Module 1: Payroll Systems & Management: An Introduction PDF

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Module 1: Payroll Systems & Management: An Introduction What we will be covering in this module includes: What exactly a payroll system is Why you need an effective payroll system in place at all How a large business and small business work differently in terms of their payroll systems What you ...

Description

Module 1: Payroll Systems & Management: An Introduction What we will be covering in this module includes: What exactly a payroll system is Why you need an effective payroll system in place at all How a large business and small business work differently in terms of their payroll systems What you need to know in terms of HMRC (the taxman) The option of using an accountant or bookkeeper vs. doing it yourself. Which is better for you? How technology plays a part in payroll systems

Welcome to your Payroll Diploma course. Before you begin the course please read these important notes.

Modules The course name is broken down into 23 modules. Each information packed module lasts between 15 and 60 minutes, but you are free to spend as long as you like on each module. Once you have finished the module, click the “continue to next module” button at the bottom of the page to move to the next one.

Assignments Some of the modules contain self-assessed assignments/tasks. The tasks are set at the end of the module. Most of the assignments should take around 30 minutes to complete, again, you are free to spend as much time as you need on them. The

assignments are self assessed; you do not need to send them in to us. You will find the answers/our suggestions attached.

Highlighted Text In the modules you may notice some text has been highlighted, or marked differently to the majority of the rest of the text. For an explanation of each, see the key below: Information worth remembering Third-party websites or links that contain information that can further your learning Vitally important to remember. Ignoring this could cause problems. Useful trivia Facts/data related to the topic Quotes and examples Sums / Calculations or other formula Questions you should ask yourself

Extra Content In addition to the course modules, we have provided you with some extra articles that cover topics not found within the course. You can find these articles in the sidebar of the course under the “Exclusive Members Content” heading. We will be looking to constantly add to these articles, so please check back in often to see the latest articles.

Revisiting Modules/Access to the Course You can revisit modules that you have completed at any time, even after you have finished the course. To do this, simply log back in to your account and click on the “revisit modules” option from your member’s sidebar. You will then be able to select any module that you have already completed.

End of Course Test At the end of the course, there is a 30 question test. Each question has multiple choice answers and you will have 3 options to choose from, one of them is correct. In order to

pass the test you need to answer 70% (21/30) of the questions correctly. Don’t panic if you don’t pass first time. You can take the test as many times as you need. If you do not pass on the first occasion we recommend that you go back over the modules that you did not fare so well at and study them again.

Completion of the Course Once you have successfully completed the end of course test, you will be awarded your certification. You can download and print your certificate any time you want. Simply log in to your account and visit this page: http://www.payrolldiploma.co.uk/my-account/download-your-certi ficate If you would prefer us to send you a hard copy of your certificate by mail, we can do so for a small charge of £10 within the UK (slightly more for international orders). You can order a copy of your certificate from here: http://newskillsacademy.co.uk/certificate-location/

Invoice If you require a receipt/invoice for your course payment, you can obtain one by clicking on the “Download Invoice” option from your course sidebar. Or click this link http://www.payrolldiploma.co.uk/my-account/download-invoice

What you can do once you have completed the course Once you have completed the course you will have a great understanding of what is needed to be a payroll worker. You can now start searching for jobs within the industry. Any potential employers can validate your qualification 24/7 via our website. Simply provide them with your full name and certificate number. If you wish, you can undertake further study to bolster your

employment chances further – you can never have too much knowledge!

Support If you need any assistance we are here to help you. Simply click one of the support tabs (located at the top and bottom of all pages on this site) and one of our support staff will get back to you as soon as possible. Please note, support hours are 9:00 – 17:30 Monday – Friday (we have a limited support outside of these hours and your enquiry may take longer to respond to).

Let’s Get Going We hope you enjoy your course and wish you the best of luck with your future career. You can now begin your course. The first module starts immediately below.

Payroll The word payroll sounds rather complicated, a little confusing and like a lot of hard work. Well, that is correct, but the bottom line is that you need payroll within your company, so figuring it out, making it run smoothly and adhering to strict guidelines is an imperative part of running a business to keep employees happy, keep the taxman happy and make sure your business continues to function properly. Everyone needs to be paid. We don’t get out of bed every morning and go to work for the sake of it. If you are an employer, then you have a responsibility to pay your employees on time every week or month, depending on your particular frequency, with the correct amount, the correct deductions, and to work to strict guidelines laid out by the taxman, also known more formally as HMRC (or Her Majesty’s Revenue & Customs).

