Personnel, benefits and pensions, oh my!
18th October 2021
If having employees is in your business plan, then this is the whistle-stop tour for you to understand what you need to put in place. Regardless of which business you set up, or the size of your business, now and in the future, you need to think about payroll, employer tax and NI contributions, pensions and benefits.
One thing you must establish first is whether you intend to employ people or contract them while they remain self-employed. There are strict rules around this (it gets referred to as ‘IR35’ which is the legislation which this relates to) and it is worth doing your research on what the difference is before you get a visit from HMRC.
Setting up as an employer
The very first thing I would advise anyone who is thinking of becoming an employer is to think about whether they can actually afford it. If you have big ambitions for your business, great, but don’t be pulled into employing lots of people to start when you don’t have the means. It’s not just a question of paying them their wages – though that is critical. There are many other things to consider. Speak to us about a preliminary cashflow forecast and to understand how else we can help with your budgeting and payroll.
As we move towards digital accounting as a matter of course, payroll systems have developed and become much more intuitive to a business’s growing needs. With the arrival of Real Time Information (RTI) enabled software you must submit information to HMRC each month you do the payroll – before you pay your employees. Your accountant can do the same on your behalf.
If you intend to have benefits as part of your employee package, I’d advise again to do your research. Benefits usually fall under the four main categories of work, health, financial security and lifestyle. Benefits you might want to consider include cars, medical insurance, life insurance, retirement plans, travel, bonuses, skills development and holidays.
Pension legislation has also changed and you are now required to provide a scheme for all employees. You must enrol anyone between the ages of 22 and State Pension age who earn at least £10,000 a year.
Tax credits and Child Benefit
There are two types of tax credit: Working Tax Credit (WTC) and Child Tax Credit (CTC). These will soon be replaced by Universal Credits, but for now look into the possibility of support while you’re setting up. The tax credit amount you ay received is assessed on the amount of children you are responsible for and how much your family earns.
Every family earning under £60,000 is entitled to Child Benefit if you are responsible for bringing up a child under 16 or under 20 if still in full-time education. As of 2021, the weekly amount is £12.15 for the eldest child and £14 for each subsequent child.
So, as you can see from just this one blog, there are so many aspects of starting your business with employees that you have to get right by law. Grant-Jones Accountancy are experts in helping you navigate your new status as an employer, so help is never very far away.
If you like to learn more about the details of starting your own business, DOWNLOAD MY BOOK, The New Business Kit today.