PAYE: What, When, Where & Why
When you run a business taking on your first employee is a big step, there is so much that you need to think about:
- HR and employment law (top tip: speak to a specialist and make sure that any templates you buy are from those with HR qualifications otherwise there is a risk they are not up to date or you will come unstuck).
- Pay rates - are you setting the right rate for the role, are you compliant with minimum wage regulations.
- Pensions - do you stick with auto enrolment or offer more?
- not to mention finding the right person!
But first steps: you need to register as an employer with HMRC. So, myth busting time:
- if you run a limited company you don't need to register if it's just you - nope! If you want to pay a salary then you need to register. We usually recommend a mix of salary and dividends as it is more tax efficient plus getting your NI "stamp" is important to ensure you are entitled to varying benefits should the need arise plus of course your state pension entitlement.
- if you are self employed you can't employee people and have a payroll scheme - nope! You can have employees and pay them - whether you should be self employed still is a different matter and not for this blog.
- they can all be self employed and just invoice me - get advice, there are strict criteria about whether someone is or is not an employee and just because it is easier for you isn't a valid reason!
To register as an employer follow this link (https://www.gov.uk/register-employer), it's actually relatively straight forward. Once you are registered you will need to run payroll each month and can do this via HMRC's basic tools or via third party software. You need to ensure that each month you send the data (RTI reporting (Real Time Information)) to HMRC too.
Hope that helps!