5 Popular Payroll Questions for Start-Ups Answered

Payroll is a complex accounting function. There are so many changes to the legislation on a year on year basis not to mention the fines and penalties imposed by Revenue for getting it wrong. When you become an employer, you need to handle everything from setting up payroll to maintaining all necessary records.

Since we wrote some articles on payroll, we’ve been getting a lot of enquiries from lots of different businesses. Today I wanted to answer questions that we get from start-ups. It’s so important that start ups get it right from the beginning.

Here are five of the most popular payroll questions we get from start-up employers.

1. What’s the best way to run payroll?

All employers have to change to the PAYE Modernisation real time reporting since the beginning of this year. There are a number of ways to run payroll, depending on the number of staff and the complexity of hours worked.

For payroll processing it really comes down to either running a payroll software in house or outsourcing payroll to a payroll provider. If you do not use a payroll package, you can meet new reporting requirements by using ROS services online.

Here at AG Associates, we undertake several of our client’s payroll for them as it ensures payroll compliance. We know the business so it’s a natural step for us to do the payroll. For other clients, they use payroll software on a weekly / monthly basis and then we will work with them on their annual return.

If you’re unsure what way is the best way to run payroll, talk to your accountant for the best advice.

2. PAYE Modernisation: How to deal with employees commencing and leaving employment?

Employers are required to notify Revenue of any new employees or employees who have left their employment. With PAYE Modernisation, some employers are confused as to what is required of them in these scenarios.

From 1 January 2019, employers are no longer required to submit a P45 Part 3 or a P46 to Revenue to register a new employee. Instead, to commence a new employment, an employer will now submit a Revenue Payroll Notification (RPN) request for the new employee. This will create the employment on Revenue’s side and Revenue will send an RPN response back into the payrol software advising of the tax credits, cut off points, etc. to be applied to the employee’s pay. The employee’s start date will subsequently be reported to Revenue in the first Payroll Submission Request (PSR) you submit for that employee.

PAYE Modernisation has also abolished the requirement for employers to issue a P45 to an employee and submit the P45 Part 1 to Revenue when they leave their employment. Instead, an employee’s leave date will be reported to Revenue in the final payroll submission made for that employee. Once a leave date is entered in the payroll software, this leaver information will automatically be included in the PSR for the relevant pay period.

3. Can I pay my employees in cash?

While most employers opt to pay using direct debit or cheques, some businesses who are cash rich can pay their employees in cash. Traditionally, paying in cash was looked on unfavourably by Revenue as it may have been a way to avoid taxes.

However, if you use a payroll system which makes all the relevant deductions, an employee can receive their take home pay in cash.

4. What payroll week are we in?

As part of PAYE modernisation real time reporting you must know the payroll week you’re in and process accordingly given this is real time payroll processing with updates to Revenue with every pay run frequency. The reporting process by employers to Revenue is now fully integrated into the employer’s payroll run as part of PAYE Modernisation, thereby contributing to a significant streamlining of business processes and reducing administrative cost for employers. Instead of a yearly P35, a “mini P35”, known as a Payroll Submission Request (PSR), will need to be submitted to Revenue each payroll run. Along with employee pay information, details of employees starting and employees leaving will also be included in the PSR. Checking for updated tax credits and cut-off points will also be an integral part of each payroll run.

5. How much can a business give as a gift to an employee?

Even though we are still enjoying the sun, many employers are forward planning. Bonuses can be given at any time, just as long as they are recorded.

The small benefit exemption was increased to €500 from €250 in the 2016 Finance Bill. What this means is that Revenue will allow one small non-cash benefit per annum to an employee up to the value of €500. None of the usual taxes – PAYE, PRSI and USC are applied to this benefit).

Gift cards or pre-set credit cards are the usual methods by which employers share this benefit with staff. The small benefit exemption can not be exchanged for cash.

PAYE Modernisation

If you have any questions about it in the meantime, please get in touch.

We can walk you through the process and audit how your process can be managed to comply with the new real time reporting. We are here to help.

AG Associates is an accounting practice that specialises in affordable accounting and payroll solutions for the SME business owner. It’s new service Clarity combines online book-keeping with offline accounting to provide an instant snap shot of how a business is doing right now

For further information please contact Angela at Unit 11, Eastgate Way, Little Island, Cork. 021 4824723 or angela@agassociates.ie