Your legal responsibilities
If you employ in the UK and you pay your employee more than £97 per week (tax year 2006/2007) the law requires you to:
- Register as an employer
- Set up and operate a PAYE (Pay As You Earn) scheme on your employee's behalf
- Keep tax records on their behalf
- Provide your employee with regular payslips
- Provide them with an employment contract
- Pay regular income tax and National Insurance Contributions
- Pay employer's National Insurance Contributions
- File an employer's annual tax return
These obligations also apply:
- If your employee earns less than £84 per week in your employment but more than £97 in total (e.g. if they have two or more part-time jobs)
- In short-term employment (i.e. a week or longer)
- To any employment taking place in the UK - irrespective of the country of origin of the employee or employer
Failure to register as an employer if you are paying your employee above the weekly threshold is an offence, which can potentially lead to heavy penalties.
Consider the following:
- Failure to file employer's annual returns by 19 May can result in penalties of £100 per month filed late
- Failure to pay all tax/NI liabilities before 19 April results in interest being charged on the amount outstanding.
All these legal obligations can be not only complex but also time-consuming, especially for a first-time employer. Without working knowledge of the tax system and current employment law, you are entering a minefield. Big businesses use skilled payroll, legal and human resources professionals. Now you can too - at a fraction of the price.