Payroll and Pensions: The Guide - More Than Accountants

Payroll and Pensions: The Guide

What exactly is payroll?

“A list of a company’s employees and the amount of money they are to be paid,” according to the definition of the word “payroll.”

That speaks nothing about the term’s modern meanings, particularly when it’s employed in the phrase “doing payroll.”

Running payroll refers to the monthly process of deducting an employee’s tax (PAYE), National Insurance payments, and any other monthly deductions required by HMRC before paying that employee.

Want to switch to More Than Accountants? You can get an instant quote online by using the form below. In a like for like comparison for services we are up to 70% cheaper than a high street accountant.

It is the employer’s responsibility if these deductions are not made correctly or HMRC is not paid on time.

Hiring an accountant to manage your payroll is a good idea.

Even if you’re a sole trader, hiring an accountant makes sense.

However, if you have a small business and need to conduct payroll every time you want to get paid, or if you have staff, the demand is tenfold.

Even if many components of payroll processing are “automated” as a consequence of integrated software that does the work for us, having an accountant on board to review the statistics might result in:

  • Potential tax savings on the pay of your staff (both optimising for them and for you as the employer).
  • When running the payroll, there’s an extra layer of protection against human error.

Depending on the size of your company and the number of employees you have, employing a payroll accountant UK may be the best option for processing.

RELATED: An Introduction to Payroll

Everything you need to know about payroll

Let’s be honest: manually processing payroll is not just inconvenient, but also dangerous. To do it properly, there is simply too much legislation to follow, and human errors can result in costly penalties for businesses.

When it comes to payroll, you must accomplish the following:

  • As part of PAYE, you must deduct the applicable tax from each of your employees and send it to HMRC.
  • For National Insurance contributions, you must use the same procedure (employer and employee national insurance, as applicable).
  • Subtract any required student loan repayments (this needs to be noted on the payslip).
  • Any charity contributions are deductible.
  • At the end of each year, P11 forms must be completed and submitted to HMRC. A P11 form is a document that keeps track of all payments and deductions made to and from an employee.
  • Every year, P60s must be filled out to show how much tax was deducted from an employee’s pay.
  • Every time you process payroll, you must give your employees a payslip on or before their pay day. If you pay them weekly, you must provide them with this payslip on a weekly basis. They can see a summary of their deductions and earnings on their payslip.
  • Pension deductions should be made if relevant.
  • After you’ve completed your payroll, you must submit a Full Payment Submission (FPS) to HMRC. This tells HMRC about all the payments and deductions you’ve made to your employees.
  • You may be required to send an Employer Payment Summary (EPS) by the 19th of the next tax month in some circumstances.

Due to auto-enrolment rules and administrative hurdles, managing pensions has become a significant issue for payroll managers in recent years.

Every business in the United Kingdom is now required by law to enrol any qualified employee in a workplace pension plan. That may appear straightforward, but it entails allocating time and payroll resources to remain on top of monthly employer payments, track new data, and conduct continuing eligibility evaluations.

GOV.UK defines an eligible jobholder in the following terms:

Earn at least £10,000 every year between the ages of 22 and State Pension age
Normally work in the United Kingdom.

Pension legislation is rapidly evolving, and payroll must stay up to date on all changes in order to be compliant and ensure that their employees are being paid the correct amount into their pot. Any company discovered to have underpaid employee pensions, whether intentionally or unintentionally, risks serious reputational harm and large fines from the Pensions Regulator. That’s why it’s critical for businesses and their payroll departments to get it right the first time.


It’s no surprise that participation in workplace pension plans has increased dramatically in recent years. According to the most recent ONS statistics, an estimated 45.6 million persons in the UK are enrolled in a workplace pension scheme as of 2018. The number of active members in the private sector has now surpassed 9.9 million, up 28.6% from 2017.

That’s enough data to conclude that auto-enrolment is having a significant influence on the UK economy.

The extra labour required with handling compliance, contributions, data transfers, opt-outs, and legal notifications to employees is reflected in the fact that just under half (44 percent) of UK payroll managers put pension management and auto-enrolment among their top three key issues.


Companies must perform a re-enrolment evaluation throughout their payroll every three years. This ensures that all eligible employees, even those who previously opted out of a pension, are re-enrolled in a programme as required by law. To guarantee compliance, employers must send a formal notice to employees within six weeks of their re-enrolment date informing them of any changes.

The particular date that a corporation sets for re-enrolment is important to remember. Regardless of how many payrolls a firm runs, they must choose a single date, which must be compatible with numerous pay frequencies, payroll software capabilities, and business processes. Out of convenience, many organisations choose the third anniversary of their staging date, albeit the date might fall anywhere within a six-month window.


Because of the numerous restrictions and complicated administration that come with auto-enrolment and re-enrolment, many businesses are opting to outsource their pension plans to a third-party provider.

However, while this is a smart option for any company that cannot manage employee pensions in-house, it also increases the burden on payroll to import and export employee data while maintaining correct records across many systems. Manually updating pension data records can soon become a time-consuming chore for payroll to maintain, to say the least.

Payroll solutions that are designed with integration and automation at their core are invaluable because they allow for more real-time tracking and updating of data across internal and external systems. This means less time spent on mundane administrative activities and data input, and more time to focus on people management as a whole.

Taking care of the burden

The rapid growth of pension programmes and auto-enrolment that we’ve seen over the last decade has presented payroll departments with a new set of issues and risks. Pension payroll software is still in its infancy, but it’s apparent that a greater emphasis on automation and integration is assisting in the reduction of time-consuming manual processes.

RELATED: How to Set Up Payroll for Your Business

Previous Payroll Advice for the First Time Employer
Next Quoting for your business services: how much should you charge?
Table of Contents