Payroll Checklist for SMEs (with Free Excel Template)

For many small and medium-sized businesses, payroll can feel like a never-ending cycle of admin. It’s not just about pressing “pay” at the end of the month. Payroll involves collecting timesheets, updating employee records, handling tax code changes, calculating pensions, and ensuring everything is compliant with HMRC.

When you add in holidays, sick pay, and leavers, it quickly becomes a complex process where mistakes can lead to delays, frustrated employees, or even fines. That’s why having a clear checklist can make such a difference. It keeps your payroll organised, ensures compliance, and saves your team valuable time.

To help, we’ve created a Payroll Checklist that breaks the process down into simple steps. You can also download our free Excel template to follow along and track progress each pay cycle.

Before the Payroll Run

The first stage of payroll is all about preparation. This is where most errors creep in if information is missing or inaccurate.

Make sure you’ve collected and approved all timesheets, including overtime. Confirm any holidays and absences so you know who should be paid and for how many days. If there are new starters, complete their starter checklist. For leavers, process their final pay and issue a P45.

It’s also essential to double-check whether employees have updated their bank details. A small change missed here could mean late or failed payments.

During the Payroll Run

Once the prep is done, it’s time to run the payroll. This stage is about accuracy. Input and verify all salary data, hours, and adjustments. Apply any tax code updates you’ve received from HMRC.

Don’t forget about pensions. Contributions need to be calculated and deducted correctly, both for the employee and the employer. Compliance checks are also important at this stage, ensuring statutory pay rules are applied.

Finally, generate draft reports. These give you the chance to spot errors before payroll is finalised.

After the Payroll Run

When payroll has been processed, there are still critical steps to complete. Payslips must be distributed to employees, and Real Time Information (RTI) submissions sent to HMRC. Payments then need to be made to both staff and HMRC for tax and National Insurance.

If there are benefits or deductions, such as childcare or employee loans, make sure these are handled correctly. For anyone leaving the business, generate and send their P45. And don’t forget record-keeping: payroll records should be securely stored to stay compliant with HMRC and GDPR.

Ongoing Payroll and HR Admin

Payroll isn’t just a monthly job. There are ongoing responsibilities that need attention. Holiday balances should be monitored, compliance deadlines tracked, and reports run regularly for Finance and HR.

Security is also a priority. Payroll data is highly sensitive, so it’s essential to keep systems and processes GDPR-compliant.

Why a Checklist Matters

When you’re managing payroll alongside everything else in the business, it’s easy for small details to slip through the cracks. A checklist ensures that every task, from collecting timesheets to submitting RTI, is done consistently and on time.

To make things even easier, we’ve built a free interactive Excel template. It includes a status tracker (Not Started / In Progress / Done) so your team can see at a glance what’s complete and what still needs attention.

Frequently Asked Questions (FAQ)

1. How long should I keep payroll records in the UK?
HMRC requires employers to keep UK payroll records for at least three years after the end of the tax year they relate to. Many businesses keep them for up to six years to align with wider accounting and audit requirements.

2. What is RTI in payroll and why is it important?
RTI (Real Time Information) is HMRC’s system for receiving payroll information. Every time you pay employees, you must submit details of pay, tax, and National Insurance contributions. Submitting RTI late or incorrectly can lead to penalties from HMRC.

3. Do I need to issue a P45 for every leaver in the UK?
Yes. In the UK, every employee who leaves your business must be given a P45. This document details their final pay and deductions and is needed for their new employer or for claiming benefits.

4. What is the difference between gross pay and net pay in the UK?
Gross pay is the total amount an employee earns before any deductions, including salary, overtime, and bonuses. Net pay is the amount they take home after deductions such as tax, National Insurance, pension contributions, and other adjustments.

5. Can payroll be automated with software?
Yes. Using automated payroll software in the UK can save significant time and reduce errors. Payroll software can manage calculations, apply HMRC tax updates, submit RTI automatically, and handle pension contributions. This ensures compliance and frees up your team to focus on business growth.

Final Thought

Payroll doesn’t have to be overwhelming. With the right systems and a clear checklist, you can reduce errors, save hours every month, and give your team more time to focus on growing the business.

👉 Download the Payroll Checklist Excel Template and take the first step towards simpler, stress-free payroll.