| Pay as you earn administration and maintaining | | | | Having established the employee records the main |
| payroll records is time consuming for all small | | | | work of the paye system begins. Each pay period |
| businesses. The financial information and paye | | | | the employer needs to calculate the income tax |
| records are highly sensitive and must be | | | | and national insurance to be deducted. This can be |
| scrupulously accurate since it may be inspected | | | | done manually or the employer can laboriously |
| by the Inland Revenue and also carries legal | | | | enter the employee and previous pay details into |
| responsibilities to the employees. Payroll Software | | | | a paye calculator to obtain the information. Payroll |
| can carry the paye burden. | | | | software is a better choice by automating these |
| Every employer has a legal responsibility to | | | | calculations saving time and providing accuracy. |
| operate a paye scheme for its employees with | | | | The paye system also requires the employer to |
| regular payslips a P60 end of year certificate and | | | | keep accurate records of the breakdown of the |
| a P45 showing details of gross pay and income | | | | calculation which are recorded on a P11 deductions |
| tax deducted during the employment if you leave. | | | | working paper. This part of the paye |
| An employer needs a paye system that satisfies | | | | administration is a burden for many small |
| both the payroll requirements for each employee | | | | employers and payroll software can automate this |
| and the additional paye records required by the | | | | task saving hours of work during the year. |
| Inland Revenue. | | | | Next the payslip which is highly important to |
| Calculating gross pay is not difficult as the rates | | | | employees and the employer has a legal |
| and hours are usually preset or subject to known | | | | responsibility to provide one. Designing a payslip |
| information such as a timesheet for example. | | | | and ensuring it meets all legal requirements is |
| Calculating the income tax and national insurance | | | | much easier if a standard legally correct format is |
| can present problems to employers inexperienced | | | | adopted as part of an automated payroll |
| in payroll matters who are not familiar with all the | | | | software system rather than manually running the |
| paye requirements. Payroll software automates | | | | paye system. |
| this income tax and nation al insurance calculations | | | | When an employee leaves they must be given a |
| reducing both the time and knowledge required. | | | | P45 to take to their next employer and the paye |
| Each new employee joining a business must | | | | system adopted must provide the information to |
| provide the employer with a P45 which contains | | | | complete the P45 accurately. It is a foregone |
| specific essential information that employer needs | | | | conclusion that using payroll software to generate |
| to start the paye system for that employee. The | | | | this information can ease the paye burden and |
| P45 contains details of the employee name and | | | | provide accurate information satisfying the legal |
| address, previous earnings and the amount of | | | | requirements of the paye system. |
| income deducted by the previous employer. The | | | | At the end of the financial year the administrative |
| P45 also states the employee tax code and any | | | | burden is increased if manual records are kept as |
| special conditions that may have been in force | | | | the employer needs to produce a P14 showing |
| such as being deducted tax on a week one or | | | | the employee deductions and provide each |
| month one basis. | | | | employee with a P60 certificate showing the |
| P45 details are required by the new employer to | | | | employee gross pay and deductions. Payroll |
| set up the payroll records for each employee. | | | | software can automatically generate the gross |
| Rather than filing the P45 under a pile of papers | | | | pay totals and the income tax and national |
| or the back of a drawer a payroll software | | | | insurance contributions providing the information |
| solution adds discipline to this process and permits | | | | required. |
| a permanent record to be kept which can | | | | The paye records must also produce the |
| prevent serious administration issues in the future. | | | | information for the P35 annual employer return |
| Documents and notes on scraps of paper can get | | | | showing the income tax and national insurance |
| lost while paye details kept on a proper payroll | | | | deducted from each employee and if an employer |
| software package rarely do and can be backed | | | | is operating a manual paye system then this task |
| up as required. | | | | is often put aside and can lead to returns being |
| The P45 does not contain details of national | | | | filed late and incurring late filing penalties. With a |
| insurance contributions as the new employer does | | | | payroll software solution the information is |
| not need to know what the previous national | | | | available immediately the final pay period has |
| contributions were. This is because national | | | | passed and the figures can easily be submitted |
| insurance contributions are always calculated on a | | | | online not only saving late penalty fines but also |
| week by week or month by month basis and so | | | | gaining a tax free online bonus. Using payroll |
| previous deductions are not relevant while | | | | software for the paye administration can not only |
| previous details of income tax deducted are | | | | save time and reduce the paye administration |
| relevant because income tax is deducted on a | | | | burden but save the employer money too. |
| cumulative basis. | | | | |