Guide: Set up payroll as a new employer
You've never ran payroll, and don't know where to start? This guide is for you 🙌
The 4 steps to set up your first payroll
There are 4 main steps you'll need to take before being able to run your first payroll:
- Register as an employer with HMRC (even if you’re just paying company directors)
- Figure out if you need a pension scheme
- Set up accounting software
- Set up a payroll software
1. Register as an employer with HMRC
First of all, you first need to register as an employer with HMRC. This is also known as “registering for PAYE”.
PAYE stands for “Pay As You Earn”. It’s HMRC’s system to collect income tax and National Insurance. That also includes things like student loans.
Once you’ve applied to register online, HMRC will send you a letter in the post. This can take 1-3 weeks. Once it’s arrived, you’ll need to enter the activation code on the letter online. Don’t wait too long, or it will expire and you’ll have to get the letter sent out again.
When your registration is complete, when you login to your Government Gateway portal you’ll now see a box called “PAYE for employers” (pictured below). If you can’t see it, you’re either not registered yet or are logging in to a different Government Gateway account (sometimes people log in to their personal ones by mistake).
⚠️ If you wait more than 2 months after registering before running payroll, HMRC may de-activate your registration as an employer, meaning you’ll have to call them again to re-activate it.
If you do need to re-activate your employer registration, you should call HMRC to ask them to re-activate it for you.
2. Figure out if you need a pension scheme
Do I need to set up a pension scheme?
You need to set up a pension scheme in the UK if you have “eligible staff”. If you don’t have any eligible staff but would still like to contribute to a pension scheme, you can still set one up.
If you’re using a modern payroll software like Onfolk, it will automatically figure out which of your staff are eligible, based on the latest criteria from the Government. Onfolk can also enrol those who meet the criteria in your pension scheme automatically.
Choosing a pension provider
Submitting and paying pension contributions
Typically, you’ll pay your pension provider by setting up a direct debit, so that the payments are taken automatically.
A modern payroll software like Onfolk will automatically notify your pension provider exactly how much they need to take. It does this by calculating the amount of pension contributions due for each employee in your business, and also the amount of pension contributions due for the business itself.
3. Set up your accounting software
This step is optional, but it's worth doing to have your accounts in order.
Xero is the most popular choice. At Onfolk, we think it’s the best currently out there.
Onfolk integrates with Xero (but also QuickBooks), so that it’s updated automatically with your payroll numbers at the end of each month.
4. Set up Onfolk as your payroll software
Once you’ve registered as an employer and got your pension scheme and accounting software in order, you need to set up your Onfolk account in order to pay your employees.
At this stage you'll need to create your account so we can get you set up for your first payroll 💰
For more info on how onboarding with Onfolk looks like, head to our Onboarding section.