Payroll terms explained
As soon as your business is large enough to have employees
, you will need to begin to manage your HR payroll. This may require extra knowledge outside of your normal sphere of experience, and plenty of hard work. It will pay to understand payroll terminology from the start as mistakes and omissions can be costly. To get you started, here are a few payroll terms made clear:Gross pay: this is the total amount paid by you, including salary, overtime and any bonuses and commission, with no deductions.
Net Pay: Net pay is what the employee will receive on pay day after National Insurance and tax, and any voluntary payments to charity or pension schemes, for example, are deducted.
PAYE: Standing for Pay As You Earn, PAYE means the employee's income tax is paid at source, i.e. deducted by you and paid to HMRC before calculating the employee's net pay. The amount deducted is determined by the correct tax code for that employee.
National Insurance: Employees are required to pay a fixed percentage of their wages as National Insurance, allowing access to the NHS and various social security benefits.
Payslip: We've all seen these, but it's now your job to produce one. It must state gross and net pay, and clearly outline all the deductions.
BACS: Standing for Bankers' Automated Clearing Services, BACS allows you to make electronic payments directly into your employees' bank accounts.
Payroll Solutions: You may find it easier to outsource the work to expert payroll companies who will worry about all of the above on your behalf, as well as sick pay, minimum wage, maternity leave and tax returns. At Moorepay, we're one of the UK's largest and most established hr and payroll services for large and small businesses and will tailor a solution to fit your needs.
Payroll terms explained
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