Getting your small business payroll right!

Wages for Small Employers

It’s not easy for small business owners to keep up with all the legislation of payroll and workplace pensions. The costs have gone up and up with minimum wage and living wage increases, plus the costs of the workplace pension – employers can certainly do without receiving penalties for getting their payroll submissions wrong. However, when you’re busy trying to juggle lots of tasks, payroll is one of those that’s easy to get wrong.

How to get Payroll right:

Minimum Wage & Living Wage Rates

Every member of staff is entitled to the equivalent of a minimum hourly rate for the work they do for you. The rate depends on their age – apart from an Apprentice. The information below is from the HMRC website where there is more information on this:

Age 25 and Over – current rate £7.83/hr – From 1st April increasing to £8.21
Age 21 to 24 – current rate £7.38/hr – From 1st April increasing to £7.70
Age 18 to 20 – current rate £5.90/hr – From 1st April increasing to £6.15
Age Under 18 – current rate £4.20/hr – From 1st April increasing to £4.35
Apprentice – current rate £3.70/hr – From 1st April increasing to £3.90

Calculating and Processing Payroll Wages

As well as calculating and processing pay and deductions, then assessing workplace pension contributions, an RTI (Real Time Information) report called an FPS (Full Payment Submission) must be sent to HMRC on or before every pay day, but did you know there is an additional monthly EPS (Employer Payment Summary) that has to be sent in certain circumstances.

For example
– To reclaim statutory payments such as maternity and paternity pay.
– To claim the £3,000 Government Employment Allowance.
– To reclaim Construction Industry Scheme (CIS) deductions as a LTD Company.
– To tell HMRC that you haven’t paid someone this month etc

More information on all of the above can be found on the HMRC Running Payroll website.

Workplace Pensions

There are many pension providers around, all offering different benefits. The way the contributions are calculated are also different and it’s important that you get the setup of these correct in your payroll software otherwise these deductions will be wrong which would cost you and your employee a lot of unnecessary money.

For example, some pensions calculate on all of an employees pay, whereas others, such as NEST don’t start generating contributions until pay has met the ‘qualifying earnings’ which is currently equivalent to £6,032 per year / £503 per month / £116 per week in 2018/19 tax year.

There are minimum percentage amounts that need to deducted from the employees pay if they are earning above the threshold and the employer has to also pay a minimum amount. In April 2019, this will be 5% for the employee and 3% for the employer, so that a total of 8% is being paid into the employees pension pot.

You can find out more about this on The Pension Regulator website.

Payroll Related Fines and Penalties

Forgetting to submit an RTI during the month is an automatic £100 penalty from HMRC if you have less than 10 employees – its double this if you have between 10 and 49 employees. Failing to pay the reported liability payments to HMRC by the dead line date will also incur interest penalties.

More painful is The Pension Regulator penalties. If you fail to assess and report your workplace pension obligations – you will be looking at a minimum £400 fixed penalty with a possible additional DAILY escalating penalty from £50 upwards.

Don’t let your name be in the Name and Shame list of employers that have been given these fines


If you’re a small business in the Telford area and struggling to process your own payroll, why not let Lady of Ledger Bookkeeping do this for you – call now for a quote 01952 350036 or email us on