However payroll can be complex and challenging to manage, particularly for small and medium enterprises. These are just 5 things you should know about payroll for your business.
The core requirement of payroll is to ensure accurate recording, collection and reporting of employee taxes. It is of course an important part of good bookkeeping for any business but the legal responsibility involved is key to ensure your business remains compliant.
The Irish tax system is progressive which is important for employees but creates a high degree of complexity for employers. Beyond basic income tax employers are also required to record and pay PRSI which is based on the employee’s income level in conjunction with their category of work.
In addition to income tax and PRSI there is also the recently introduced USC which is levied on all income and like income tax increases with earnings. For instance, 1.5% is charged on the first ?12,012 but is not levied if total income for the year is less than that.
New Hire Procedures
New employees have to be issued a contract that outlines the job’s requirements. This includes things like detailing the place of work, rates of pay, the title of the job and hours to be worked in each period of pay.
Employees must also be issued a payslip for each period of pay that includes gross wages before tax as well as deductions that are made to their pay. You must also ensure their pay meets the minimum wage requirements.
Employee classification – PAYE or Consultant
It is important to be clear when an employee is a regular PAYE worker or is operating as a consultant or freelancer. An employee initially taken on in a freelance capacity can easily become a permanent member of staff requiring them to be paid through the PAYE system rather than as an independent service provider.
An employee does not need to be working fulltime to be required to be in the PAYE system. When they enter into an open ended contract they can be considered a permanent employee.
Changes to the Law
One of the more difficult aspects of managing your business’ payroll is keeping up with changes to payroll related legislation. Laws that affect payroll, how it is applied and rates that need to be considered can change relatively frequently.
There are many, less obvious elements related to payroll that can change such as restrictions in hiring relatives, sick pay, leave and overtime. It is important to consult a payroll specialist to ensure your payroll conforms to the latest requirements.
Employers are required to keep full and accurate records of payroll including start and finish times for employees, hours worked each day and any leave granted. These record need to be kept for 3 years.
These records also need to be kept in such a way that they are comprehensible to an inspector. Where a business does not have a means of electronically recording employee data then employers must fill out an OWT1 form on a regular basis.