Introduction to Payroll

Employment Law

The body of law in the UK that aims to protect workers' rights in the workplace, including the right to a contract.

Contract of Employment

A document specifying the amount an employee will receive for their work and the frequency of payments.

HMRC Role in Payroll

The government body that requires deductions to be made from employee pay and paid directly to the government.

Employer Registration

The requirement for anyone starting to employ staff or use a subcontractor to register with HMRC.

Director Payroll

A director must register as an employer if they intend to pay themselves a salary.

Registration Deadline

A business must be registered as an employer before the first payday occurs.

Real Time Information(RTI)

The online process for electronic transmission of employee details and payment information to HMRC.

Payroll Bureau

A specialist payroll business or accountant that carries out payroll functions and liaises with HMRC on a client's behalf.

Tax Year Dates

The period for which employment tax rates apply, running from 6 April to 5 April the following year.

Payroll Record Retention

Employers must keep records for three years after the end of the tax year to show accurate reporting to HMRC.

Data Protection

Legislation employers must adhere to when storing employee data securely and with permission.

Gross Pay

The amount an employee earns before any deductions like tax, national insurance, or pension contributions.

Gross Pay Elements

Includes regular earnings, bonuses, holiday pay, sick pay, maternity pay, and paternity pay.

Taxable Pay

Gross pay adjusted for specific items, such as pension contributions or payroll giving, before tax is calculated.

Net Pay

The amount paid to the employee after all tax, national insurance, and other deductions; also called 'take home pay.

Statutory Deductions

Deductions an employer must make by law, such as PAYE and National Insurance, without needing employee permission.

Non-Statutory Deductions

Deductions like union fees or charitable giving that require employee permission before being taken from pay.

PAYE

Pay As You Earn; the method used in the UK to collect Income Tax from employed workers.

Income Tax

A direct tax paid to HMRC by the employee through deductions from their wages.

Payroll Information Communication

The process of providing wages reports and seeking authorization for payments to employees and HMRC.