When you take on your first employee, inform the Inland Revenue and they will send you a new employer starter pack. This gives you the information you need to operate a PAYE scheme.

Employees are entitled to an itemised pay statement. This has to show each deduction from pay individually as well as any tax credit payments. The deductions will be PAYE and NI, but also might include student loan deductions and earnings arrestments.

You can use the Inland Revenue P11 forms to calculate how much to deduct from each employee (and how much employers NI you have to pay out on top of the deductions from gross pay) but you should also consider a computer payroll package or using a payroll bureau. If you buy the software, you must subscribe to regular updates. The format of the Inland Revenue forms seems to change every year, as well as the tax and NI rates and bands, SSP and SMP rates and a host of other criteria.

I can recommend CS Corporate Solutions payroll bureau (there are other payroll bureaus) to take the bureaucratic strain or just as a source of friendly payroll advice on a host of issues such as the National Minimum Wage - but then I would say that, wouldn't I?

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