If you fail at any of these points, you are not only upsetting your employees, but you are also putting yourself at risk of trouble with the taxman and a hefty fine at the very least. As you can see, getting your payroll requirements right is a hugely important part of running any business, whether it is a large company or just a small one.

1.1 What system?

exactly

is

a

payroll

It might sound complicated but, basically, a payroll system is the way you pay your employees every week or month, depending on the frequency in which you choose to pay them.

This is a decision that should be made at the beginning of the employment and should be the same for all employees. You should stick with this frequency for the duration of employment. Payroll is a term which covers the umbrella of paying people their wages or salary and deducting tax, National Insurance, pension contributions, healthcare insurance contributions (if at all applicable), student loan repayments, etc. On top of this, a payroll system also keeps up-to-date records, reports changes in employment for every single employee to HMRC, and keeps more detailed reports for the end of the tax year, in preparation for the new one, starting on 6 April every year. The term also covers the issuing of payslips for employees, P45s for those who leave, and P60s at the end of each tax year. We will talk about every facet of a payroll system in more

detail as we move through our modules; however, as a general overview, this is what a payroll system does, and it is important to implement a system that works for you, covers all of these important points, and has back-up systems in place too, just in case. Every business who employs anyone needs a payroll system which runs effectively and is understood by several people, just in case the one person who does understand it is off sick or away for any reason. It also needs to cover all the requirements by HMRC. There are many different variations on this, on how you do it, who does it and how often you do it. Again, we will cover that in more detail shortly, but when setting up a business, you need to make a decision that works for you in terms of paying your staff and how you’re going to do it.

FACT

Payroll and administration accounts for 35% of all HR costs. . Source: adp.co.uk

1.2 Why do you need a payroll system that actually works well? This might sound like a ridiculous question, but if your particular system doesn’t work well, if there are problems with it, bumps in the road that keep occurring, or failures in communication, then you could be looking at a whole world of trouble.

Firstly, put yourself in the shoes of your employees; if you were working for a company and you couldn’t rely on them to pay you on the same day every week or every month, the amount was never right and there was always a problem on payday, would you be happy? No! You would be looking for another job quickly and rightly so! As we said before, you don’t go to work for free, so why should you put up with a drama every single payday? Employees have bills to pay, mortgages, rent, utility bills, etc., and it’s not your place to give them any problems to deal with. To break it down to its most basic form: we don’t work for fun generally speaking. We need money to live, so you owe it to your employees to get their wages right every single time. At the other end of the spectrum, if you don’t keep the correct records, make the right deductions, and report the correct information to HMRC when you should, you’re not only going to be having to answer some rather tough questions, but you could find yourself fined rather heavily. Money doesn’t grow on trees, and this will be a very costly mistake, simply because you couldn’t arrange an efficient payroll system in the first place. Put simply, this is probably going to be one of the most important decisions and functions you will put into place in your business throughout its entire lifespan, so make sure you

give it some thought, do some research, check out your options, find out what works best for you, and then put enough dedicated time into it on a regular basis to get everything just right. On top of this, when it comes to record keeping, which we will cover in a little more detail later, you need to read up on Data Protection laws, as you will be storing personal information about your employees. This comes with some rather hefty fines and upsetting roads to go down from a legal point of view if you don’t adhere to the strict guidelines that are in place. Large business or small business, it all works a little differently, but the end result is still the same. We know what a payroll system is now, and we understand why you need to put an effective system into place that you understand completely and can run smoothly, but it’s also important to understand that the size of your business could affect how your payroll system is implemented and undertaken. It’s common sense when you think about it – the larger a business is, the more employees it will have, so of course your payroll requirements are going to be a little more complex compared to a smaller business with just a handful of employees. Within a large company, you may have employees who are all paid different amounts each month, usually because they are working their way through an incremental scheme, whereby their wages increase every year they work there, to a certain point. Because of this, the payroll system is going to be complicated and completely different for every single person on the payroll. If there are hundreds of people within the business, you can understand why this particular function can be dedicated to an entire department, because it is so important to get it right, and one single person could make a myriad important mistakes with this huge amount of work and

responsibility. It’s just not feasible to dedicate this task to solely one person. Conversely, a smaller business with just a few employees may find that payroll is a quick and simple task, because there simply isn’t so much complexity about it and overall it isn’t as time consuming. In this case, one or two people could be relied upon to complete payroll duties every week or month. As a side note, however, always have someone else within your business who understands the system, in case of sickness or annual leave. However, it doesn’t matter how big or small the company is, who does the payroll and how much an employee gets paid, HMRC still need the same information – big or small, the end result is certainly always the same from this point of view.

