Wonder if you can help. I am the bookkeeper for a Ltd Co and the directors have asked me to produce a budget for payroll for the year. The only problem is I dont believe I can budget for PAYE and NIC (Employee and Employer's). Do I have to use HMRC tax tables to try and work out future PAYE and NIC's for the end of the year? I presume I cant just divide £7475 (personal allowance) by 12 (months) and use remainder as taxable free pay per month then deduct 20% PAYE and 13.8% NIC?
Easy way to budget... Take last years figure and add 10% (that's actually real, it's called incremental budgeting).
Don't forget employers and well and employee's N.I. in the budget report.
Surely though all that you are really being asked to do is take the total number of employee's and working out how much to budget for paying them in which case employee's N.I. and Tax is inclusive in their salary so no need to seperate it out.
So, take the salary including any potential pay rise of each employee and add them all together then calculate the employers NI based on that figure.
You are likely to have some leavers and newstarters during the year so best to get managements call on what to factor in for low and high numbers for each of those and show your budget based on current estimate, high and low values.
hope that helps,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
THANKS SHAMUS. DIRECTORS WANT TO SEE BUDGETED GROSS SALARY, PAYE AND NIC (EYER AND EYEE) FOR EACH EMPLOYEE FOR EACH MONTH OF THE YEAR SO I CANT GROUP TOGETHER. I THINK THEY WANT TO LOOK INTO REDUCING HOURS SO NEED TO SEE WHO COSTS WHAT! I THINK I AM GOING TO USE CURRENT PAYE AND NI RATES AND USE MONTH ONE PAYROLL FOR REST OF YEAR RATHER THAN FAFFING AROUND WITH TAX TABLES-WHAT DO YOU RECKON?
Lol, when you said Ta x I just read it as Tax... Doesn't take a lot to keep me amused!
your spreadsheet needs a couple of worksheets. The first one showing the detail and a second one showing the totals only.
On the detail one you need to list every employee, their expected salary (based on hours and rate) and their tax code. (hope it's not a big company).
From there it's easy enough to calculate out the salary, tax and NI that each will be paying and also calculate out the employers NI.
The weighting factors that you need to build into the spreadsheet will be where some months are always heavier on the overtime than others. Best there to use averages based on previous years unless something is about to change.
Try and keep weighting factors seperate from the cell formulae as you may need to change them for what if scenario's.
I personally would be taking whole year figures rather than faffing with tax tables on a monthly basis. A budget is only a best guess anyway. It doesn't factor in (at least not in a foolproof way) sickness, holidays (people don't always take all of their entitlement), people leaving, newstarters, changes in personal tax codes, rate rises, etc.... Sorry, bet your depressed now that this is really a pointless excercise!
Worth mentioning here that many companies don't budget in the traditional sense but rather base everything on production volumes. The classic for that is Ikea. A good theory (and book) in relation to this is Beyond Budgeting, how managers can break free from the annual performance trap (Fraser & Hope).
Hope that this points you in the right direction.
All the best,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I think you need to advise your employers that the GROSS salary includes Tax (paye) and Employee's NI. So all you need to add to this is the employer's NI which is currently 13.8% on earnings over the first £136 per week.
that was pretty much my first approach but Joannes employers seems want the breakdown regardless as to how useless the information is to them!
remember the old saying, "just smile and take the nice mans money!".
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
