Payroll in the UK can be run monthly, which is usual in the UK, or every week if preferred. Part of running the payroll includes collecting UK payroll taxes from employees’ salaries.
Overseas employers need to consider both income tax and National Insurance tax. These are paid via the Pay As You Earn (PAYE) system.
The payroll system is a method of paying income tax and National Insurance contributions. Employers deduct tax and National Insurance contributions from employee wages or occupational pensions before paying them.
If you choose to “second” your employees to a UK-based firm, PAYE is their responsibility. They will, however, operate under a different tax rate. Other deductions collected through payroll include student loan repayments and pension contributions. In addition, you will also need to pay National Insurance, which is based on your employees’ salaries.
Rates of National Insurance and income tax change regularly in the UK. Rate changes are usually announced during the annual budget announcements.
Auto Enrolment of Payroll System
The UK. requires every employer of UK employees to offer a workplace pension. The rules around Auto Enrolment mean that there is a greater onus on employers to act in compliance with The Pensions Regulator.
Like PAYE, employers have to implement several processes to ensure they are complying with the legal requirements and supporting staff effectively.
Any statutory payments— statutory sick pay, maternity pay, paternity pay, or adoption pay—are processed through the payroll. Employers can recover payments for statutory pay, but the amount that they can recover depends on the amount of National Insurance paid in a year. Employers can reclaim the appropriate recoverable amount by reducing their monthly payroll tax payments to HMRC.
Statutory Sick Pay
Statutory annual leave is accrued while the employee is off work sick and can be taken during sick leave.