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How to choose the right computer equipment for your business to increase your productivity and efficiency without it costing the earth.

Business software helps you complete a range of tasks. Choose the right software, provide support and train your staff with our introduction.

It is highly likely that you depend on the internet for some aspects of your business. Find out how you can use the internet more effectively.

Good communication with customers, partners and suppliers is vital for business success. This summary explores business communication methods.

How would you cope if your IT system failed or was breached? We cover the main IT security issues and how to protect against them.

Good IT management can help you choose, use and implement IT. Our overview helps you manage IT in a way that maximises the return on your investment.

IT support is vital if you rely on your IT system. But how can you set up an effective safety net in case things go wrong? We explore the options.

Getting the right IT is just the first step. Appropriate training, policies and working practices can help you maximise return on your IT investment.

Do you need a payroll system?

**Note: prices correct on 09/01/24 (limited time offers may be available)**

An efficient payroll system is essential if your business employs people. It helps ensure you comply with your legal obligations and deduct the right amount of income tax and National Insurance (NI). But how do you find the right payroll system?

While some businesses used to run payroll manually, the introduction of HM Revenue & Customs' (HMRC) Real Time Information (RTI) scheme made this virtually impossible. RTI requires you to submit information to HMRC every time you run payroll. This data must be sent electronically, via an RTI compatible payroll system.

Additionally, many businesses have to juggle the complication of pension contributions under auto-enrolment.

If you have fewer than nine employees, you can use HMRC's free payroll system, the HMRC Basic Payroll Tool. The only cost is your time. However, this payroll system will not be suitable if you take on more employees. You will need to transfer your employee data to an electronic payroll system or outsource your payroll if your business grows.

What are the benefits of payroll software?

Efficiency

Manually processing your monthly payroll is time consuming, especially as your business grows. Although you will need to set up your payroll software initially, every calculation and payment thereafter will be done automatically. You simply need to maintain employee records and input holidays and absences as they happen.

Cost effective

Payroll software is surprisingly budget-friendly. Most payroll software solutions are available for a relatively small monthly fee making it affordable for even the most cash-strapped small businesses. It will certainly be a lot cheaper than hiring a payroll manager or outsourcing your payroll to someone else.

Minimises errors

Payroll mistakes such as miscalculating tax or underpaying your employees can have damaging consequences for your business. While mistakes can still happen, payroll software makes them much less likely to happen. When they do, it is usually relatively quick and easy to fix them. Incorrect data can be corrected and updated at the click of a button.

Keeps employees happy

Employees that are paid accurately and on time will be happier than staff who have to wait to be paid. Remember, employees are entitled to a payslip. Payroll software can automate this process and some payroll solutions allow employees to log into their own account where they can see all the payslips they've ever received as well as update their details. This added visibility will also remove the need for staff to approach the business owners to request payroll related documents.

Protects your business

Relying on manually payroll records and data is risky. Records could be lost, destroyed, or stolen, leaving your business open to fraud. Payroll software keeps payroll data safe and secure by encrypting the data and stores it securely, giving you peace of mind.

Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants (ACCA), thinks it's important to find the right payroll system, regardless of staff numbers.

"There are many rates and allowance changes, so using an electronic system can save you time and help you avoid errors,. When employees have pension contributions or student loan repayments, it gets even more complicated. Payroll systems can simplify all those calculations.

"However, the risks of using electronic systems are data loss through crashes, viruses, and payroll errors if new tax rules aren't properly implemented. Switching to payroll systems at a later date will be time consuming. The data you're inputting must be accurate so it can be difficult, but good payroll software will alert you if anything looks odd."

What is payroll software?

Payroll software helps businesses manage the payroll payments they must make to employees. This includes not only salaries but also things like bonuses and holiday pay. Other tasks payroll software can help you with include:

  • calculating tax and national insurance deductions
  • managing workplace pension contributions 
  • creating P60s and payslips
  • payroll analysis with reporting 

Almost all payroll systems include features to handle RTI and auto-enrolment. They can also complete key payroll forms and send these - along with the relevant information - to HMRC. The software will also calculate overtime and bonus payments, deduct wage garnishments, and generate payslips. Most payroll systems also allow employees to access and download their payslips.

Because the payroll system handles all calculations for you, you're less likely to encounter errors or get hit by penalties for filing information late.

 

Pick a payroll system

Payroll software will process your information and tell you what the deductions are. Whichever electronic payroll system you choose, make sure it is recognised by HMRC, and that it calculates income tax, NI and taxable benefits.

Payroll software providers that offer software for small firms include Sage, Quickbooks and Iris.

Most providers also offer online solutions which can be more flexible. Data is held in the cloud allowing you to access it from any location with an internet connection.

Online software is often available for a low, monthly fee avoiding large up-front costs.

Some payroll system providers charge a fee for each extra employee. Others charge a monthly or annual cost.

"A lot of software providers will give you a free trial," points out Roy-Chowdhury. "Ask your accountant or other small businesses which they use."

Read our review of the best UK payroll software.

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