When you are setting up a business many of the important issues come along with employing people. You won’t need to worry about payroll if you are going to be a sole trader, but if your business will need to employ people to get your goods and services out to market, then payroll is an issue.

Payroll is the process of calculating your employees pay and necessary deductions which you undertake (either as a paper or electronic system on computer) to fulfil the requirements of the Government’s PAYE (Pay AS You Earn) scheme. It will include all payments you will make to your employees such as: wages/salaries, overtime payments, commission/bonuses, holiday pay and any statutory payments they may be entitled to such as Sick Pay and Maternity/Paternity pay. It also covers the deductions you have to make for Tax and National Insurance Contributions (both employees and employers) and student loans that you will pay out to HM Revenue and Customs every month. If all this seems daunting and complicated, the answer is, it is, if you haven’t had any training or experience.

As a new business owner you may well not want to spend your time grappling with the payroll paperwork – though there are good proprietary software products as well as HMRC software that can help. Outsourcing your payroll to companies offering payroll services is a favoured option for many small businesses, as the right choice will ensure accurate and timely payments are made to your employees (they won’t thank you for any errors you make).