Employing a member of staff for the first time can be a minefield on many fronts – from recruitment and interviewing to induction and training. To make sure you’re legal and compliant on the finance front, here’s a quick pick of six tips for a new employer:
1) Money matters – decide on the wage to offer your new joiner, ensuring it is at least at the rate of the National Minimum Wage (NMW) – £6.19 (21 years +), £4.98 (18-20 year olds) and £2.65 (apprentices under 19 years old in their first year).
2) Legal eagle – ensure that the candidate is entitled to work in the UK prior to them starting employment. The UK Border Agency advises employers to conduct checks on entitlement to work for all new employees in order to prevent illegal working which faces a civil penalty of up to £10,000 per worker. You can check if someone can legally work for you by visiting: www.gov.uk/legal-right-to-work-in-the-uk
3) Be protected – you must have employers’ liability insurance covering you for at least £5 million. For a list of authorised insurers visit www.fsa.gov.uk
4) Register and report– you must register as an employer and operate a PAYE system. You will be required to submit payroll reporting information to HMRC regarding all employees before or on every payday, even if they only work for a short period, are earning under the Lower Earnings Limit, are paid just once a year or are deemed to be temporary or casual staff. When you take on a new employee you will need to obtain a record of personal information which must be kept for at least two years, via letter, email or a form – see the Payroll section of the Evans Entwistle website for a new starter record form. The HMRC guide ‘Notifying and getting new employee information right’ tells you what you must find out from your employee (there’s a copy on the Evans Entwistle website under Payroll)
To register as an employer, you will be required to provide your:
• business name
• business or home address, including postcode
• business or home telephone number
• contact email address
• contact telephone number
• name and address for correspondence
• the date of your first payday or, if earlier, the first date you made payments of expenses and/or provided benefits to your employees
5) Its pay day! – each payday, you will be required to run payroll making any deductions (i.e. PAYE and National Insurance contributions) and give a pay statement to your employee. To do this, you can use an agent, payroll bureau or do it yourself using either commercial payroll software such as Sage or Quickbooks, or use HMRC’s Basic PAYE Tools. Remember to make sure you use the correct tax code from the employee’s P45 from their former employer.
6) Real Time becomes reality – Real Time Information (RTI) is a new way of submitting payroll data to the Tax Office. Instead of sending updated PAYE information to HMRC at the end of the tax year, employers must submit their payroll data online every time their employees are paid. HMRC say that this will make the PAYE process simpler for employers by removing the need for year end returns (forms P35 and P14),and by reducing tax credit error and fraud, whilst also simplifying the employee joining/leaving processes – but in reality, the remit of the scheme is essentially to give HMRC the opportunity to clamp down on businesses that fail to make PAYE payments on time. All SME employers will be expected to commence RTI to submit payroll data from April 2013, unless they have agreed an alternative start date with HMRC. Otherwise, once you receive an ‘invitation’ to use RTI, you must join the system from the date directed. If you run a computerised payroll system, your payroll software should be updated to manage this change – but do check with your provider, just to be sure. If your software is not going to be upgraded, or you run a manual payroll, you can either use the free software provided by HMRC, or of course, we can process your payroll from just £25/month for up to 5 employees.
Fill in the blanks…
RTI requires a number of pieces of information not currently required for PAYE – so you may want to consider gathering any missing records in advance to make sure you’re ready to go this Spring:
• Hours worked per week for each employee (based on one of four bands);
• Details of those earning less than the lower earnings limit (£107 per week);
• Details of those employees paid irregularly;
• Date of birth, gender, full name and address for each employee;
• Passport numbers for employees who do not have NI numbers.