5 Questions Startups Always Ask About Payroll

15th April 2019


If you’re a startup or a small business, payroll might not be at the forefront of your mind. The exciting cut and thrust of entrepreneurial spirit seldom has time for something as pedestrian as your payroll provider.

But if you pay no heed to your payroll solution, it could end up costing you.

Payroll errors cost UK firms over £700million each year through overpayments to HMRC. That’s a lot of money for any business, but payroll errors can be a death knell for startups. Running out of money is known to be the second biggest reason for their failure.

So, getting payroll right is important.

As a leading provider of payroll solutions, from software to outsourcing, supporting startups and small businesses, we understand the challenges you face.

Here are a few questions we hear all the time – questions you should be asking too if you want to ensure accurate and cost effective payroll management.

1. What are my payroll requirements?

The first thing you need to establish is your needs. Take a look at the size of your startup and ascertain your requirements. Are you paying a lot of people? Are they weekly or monthly paid? Have you got the capacity (and time) to use and understand payroll software? Have you considered auto enrolment and the costs associated with that? Do you need international payroll?

Get an idea of the scope of your needs. This will give you an idea of how to ballpark your budget.

Speaking of budgets…

2. What is my budget?

Before you can go spending money, you need to know how much you have. As a startup, you should have allocated a specific amount of money for doing at least basic HR, the books etc. You need to decide how much of that budget will go towards finding a way to pay your people.

Bear in mind that some payroll solutions do more than just payroll. By investing a little more, you may be able to get your hands on a hassle-free system that manages all aspects of HR, as well as payroll. It pays to be flexible when it comes to your budget, but to do that, you need to have a budget in the first place. And if you keep things separate, look for free versions of really good essential HR software that only costs you once you exceed a certain number of staff.

Working out how much of your budget should be spent on payroll is more art than science, but based on your average overhead percentages, you can calculate a pretty good estimate.

3. What type of payroll solution is best for my needs?

A good payroll provider will, at the very least, aim to deliver a tailored service that meets your needs. There are many payroll solutions out there to choose from.

You may find that outsourcing your payroll is a good starting point. Using an outsourced provider frees up time and the administrative burden. You just send your payroll information and let your provider do the rest. This gives you access to technical expertise you don’t have and takes all the fussy data entry out of your hands.

On the other hand, payroll software may allow you to integrate your spreadsheets and existing systems. This provides a number of benefits, including accessibility, greater control and access to key insights. But, you need to be completely on top of legislation and payroll compliance with the HMRC to get the most from a piece of software. Get it wrong and this is where start ups get into trouble.

Some start ups take the best of both and have a part managed solution, using a bit of front end software, but leaving the administrative grunt to the experts.

Which one is best for you will be unique to your business. Startups aren’t all created equally and there are so many factors, beyond skills and budgets to consider.

One way to ascertain which solution is right for you is to speak to a payroll provider. Many providers, like us, are happy to offer no obligation advice on which options are best for your startup.

4. Will my payroll solution grow with my startup?

This question is key. Whether you’re engaging a payroll provider’s outsourced service or software solution, you need to know that today’s service will be just as good tomorrow’s. Successful startups expand at a rate faster than any other type of business, which can put pressure on 3rd party providers or restrictive software.

Before choosing a provider, make sure they’re equipped to handle the levels and rate of expansion you expect to experience from your startup.

But, be realistic. Don’t pay for an expensive piece of payroll software that has all the bells and whistles, but you find you won’t use until your company is considerably larger. Look for modular systems where possible, where the software allows you to bolt (and pay) for components only when you need them.

5. How do I know if a payroll provider is any good?

BACS accreditation, HMRC approved, ISO 27001 compliant, CIPP Assurance. All of these things are essential for payroll providers in the 21st century. Remember, by engaging a third party provider, even for software, you’re exposing your financial and employee data to risk.

Unless you’re 100% confident in the security and compliance of any service provider, be it payroll, pensions or banking, think twice about sharing data with them.

55% of the nearly 600 small- and medium-sized businesses surveyed by the Ponemon Institute reported being hit by a cyber attack in 2017. In addition to the cost of breaches, the survey revealed that negligent employees or contractors and third parties caused the most data breaches.

Always double check the security of your third party providers. Bad providers are the weak link in the chain. Good providers offer extra layers of protection. And just as importantly make sure that employee payslips are protected as well.


Payroll best practices for new startups

Process payroll on time, every time

Be on time with payroll each pay period. Paying people on time keeps staff happy and keeps you from making costly mistakes like overpaying employees (or worse, underpaying them) because you’ve rushed the payroll. Whatever you choose to do, get into good habits of sticking to regular payday processes.

File payroll taxes on time

Avoid costly fines and additional stress by filing your paperwork on time. Key tax dates include 6th April for the start of the financial year and 31st October. This is the deadline for submitting your self assessment tax return on paper.

As a startup, there are plenty of resources available from HRMC to ensure that you’re meeting your deadlines and staying on top of things.

Be meticulous and fill out forms correctly

Before you submit your payroll taxes, make sure you line up all those columns and lines, then triple-check to make sure that everything is in order. Human error is one of the biggest causes of payroll mistakes. And mistakes mean doing it all over again, which can cost a lot of time and money in the future.

Automation can only take you so far, but to really ensure accuracy, your need a trained eye. This is one of the key benefits to outsourcing your payroll – you can rest assured that your payroll is always accurate and always compliant.

Maintain squeaky-clean payroll records

Organise and find a secure place to keep your payroll data.  Keeping your house in order is essential for turning a startup into a success. You need to have access to tax information, wage information, employee demographics, and other required documentation in order to meet your legal obligations.

You must submit regular payroll information and do annual reporting throughout your entire life as a startup. In addition, if regulators ask for employee information, having it available in a single, easy to find place is essential.

This might seem like a big task, but the good news is that you only have to set up payroll once. After that first time, you should get into a routine of handling your weekly and monthly payroll responsibilities, and then preparing quarterly and year-end tax filing and reporting.

Start your startup off right

Amity Essentials is our latest HR software solution designed specifically for growing businesses. Its modular design means you can get the HR support you need for a price you can afford.

Best of all, its FREE for businesses of 0-10 employees.

For small businesses where key stakeholders are often handling multiple roles, you need the power to manage HR anywhere at any time. Accessible on any device, Amity Essentials allows business owners to manage their HR at a time and place to suit them. Whether that’s on a site, travelling for business or at their desk.