How to Register a New Employee
The employees are the most important assets a business has, and most of their work in terms of taxes and obligations towards the government revolves around the employees. This starts as soon as you hire a new employee.
Her Majesty’s Revenue and Customs need to be informed that you’ve hired a new employee and there’s a process for doing that. It can be done by your HR team, or it can be done by the owner who is how most small companies will do it.
The fact that you have an employee working for you needs to be something that you convey to HMRC. That way, you could start paying taxes on their salary and their national insurance contributions which are also based on income. The process is known as Pull Payment Submission. It will provide the data about both the employee and your financial obligations towards them.
This can be done online, and HMRC prefers that you do it that way since it’s the simplest and the most cost-effective way to do it. If not, it can be done via mail as well.
There’s a set of employee information that you need to provide to HMRC in order to clearly identify who the person is working for you and what kind of responsibilities you have towards them. The data you need to provide includes:
- Date of birth
- full address
- start date
Other information is taken from the employees P45 document if they have worked somewhere before or put into their P45 if you’re the person who employs them. Here’s a list of the data you need to enter:
- Full name
- leaving date from their last job
- total pay and tax paid to date for the current tax year
- student loan deduction status
- National Insurance number
- existing tax code
The tax code
The tax code is one of the information pieces that you need to provide to HMRC, and that’s the code through which HMRC follows the employee and how much they should be taxed based on the variety of circumstances starting with how much they earn.
The code depends on these features:
- When the employee started working for you
- Does the P45 document for the employee includes: BR, OT or D1
- Is this their first job, or they have been employed before
National insurance is another obligation that you have towards the government in regards to your employees and based on their salaries. It’s not technically a tax since it’s not paid used by the government as they see fit. You’ll need to register your employees for national insurance as soon as you employ them.
There are differences between men and women when it comes to natural insurance payments, and this is why you need to specify the gender of your employees when you hire them. This is because of the cost of the medical procedures that only women can go through.
Employees only pay once
Sometimes you’ll need to hire an employee that will do only one task from start to finish and get paid for that task. The rules are different in these cases than they are when you hire a part-time employee or the employee working for a limited amount of time.
When you hire such an employee you’ll need to the following on your report:
- Use tax code ‘0T’ on a ‘Week 1’ or ‘Month 1’ basis
- put ‘IO’ in the ‘Pay Frequency’ field
- do not put a start or leaving date
Employees with more than one job
There are employees you’ll need to hire that will do more than one job, and that can move from one position to another. This will affect how they are paid since each of those positions will have its own rate and its own rules. This will have an effect on taxes as well.
Most importantly, this will affect the taxes and the national insurance contributions since they are tied to how much the employee earns and in those cases, you’ll need to calculate these expenses for each job individually.
A company needs to register that they have hired the employee and that they are paying the taxes and the insurance contributions that are based on salary. This is done with HMRC, and it can be done online. During the registration process, you’ll need to provide some information about the employees and how they earn.
There are a few special concerns that you need to take into account when the employees are hired to do one particular task or few tasks at the same time. There are paths you should take when this happens since it will affect taxation.