FinOps handbook

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Expense Cards

Running Payroll

Payroll checklist

Tracking payroll changes

We currently have a few different ways of doing this.

When a client sends emails

Create tasks when we receive an email from the client throughout the month

Update a

Google Sheet⁠

with the changes

HR Software (ie - Charlie HR)

Downloading reports for;

Joiners

Leavers

Salary changes

Accrued holidays for leavers

What's our general approach?

Track changes in HR software (limited

Track changes in Google Sheet - easy to see month on month changes

Processing payroll changes

New starters

Information required from employee

New starter form or P45 (either of is fine)

Bank account details

Information we should already hold for the client

Pension enrolment (immediately or deferred for 3 months)

Annual salary

Start date

How to

add a new employee to Xero?⁠

⁠

Add personal details

Add tax details

P45

If there is no P45, the payroll software will default to a

non-cumulative emergency tax code of 1250L W1/M1 or 1250 X⁠

⁠

If there is a P45, enter the information in Xero exactly per the P45 in Box 7

Student Loan

if information is provided in the new starter form, enter accordingly

if you don't have any information on this,

default to Plan 1⁠

⁠

Add employee to pension scheme

Select whether the employee is in a pension scheme:

If No, Xero assesses the employee for auto enrolment, and adds pension pay items to their pay template.

Defer for auto-enrolment

Leavers

Information required from the employer

Last day of employment

Any holiday accruals

Any redundancy payments

Any other deduction (ie - season tickets loan, laptop purchase etc)

Salary changes

Commission

Bonus

Salary increase or decrease

Pension contribution changes

In the UK, all employees aged over 22 years old and earning a minimum of £10k a year are opted in to pension contributions, unless they opt out.

If they are under 22 or earning less than this amount, you can ask the employee if they’d like to voluntarily enrol or “opt-in”.

If they opted out within the first month, the employee will be able to get the money back. If they opted out after that, they can't get the money back but no more contributions will be made to their pension fund.

An employee can defer their enrolment for 3 months after joining the company. If they choose to defer, you must send them a postponement letter. This is automatically generated in Xero under the pension section. After 3-months they must be enrolled.

When adding an employee in Xero, Xero will automatically prompt you to enrol them in the pension scheme if they have not been deferred. If they have been deferred Xero will automatically ask you to enrol them in 3 months time when processing pay-run.

When employees are enrolled, you must send them a pension eligibility letter. This can be found in Xero once the pay-run has been processed under the employees name and under the pension tab.

On occasion, employees may want to increase their pension contributions or to opt out of pension

Pension contribution holidays (pause contributions)

3 yearly enrolment day

Tutorial (TBC)

How to change employee contributions

How to opt out of pension contribution

Checks

What can go wrong

What checks in place

Salary changes not put through

Gross salary month-on-month and provide commentary for any changes

Not adding pension contributions

Net salary month-on-month and provide commentary for any changes

Tax code changes causing a significant change in net salary

Net salary month-on-month and provide commentary for any changes

Applying salary changes to the wrong person

Gross salary month-on-month and provide commentary for any changes

Paying to the wrong bank account

Not paying the PAYE payment before the next deadline

Not applying salary increase after probation period

Tax notices received in HMRC not applied in payroll system

Taking student loan deductions when we should haven't / Not deducting student loans when should have

Not deducting pension deductions when we should be

Not posting payroll before paying employees

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⁠

Pension providers

Where have an agent account

Smart Pensions

NEST

Where we don't have an agent account

Aviva

The People's Pension

Christmas payroll

TBC

End of tax year procedures

Checks

PAYE and NI liabilities

Ensure that Wages Payable account is nil

Reconcile PAYE and NI payable account to payroll reports (P11 NIC and P11 PAYE)

Reconcile PAYE and NI payable to HMRC portal

Compliance deadlines

Send final FPS of the year (same process as per the monthly FPS)

Send employees P60 by 31st of May

Report employee benefits (P11D) by 6th of July

PAYE Settlement Agreements by 6th of July (payment by 22nd October)

Payroll software

Software

Pros

Cons

Xero

integrated into accounting system

only online support

automatic payroll journals only allocate gross salaries to different departments, not associated costs such as Employers NI and Pension Costs

inability to export csv reports vs gross and net

Payfit

free migration

hands-ons support via video call and online support

reports on gross salary and net salary

rapid development

a growing startup so product occasionally buggy

Sage Payroll

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⁠

Other payroll technicalities

Holiday accruals

Check holiday allowance for employees per the employment contract

For example, 28 days (including public holidays is statutory holidays)20 days

Start - 2nd December 2019, End - 27th of March (4 months)

PAYE Settlement Agreement

PAYE Settlement Agreement (PSA)⁠

allows you to make one annual payment to cover all the tax and National Insurance due on

minor, irregular or impracticable⁠

expenses or benefits for your employees.

Migrating payroll software

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