What is payroll? Available Sage payroll training

What is payroll?

Payroll is the compilation of amounts of money due to an organization’s employees. This includes calculating amounts earned, applying any deductions and paying net amounts due to both employees and tax authorities.

Payroll is an essential and important part of all businesses because:

* Employees expect to receive net pay that reflects their full entitlement after authorized and statutory deductions have been made.

* Government agencies authorized to collect taxes expect accurate payslips.

* Labor costs make up a large portion of a company’s overhead and must be accurate for profit calculations to be accurate.

A clerk or clerk in payroll has a major responsibility to ensure accurate calculations are made and must consider the following:

income tax and social security contributions

Anyone whose income exceeds a certain amount set by the government must pay income tax. This rule extends to seniors, pensions, dividends and interest on investments, rental income and benefits in kind.

National Insurance Contributions

National Insurance Contributions (NICs) are a form of taxation used to fund government benefits such as:

* Unemployment benefits.

* old-age pensions.

* sick pay.

* And other forms of government benefits.

Calculation of the gross wage

hourly rate

Workers receive an agreed rate for each hour or part of it that they work. Normally the total hours required are agreed per day or per week and any hours worked in excess of these hours will attract an additional payment known as overtime.

In addition, we must take into account:

bonus payments


Pay other supplements

Wages and salaries are often supplemented by other types of benefits.

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These vary widely but could include:-

* Private health insurance.

* Company car.

* Home to work payments.

* Employee participation programs

* Loans

Pay As You Earn (PAYE)

Employers are required by law to deduct both income tax and social security contributions from employees’ income. Generally, payroll is calculated and paid either weekly or monthly, and again, weekly payments are generally classified as wages while monthly payments are classified as salaries.

personal permission

Everyone is entitled to a personal allowance – that is the amount of income someone can earn before having to pay taxes. Note that income includes income from work, pensions, interest on investments, dividends, rent from property, etc. This personal allowance can also be referred to as tax-free income

tax codes

Everyone who works is given a tax number by HMRC. The tax codes usually consist of a letter and numbers and are used to calculate the personal allowance and the taxable wage. The letter merely shows how it should be adjusted following changes announced in the budget. This does not affect the amount of taxes you have to pay.

Age restriction for single people

* Age supplement for married couples

* Emergency control codes

These are used when someone who is getting into payroll accounting cannot provide any information about the key figure or information on previous earnings using form P45. The emergency code is equivalent to a single person allowance but applied in a week 1 or month 1 period.

SSP or Statutory Sick Pay, maternity pay, student loan repayments are among other elements that a payroll clerk must consider and calculate an employee’s wages and work breaks.

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employer contributions

As well as paying a gross amount to employees, the employer must also make social security payments to HMRC in excess of what is paid to the employee. This is usually around 1% more than the employee pays. So if the employee pays £10 into Social Security, the employer will also have to pay around an additional £11.

As you can see, payroll administration is very complicated considering the above is just a condensed version of what it’s all about. HMRC has offered incentives for companies switching from manual payroll to computerized payroll. Sage Payroll is the most popular payroll management software used in the UK and learning how to use it is becoming increasingly important. Because once learned, it is extremely accurate and easy to use. This system is extremely efficient and can save up to 60% of your time. On average, it only takes about 20 hours for an experienced Payroll Administrator to learn the Sage 50 Payroll Professional package. For a complete beginner looking to gain recognized qualifications, it is advisable to start at the beginning by learning the basics and administer payroll in the traditional manual method, and then move on to learning the Sage Computerized Payroll package. Training Link offers both the ICB Diploma in Payroll Management courses and the standalone Sage Payroll training courses. The diploma course lasts about 50 hours and after passing the exam the student has a professional qualification and can use the letters denoted by the ICB after his name.