1.3 Why you need to please the taxman Because HMRC requirements are such part of payroll, we will cover this more detail to ensure you tick every need to and you don’t fall foul problems.

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Just to give you an idea of what you need, however, let’s briefly discuss why you need to cover everything the taxman asks for without missing anything out. We talked before about how if you don’t report changes, if you don’t keep records, and if you don’t pay the right amount of tax and National Insurance to HMRC, then you are basically breaking the law and you can be fined a very large amount. This is easily overlooked if you don’t understand the

requirements, so being au-fait with them is probably one of the biggest decisions and processes you will undertake in your business. HMRC will not take ignorance of the facts as an excuse for missing important requirements. If you haven’t heard of PAYE, or Pay As You Earn, then basically this is the way HMRC deduct Income Tax and National Insurance from an employee’s wages, and it is down to the employer to complete this deduction and send the payment to HMRC every week or month. Generally speaking, this is done online, because it is much quicker and easier; however, there are exemptions to this which allow these reports and deductions to be done in paper form. Despite this fact, you need to fall into strict categories, so always check this out with HMRC beforehand, to see if you qualify for this requirement.

1.4 Do you use an accountant, or do you give it a go for yourself? If you’re reading this and you’re starting to get a bit stressed out about how you’re going to go about this huge, important task, there are options for someone else to do it for you.

However, you need to weigh up the pros and cons of this in great detail before you make a final decision. An accountant or bookkeeper is experienced in payroll and can get everything in place for you so you don’t have to lift a finger. They can also run your weekly or monthly payroll system for you. That’s the upside of it. The downside? One slip in communication, e.g. forgetting to tell your accountant

that someone has left the company, for example, could result in that person still being paid, and then you need to go down a long process of recouping the money and rectifying your payroll records with HMRC. Small mistakes such as this can be costly and time consuming. Additionally, you are going to have to pay your accountant for the pleasure of conducting your payroll needs, and we all know that accountants don’t exactly come cheap. On the other hand, you can do it for yourself in-house. Yes, this is going to mean dedicating a large chunk of your time to learning a new skill, possibly taking a few day courses, reading plentiful material, and practicing quite a lot, but it will save you cash in the long-run. If you have a large business, the general consensus is that a person in-house will do this for you, because this is cheaper than an accountant and generally the same kind of process, or you will employ a whole department for a large business with countless employees. It’s a personal decision on who does your payroll for you and one which has to be thought about carefully in terms of cost and responsibility.

1.5 It’s all about technology Gone are the days when we sat down with a pen and paper and played around with a few figures on our fingers.

These days, we do everything on the computer. Even calculators aren’t used much nowadays. Payroll systems are all

computerised, and that means either downloading a software product onto your computer, such as SAGE and using it at that actual workstation, or using an online product, which will allow you to log-in remotely, at any computer. The latter is a great tool for those smaller businesses, with employees who work from home as well as in the office, because it gives you more flexibility. Again, the decision is a personal one as to which works best for you, but those who aren’t so technologically minded may feel daunted by using such an in-depth tool to calculate such important figures and reports. This is understandable, but these software packages are rather easy to use, and all you need to do is input the correct figures and the software will calculate deductions for you. This allows you to send the correct information to HMRC, make the correct payments to them, and also to pay your employee the right amount of money every week or month without any major dramas. Recordkeeping will still need to be done, which we will talk about in depth later on. Shopping around for the best product for you and doing your research is the best first step in this case, as well as making sure your product is bang up to date, as requirements change quite frequently and you don’t want to be working to an old set of rules – again, this could be a rather costly mistake for your business.

Summary The aim of this module is to familiarise you with exactly what a payroll system is, give you a short overview of why you need to have a good quality system in place, the potential pitfalls of not having a good quality system, and the options available to you in terms of who runs your system and the technological

side of it, too. Don’t feel too concerned or worried about how to run your system or be concerned that you aren’t going to get your head around the ins and outs of it because, like most things in life, thinking about it is often worse than doing it. Once your system is set up and runs smoothly, everything within it will be simple enough. Provided you understand the sheer importance of why it is imperative to get your system correct at the set-up stage and to review it regularly in terms of how well it is running, as well as keeping up-to-date training going for those who actually manage the system, there should be no major worries. [Tweet “I just completed Module 1 of the Payroll Diploma Course”]...