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Setting up a payroll management system

Payroll is another important task for the small business owner. It is possible to do payment runs yourself if you have a small business, but the problem comes with calculating National Insurance and PAYE deductions. This article looks at the basics of setting up a payroll system.

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Payroll is another important task for the small business owner. It is possible to do payment runs yourself if you have a small business, but the problem comes with calculating National Insurance and PAYE deductions. This article looks at the basics of setting up a payroll system. Unless you are fully up to speed on such financial technicalities it is very easy to make mistakes and pay your staff too much or not enough. Reclaiming overpayments is not as easy as it may sound, and can have a very bad affect on staff morale. The cost of a payroll system can vary. You may find that your accountant will process your payroll as a value-added service for no charge if you only have one or two employees. As you grow you will need to invest in a payroll system, and for most small businesses outsourcing the payroll function would be the best solution. With an outsourced payroll system you will usually be charged a monthly fee based on the number of employees. There may also be a charge for setting up the payroll system. Small business payroll software can cost between £50 and £500. What is a payroll system? A payroll system is a computerised payment system that automates a lot of the monthly payroll processes such as calculating Income Tax, NICs and other deductions as well as producing pay statements for employees. Once the system has been set up, payments can be transferred automatically and payslips generated with accurate and detailed breakdowns of the employee's salary and deductions. Many larger corporations choose to run their own payroll system in house, but this is probably not suitable for most small businesses. An outsourced payroll provider would run the payrolls for many small businesses and has the people, processes and infrastructure to manage these operations. Why bother with a payroll system? As a small business owner you need to be selling, marketing and developing your product range. Payroll will use up valuable time that is best spent on developing your business. Employing the people to manage your payroll can be expensive. You could use accounts staff to run the payroll, but then they are not chasing up payments or running the accounts for your business. Payroll needs specialist advice in setting up and managing changes due to legislation or policies that can affect staff pay. If I want to buy a payroll system what features should I look for? Buying software can be a complex task. Typically a small business payroll system will have the following features or capabilities: Employee personal records so that all of your team's data is in one place. Holiday and sickness records for all your employee absences from work and detailed reports for management purposes. Payments and deductions records which are maintained automatically. Year end processing for tax purposes. Sick pay, maternity pay and paternity pay. Holiday pay record keeping. Pension contribution and tax credit records, where appropriate. Student loan repayments. Products will vary and it is important that you get the help and support you need to set up the system in the first place and then ensure it keeps running. Computer backups and data security are vital when dealing with pay issues.

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