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Becoming an employer (5) - paying people

Very few people are going to work for you without being paid. So when you become an employer you need to think through early on how you will pay people and how you will account for tax, national insurance, pension contributions, etc.

I thought this bit would be relatively easy for me. For some strange reason, I've loved filling in forms since I was a little girl, and I've worked alongside payroll professionals for my whole career.

However, the first hurdle was getting registered with HMRC as an employer and getting signed up for PAYE. I had already got myself a Government Gateway account as part of being self-employed, but now I needed to set a linked one up for HR by Tara and register for PAYE. This involved proving my identity on the website (more than once during the process). Passport was fine, but as I haven't had a P60 recently I ended up having to answer lots of questions about my credit record to demonstrate I was who I said I was.

The website recommends you don't sign up more than a month before your first pay date - but the fact that HMRC then have to send you information through the post in order to complete your registration means that (if you're anything like me) you're checking the post each day in the hope that it all comes in time for that first pay date. I applied on 31 Jan and got my PAYE reference number in the post a few days later. I then got my activation code in the post on 10 Feb. So I'm now all registered and ready to go.

Next step, get some payroll software. HMRC lists some free payroll software for small businesses on their website. I wanted to go with something free for now, so that I'm not tied in to anything. If I get an accountant to do my bookkeeping from April onward then I may want to then use payroll software that integrates with the accounting software they use. However, I have a complication. The payroll software needs to be cloud-based and able to work on a Chromebook - as that's what I use to run my business. This ruled out a few of the options. In the end I went for Shape payroll and it was really easy to set up. I'll let you know how my first payroll run goes on 25 Feb!

Obviously you need to have information from your employee to set them up on the payroll system. I think the best option is the HMRC starter checklist, plus them sending you their bank details. Obviously, if they have a recent P45 then you need that too, to help make sure they're taxed correctly from the start. Bear in mind my article on protecting employee data and make sure you don't collect more personal information than you need.

Also, as soon as you employ anyone, you need to have a workplace pension scheme in place. I have chosen to go with NEST at this point, due to it being really easy to set up and operate. It's probably not what I would choose for a workplace pension if I had a bigger team. If my business grows then I will definitely get some good financial advice and select a pension that I believe will be good for my employees as well as for the business. In the meantime, I think NEST is the right way to go.

So, now I'm just waiting for my lovely employee to send me her timesheets so I can put the information in to the system and get her paid. Fingers crossed it all goes smoothly!

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