You can setup payroll for directors by following these steps:
Add your director's business
Before you can pay directors, you need to add their business by following these steps:
- From the business menu, select "Add a new business"
- You'll need to enter the following details:
- Company house registration number (or select "I don't have a CHRN" if the business dosn't have one)
- Business name
- Legal name
- Number of employees
- Once you have done this select "Next Step" and your business will be created.
You need to add a business for each separate PAYE scheme you'll be paying directors under, but if your client's business has multiple directors, you can pay them from within the same business.
Set up your director's business
- Under payroll settings > HMRC settings, enter the HMRC settings for this business. These settings will be used to submit the FPS and EPS reports to HMRC.
There are a number of other settings available, but these are the key settings to review when setting up payroll for directors.
Add your directors
Once you've added your director's business, you can add directors using the "add employee" wizard. When adding a director some key things to note are:
- Under the "Employment details" section set the pay rate, hours per week and the primary pay category. If your directors aren't working a set number of hours, you can add "1" as the standard number of hours, otherwise add 37.5
- Under the "Tax and NI" section be sure to tick "is company director". When this option is selected, you'll be able to set:
- NI Calculation method: use standard annual earnings period if you're paying variable director amounts or the directorship starts part way through the tax year, otherwise use the monthly calculation basis. You can find out more about the best calculation method here: https://www.gov.uk/employee-directors
- Appointment start date: This is the date the directorship started. It may be the same as the employee start date, but if it's not, you can specify a different start date.
Enter opening balances
If you're transferring a director from another payroll system and have paid this director during the calendar year, you'll need to enter the opening balances (YTD values) for the director. You can do this by going to the employee file > opening balances page. The key items to enter on the opening balances page for directors are:
- Earnings - under the earnings tab on the opening balances page, make sure you enter the YTD earnings figure for your director
- PAYE - under the PAYE tab on the opening balances page, make sure you enter the YTD PAYE figure for your director
- National Insurance - under the national insurance tab, make sure you enter the national insurance figures and ensure the applies to directors NI check box is ticked
If your director has been paid under multiple NI categories during the calendar year, you can click "Add another category" to include additional NI category values.
Create a pay run
Once you have setup your director and their opening balances, you can now create a trial pay run. You can create a trial pay run by following these steps:
- From the dashboard, click "Create pay run" in the top right corner
- Enter the period end date and date paid in the dialog box and click "Create"
- A pay run will then be created where you can review the pay run values for the trial pay run
NOTE: At this point, the pay run is in DRAFT so you can review and adjust figures, change settings and delete the pay run and this will have no impact on the payroll file.
Once you are happy with the figures in the pay run, you can Finalise the pay run. Finalising the pay run marks the pay run as complete and allows you to submit the FPS to HMRC.
You can find out more about finalising your pay run here
Automating your director pays
Once you have set everything up, you can setup your director's pays to be processed automatically each month without any manual intervention from you. When automating your pay run you can:
- Create and finalise the pay run
- Submit the pay run FPS to HMRC
- Export journals to your accounting system
- Automatically send reports and pay slips once the pay run has been processed
You can automate your pay run by following these steps:
- Go to payroll settings > pay schedules and click on the pay schedule name to expand the pay schedule settings.
- Click on the link under "Pay run automation" to view the pay run automation settings wizard
- From the wizard, enter the details you'd like to automate your pay run and from there you can set the net pay run date and your finalisation options
Once you've set your automation options, the pay run will automatically be processed for you.
You will be notified if the pay run completes and you'll be able to review any issues from within the pay run screen.
At this point you've successfully setup your director payroll but you may want to take advantage of these powerful features to streamline and enhance your director pays even further:
- Export journals to your accounting system
- Setup report packs to automate report delivery
- Automate your EPS to be sent every month
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