Guide 8 min read
1. Overview
Payroll involves ensuring employees are paid accurately, on time, and in compliance with all relevant tax and legal regulations. Key duties include data collection, wage processing, tax and benefits administration, and reporting.
Payroll Process Guide
This guide outlines the standard payroll process, from collecting employee data to paying employees and fulfilling compliance obligations.
2. Employee data collection
- Gather new starter details (name, address, NI number, bank details, tax code).
- Record employment contracts, working hours, and agreed pay rates.
- Maintain accurate and up-to-date employee records in the payroll system.
3. Timesheet verification
- Collect timesheets or digital attendance records.
- Check accuracy of hours worked, overtime, and leave taken.
- Resolve discrepancies with line managers before processing.
4. Wage and salary calculation
- Calculate gross pay, including:
- Basic salary/wages
- Overtime
- Bonuses and commissions
- Statutory payments (e.g., sick pay, maternity pay).
- Cross-check figures against employment contracts.
5. Deductions processing
- Apply statutory deductions:
- Income Tax (PAYE)
- National Insurance (NI)
- Pension contributions
- Student loan repayments.
- Apply voluntary or contractual deductions:
- Union dues
- Health insurance
- Other salary sacrifice arrangements.
6. Net pay distribution
- Calculate net pay after all deductions.
- Process payments via BACS/direct bank transfer.
- Ensure employees are paid accurately and on time.
7. Compliance and reporting
- Submit Real-Time Information (RTI) to HMRC:
- Full Payment Submission (FPS): report pay and deductions every payday.
- Employer Payment Summary (EPS): report adjustments or statutory payments.
- Pay HMRC tax and NI contributions (usually monthly).
- Maintain payroll records for a minimum of 3 years.
- Issue P60s to employees at year-end.
8. Employee and benefits management
- Answer payroll-related queries promptly (pay, tax, benefits).
- Coordinate with HR to manage benefits such as pensions, healthcare, and allowances.
- Update employee records when circumstances change (promotions, new deductions, leavers).
9. Key skills and tools for payroll staff
- Payroll Software: Use to automate calculations, reduce errors, and generate reports.
- Legislation Knowledge: Stay up to date with PAYE, NI, pensions, and employment law changes.
- Attention to Detail: Ensure accuracy in all payroll tasks.
- Confidentiality: Handle employee data responsibly and securely.