An essential feature of any payroll solution is the inclusion of an employee details worksheet in which simple details are entered for each employee such as name and address, income tax code, national insurance number and relevant dates which satisfies the requirements of small businesses operating a paye scheme. The payroll software then uses these details particularly of income tax code and national insurance dates to calculate the income tax and national insurance deductions. Once the employee details have been entered running a PAYE system could not be easier.



This payroll software pre-enters each employee name on the payroll each week or month and simply entering the employee gross pay triggers the payroll to automatically calculate income tax and national insurance contributions including the employer national insurance contribution using the standard income tax and national insurance tables which are embedded within the files supplied with the payroll software system.

Having calculated the net pay the payroll software then automatically completes the PAYE deduction sheets which are arranged in the same appearance as the official inland revenue deductions sheet for recording income tax and national insurance deductions. In the employee PAYE section are copies of the employee P60 certificate, P45 if required and the P14 which is a summary of the pay, income tax and national insurance contributions made by each employee. Completing these documents manually can be an administrative headache for many small employers who are not using a small business payroll solution.

Many payroll software systems require the purchase of specialised payslip stationery which increases the cost of using that particular package. This payroll software is different in this respect. The payslips are all generated automatically from the information in the payroll file which shows the weekly or monthly gross and net pay, income tax and national insurance and the gross numbers to date. The payslips can be printed at any time on normal A4 copy paper.

Having calculated the income tax and national insurance contributions throughout the year the payroll software produces the P35, Annual PAYE Employers return. The excel copy of the P35 is in the same format as the inland revenue form which can be simply printed out enabling the payroll figures to then be entered and filed online for employers to both avoid late penalties and receive the online tax free bonus available.

The payroll software can be integrated into the DIY Accounting software by saving the payroll files into the same folder as the accounting files providing a complete accounting and payroll solution for users.

Payroll Software Weaknesses

The DIY Accounting payroll system does not deal with income tax K codes. K codes are income tax codes that are allocated to employees by the Inland Revenue in cases where taxable expenses will exceed the annual income tax allowance and is then not applicable to the vast majority of employers.

The calculation of statutory payments such as statutory sick pay and maternity leave are inserted manually by employers. Considered to be a minor weakness since these figures when applicable can be easily looked up on the employers CD-Rom as required.

The quoted package sizes of 5 employees, 10 employees and 20 employees include all employees during the year including new starters and leavers and it is important then to obtain a package likely to be in excess of the total number of expected employees to avoid changing the payroll solution during the financial year.

Conclusion

This small business payroll solution for up to 20 employees provides accurate income tax and national insurance contribution calculations, offers significant reductions in PAYE administration time, regular payslips for each employee, compliance with paye administrative requirements and the satisfaction and valuable tax free bonus prize of producing the payroll on time.