Payroll, PAYE & NIC: What New Employers Need to Know

Hiring your first employee is exciting. But it also comes with responsibilities — payroll, PAYE, and National Insurance.

Here’s a no-nonsense breakdown.

Payroll Basics

Payroll is simply the process of paying your employees. That includes their wages, bonuses, overtime, and holiday pay. But it also means handling tax and deductions on behalf of HMRC.

PAYE (Pay As You Earn)

PAYE is HMRC’s system for collecting Income Tax and National Insurance from employees’ pay. As an employer, you deduct these at source every payday and send them to HMRC.

National Insurance Contributions (NICs)

Both you and your employees pay NICs.

• Employees have NICs deducted from their wages.

• Employers pay additional NICs on top.

NICs help fund state benefits like pensions and the NHS.

Registering as an Employer

Before you pay anyone, you must register with HMRC as an employer. Once set up, you’ll use payroll software to calculate deductions and submit reports.

Deadlines

• Run payroll every time you pay staff.

• Report deductions to HMRC on or before payday.

• Pay the tax and NICs to HMRC by the 22nd of the following month (19th if paying by post).