| What is payroll? | | | | Personal Allowance |
| Payroll is the compilation of amounts of money due to | | | | Everyone is entitled to a personal allowance - this is |
| employees of an Organisation. This involves the | | | | the amount of income that someone can earn before |
| calculation of amounts earned, the application of all | | | | they start to pay tax. Note that income includes |
| deductions and the payment of net amounts due both | | | | earnings from work, pensions, interest on investments, |
| to employees and Tax Collection Authorities. | | | | dividends, rental from property etc. This personal |
| Payroll is an essential and vital part of all businesses | | | | allowance can also be referred to as Tax Free Pay |
| because: | | | | Tax Codes |
| * Employees expect to receive a net amount of pay | | | | Everyone who works is given a tax code by HMRC. |
| that reflects their full entitlement after authorised and | | | | The tax codes are usually made up of a letter and |
| statutory deductions have been made. | | | | numbers and is used to calculate the personal |
| * Government departments authorised to collect taxes | | | | allowance and the taxable pay. The letter simply |
| expect payroll calculations to be correct. | | | | shows how it should be adjusted following any |
| * Labour costs form a large part of businesses' | | | | changes announced in the Budget. It does not affect |
| overhead expenses and must be accurate in order | | | | the amount of tax you pay. |
| that profit calculations are correctly ascertained. | | | | Restriction on age allowance for single persons |
| A payroll clerk or administrator has quite a responsibility | | | | * Age allowance for married couples |
| to ensure accurate calculations are made and have to | | | | * Emergency Tax Codes |
| take into account the following: | | | | These are used when someone joining the payroll is |
| Income Tax and National Insurance Contributions | | | | unable to provide information concerning code number |
| Everybody whose income is in excess of a certain | | | | or details of previous earnings by means of a Form |
| figure, which is fixed by the Government, must pay | | | | P45. The emergency code is equivalent to a single |
| Income Tax. This rule extends to senior citizens, | | | | persons allowance but operated on a week 1 or |
| pensions, dividends and interest from investments, | | | | month1. |
| rents received from property leases and benefits in | | | | SSP or Statutory Sick pay, Maternity Pay, Student |
| kind. | | | | Loan repayments are amongst other elements that a |
| National Insurance Contributions | | | | Payroll administrator has to take into account and |
| National Insurance Contributions (NICs) are a form of | | | | calculate an employee's wages and stoppages. |
| taxation intended to fund state welfare benefits such | | | | Employers Contributions |
| as:- | | | | Besides paying employees a gross sum and employer |
| * Unemployment benefit. | | | | also has to make National Insurance payments to |
| * Retirement pensions. | | | | HMRC over and above what is paid to the employee. |
| * Sickness benefits. | | | | This is usually around 1% more than the employee |
| * And other forms of state benefit. | | | | pays. So if the employee pays £10 in National |
| Calculating Gross Pay | | | | Insurance the Employer also has to pay around |
| Hourly Rate | | | | £11 on top. |
| Workers are paid an agreed rate for every hour, or | | | | As you can see Payroll Administration is very |
| part thereof that they work, Usually, total required | | | | complicated considering the above is only a |
| hours per day or per week are agreed and any time | | | | summarised version of what is involved. HMRC have |
| worked in excess of these hours attract extra | | | | offered incentives for companies who switch from |
| payment, known as overtime. | | | | Manual Payroll to Computerised payroll. Sage Payroll is |
| We also have to take into account: | | | | the most popular Payroll Administration software used |
| Bonus Payments | | | | in the UK, and learning how to use it is becoming |
| Commission | | | | essential. Because once learned it is extremely |
| Other additions to pay | | | | accurate and easy to use. This system is extremely |
| Wages and salaries are often supplemented by | | | | efficient and can save up to 60% of your time. On |
| benefits of another nature. | | | | average for an experienced Payroll Administrator the |
| These are very varied but might include :- | | | | Sage 50 Payroll Professional package only takes |
| * Private Health Insurance. | | | | around 20 hours to learn. For a complete beginner |
| * Company Car. | | | | wishing to gain recognised qualifications it is advisable |
| * Payments for travel from home to work. | | | | to start at the beginning by learning the basics and |
| * Staff share schemes | | | | administrating Payroll in the traditional manual method, |
| * Loans | | | | and then progressing on to learning the Sage |
| Pay As You Earn (PAYE) | | | | Computerised Payroll package. Training Link provide |
| Employers are required by law to make deductions | | | | both the ICB Diploma in Payroll Management courses |
| from employees' earnings for both Income Tax and | | | | and also the stand alone Sage Payroll training Courses. |
| National Insurance Contributions. Generally payroll is | | | | The diploma course takes around 50 hours to |
| calculated and paid either weekly or monthly and again | | | | complete and on passing the exam the student will |
| generally weekly payments are classified as Wages | | | | have professional qualifications and be able to use ICB |
| whilst monthly are classified as Salaries. | | | | designated letters after their name. |