Business Start Up Packages - Employee Engagement
Staff recruitment will be a part of any flourishing business and complying with PAYE regulations is a crucial aspect of employee engagement
. The guidelines of dealing with these regulations can be summed up quite easily.Collection of PAYE & employees' national insurance from salaries should be remitted to the Collector of Taxes, along with employers' national insurance, on a regular basis. Payments are made on a monthly basis and should reach the Collector by the fourteenth of the following month. Failure to comply with this may mean interest is applied in the following tax year.
It is the responsibility of the employer to collect the full amount of PAYE and national insurance from employees and in this respect they are liable for any shortfall. If the amounts due are less than 1,500 per month it is possible to come to arrangement with HMRC to pay on a quarterly basis which will help with cash flow. Statutory returns scheduling salaries and tax are due by 19 May of the following year. P11D returns which detail benefits in kind must be remitted by 6 July and can be subject to fines of up to 3,000 per form in respect of errors and late filing.
As HMRC conducts PAYE audits, any errors made by the employer are likely to be discovered eventually. Valuable resources to getting it right are HMRC's publications 'New Employer's Starter Pack' and 'Employer's Further Guide to PAYE and NICs'.
One way to avoid PAYE and NIC regulations is to use self-employed labour, but this can involve complications. HMRC will want to be satisfied that the self-employed people are indeed genuinely self-employed, and not employees in another guise. Employers may find it very difficult to convince HMRC that people are self-employed. If HMRC thinks that people are not self-employed, then employers could have to pay a considerable sum of back income tax and national insurance which should have been deducted under the PAYE system.
Any employer unsure of how to treat a new member of staff in this respect should contact their Tax office, giving all details of the proposed employment and they will be able to advise based on the information presented.
Many small businesses have spouses working together, not least so that they can take advantage of any tax allowances available. It would be reasonable to employ a spouse on a part time basis earning say 5,000 doing general office work, making telephone calls etc. It is important that they are paid at least the minimum wage in line with statutory requirements.
If you are going to employ your spouse in the business you need to be aware that the HMRC will regard this as a regular employee engagement and will expect any salaries earned to be paid as normal. If this is the sole employment of the spouse it should be covered by their personal tax allowance and national insurance can be avoided also if kept under the threshold. Where the spouse is earning considerably more and incurring PAYE and NICs it can make more sense for them to become partners in the business.
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