If you employ staff you will need to learn how to account for payroll. It is very important that you use the correct procedures. All the information you need is provided on the Government website. You will need to ensure that the figures that you use are calculated correctly, the best way to do this is either within you accounting software or outsourcing your payroll.
There are several different ways in which you can calculate your figures for payroll, these include the following:
- Payroll software – There are some specialist software packages available and some accounting software packages have add on features, you will normally need to pay an extra amount and ensure that your software is up to date.
- Outsourced services – There are many companies that offer to complete your payroll for you, I recently looked into this and was surprised by how cheap it was.
- Do it yourself – HMRC provides all the calculators and information so that you can complete it yourself.
Accounting for payroll
Payroll is made up of several different parts and understanding this is important. When you issue a payslip, it will show Gross salary less any deductions; these deductions may include tax, NI, bonus and pension, there may well be other deductions as well.
Double entry bookkeeping for your Payroll
As with any accounting software you will need to complete double entry posts. One of the entries is posted to the Profit & Loss account as expenses; this will include pay, employees NI, employers NI pension, bonus and any other deductions. The double entry will be on the Balance sheet which includes the payment from the bank for the wage, there will also be a posting for money owed to HMRC for tax and NI (these are normally paid the month following the payroll).
If you run the salaries through your accounts software the posts will automatically be completed for you.
How to Account for Payroll – Warning
If you are unsure on any aspect of your payroll either contact your accountant, service provider or HMRC it is important that it is dealt with correctly. HMRC provide deadlines for payments and forms to be completed ensure you keep to these dates; otherwise, you will receive a penalty and may have to pay interest.
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