his patience would not extend into a second month.

The authorisation code finally arrived two days before payday and the new accountants were able to send me proper payslips. As I printed them out, it felt like we were once again moving up another step into the world of running a successful business.

So am I glad I decided to do our own payroll?

Yes, I am glad that I took the decision to do my own payroll – at least for a short time.

Craig, of course, may not agree with this because I know his month was a stressful one (so was mine, but differently!)

In hindsight, I enjoyed doing payroll but I am glad and relieved to have passed the responsibility on. I am so glad I did it for just over a year, because now I understand the process enough to go forward and it will help me deal with any potential future issues.

But, being very honest, handing over is a relief. No more pay day scrambles, and no more panics over getting things wrong!

One thing to remember is as an employer you are expected to be almost super human and never to get anything wrong. Employees and their family and friends have a remarkable ability to forget that employers, especially start up business owners, are people just like them, on a huge journey of learning and discovery.

The responsibility of funding someone’s life every month is a big one, and definitely, DEFINITELY not for the faint-hearted.

 

 

 

 

 

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