Once you have decided someone is an employee you have to put them on the payroll and of course you are obligated to deduct tax and national insurance from their salaries. To do this you need to inform the government how much each employee earns on a regular basis by registering with HMRC as an employer and submitting RTI returns (Real Time Information). What this means is that however regular you pay your employees be it weekly or monthly you will have to file a return with HMRC stating the amounts paid and tax and NI incurred each time you make a payment. Therefor the chances are you will either have 12 or 52 returns to file each year.
£112 National Insurance Limit
- Must be submitted before or on pay date
- Every week/month
- Personal Details:
- Full name
- National Insurance Number
- Date of Birth
The only situation where you will not be required to file such regular returns is if each and every person you employ earns less than the national insurance limit which is currently £112 per week. Unfortunately, if just one person breeches this limit throughout the year then the entire payroll needs to be registered and returns filed every week or month. You will need some sort of software to calculate the tax and national insurance for you.
Other issues range from Pensions, Maternity Pay, Statutory Sick Pay, Student Loan Deductions and attachment of earnings orders.
Over the next couple of years the government are introducing an auto enrolment pension scheme which means that employers will have to provide employees with a pension and make contributions into that of a minimum of 1% of their salary. It is something to be aware of going forward as it will eventually affect all businesses with employees.
Sick pay is something that you are obliged to pay. It used to be that you could claim it back off the government but unfortunately that is no longer the case. The government have introduced a £3,000 a year employment allowance on the national insurance that employers have to pay. So if your employer’s NI is anything up to £3,000 you won’t pay anything and if it is more you will only pay the difference.
Maternity and Paternity pay are also unavoidable costs. Maternity pay has to be paid for 39 weeks. The first 6 weeks at 90% of their full pay with the remaining 33 weeks at £139.58 a week.
Paternity pay is much shorter with the entitlement just 2 weeks together at the same rate of £139.58 per week.The good news is that unlike sick pay the government do subsidise the majority of maternity and paternity pay, so this is not something you will have to afford for whilst also paying for cover. They will also give you advance funding up front to cover maternity costs, if it is likely to prove a burden on your cash flow.
Student Loan Deductions:
Under the current rules there are two plans: plan 1only affects you when your employees earn over £17,495: plan 2 deductions start for someone earning over £21,000 a year. Once the employee has reached these thresholds they have to pay back 9% of any excess over that amount. So if someone has a salary of £22,000, is on plan 2, they will repay 9% of the 1,000 which is £90 a year, which you need to deduct from their salaries and pay back to the government.
These figures are for people who have had their loans recently, so if you are employing someone older then the rates may be different.
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