Career profile: Payroll accounting

Ever considered becoming a payroll accountant? Here’s what to expect.

The role of a payroll accountant has become ever more important as a result of changes in legislation around tax and pensions, further increases in business regulation and the growing importance of compliance.

A payroll accountant is responsible for:

• administering PAYE
• working out and recording expenditure on wages and salaries
• overseeing employee pension contributions, sickness, maternity and holiday pay
• calculating employee perks such as company cars, health insurance and share schemes.
• ensuring employer and employee NI is correctly calculated
• arranging payment of employer taxes correctly and on time.

What does the role involve?

• Helping the business understand its liabilities – by understanding payroll obligations a business can better calculate current and future cashflow.
• Ensuring that employees receive the correct salary on time, minus any tax they need to pay, taking into account pension contributions and student loans.
• Adjusting pay and administering changes in employee tax codes, for example if someone gets married or takes parental leave, receives a pay rise or becomes a director.
• Payroll accountants need to report employees’ payments and deductions to HMRC on or before each payday.
• A payroll account needs to ensure that employer and employee tax is calculated correctly and paid on time in order to avoid fines.

What type of work would I do?

On a day to day basis, a payroll accountant is responsible for recording wages, working out bonuses, calculating and deducting taxes for employees, and calculating employer tax and liabilities.

As part of the process, the payroll accountant will have access to a lot of sensitive salary and bonus data, so it is essential that they understand data protection laws and how to ensure all information is kept completely confidential.

They will also need to keep track of new employees who join the company, and then notify HMRC accordingly. A key responsibility is notifying HMRC if an employee’s circumstances change – for example if they retire, leave the company, or take maternity leave.

At a senior level, you might be involved in implementing a new payroll system.

How much could I earn?

The AAT Salary Survey 2019 provides details of the typical salary an accountant might expect to earn, based on information gathered from AAT members.

For example:

• Director/Senior Manager might earn an average salary of £43,000
• Middle Manager £34,000; Junior Manager £28,560
• Team Leader/Supervisor £27,000
• Accounts/Finance Officer £25,464
• Administrator Accounts/Finance Assistant £19,500

What qualifications do I need?

The AAT Bookkeeping qualification is ideal for those wanting to work in payroll.

AAT offers five short bookkeeping qualifications, which each take six to twelve weeks to complete. These qualifications provide training for a huge range of bookkeeping roles and are respected by employers worldwide.

The courses on offer are:

• Access Award in Bookkeeping (Level 1)
• Access Award in Accounting Software (Level 1) 
• Foundation Certificate in Bookkeeping (Level 2)
• Foundation Award in Accounting Software (Level 2)
• Advanced Certificate in Bookkeeping (Level 3) -This qualification can be used as a route to professional AAT Bookkeeper status (AATQB).

Key takeaways

Payroll accounting is a very important function within an organisation because:

• understanding payroll obligations helps a business calculate cashflow and future and current liabilities
• it protects the company from fines
• it ensures that employees receive the correct salary, minus any tax they need to pay
• employer and employee tax must be calculated correctly and paid on time to avoid fines
• payroll accountants liaise with HMRC and DWP to ensure tax and pension contributions have been correctly calculated
• it’s important to keep up with legislation to ensure the business is compliant and no penalties are levied.

Case study: the role of a payroll administrator

Jennifer Carline is head of payroll accounting at the Manchester office of top 20 firm UHY Hacker Young. She runs a team of payroll administrators who provide payroll, tax and pension services for external clients.

“You need to be methodical and yet able to work to tight deadlines,” she says.

“I have a team of three administrators working for me and we offer a bureau service for external clients. The administrators run the payroll function for the external clients and the tasks include managing the auto-enrolment process, and corresponding with HMRC and the DWP on behalf of the client.

Double-checking calculations

“They may also be required to check the work of their colleagues, because we don’t just rely on the computer software – it is important to make sure that all the calculations have been done correctly.”

She says that technology does help but you still need the human element and the checks that go with that, so payroll is unlikely to be replaced by fully automated processes any time soon.

While the role does require mathematical skills, it would also appeal to someone who’s well-organised, can work under pressure, and memorise a raft of important legislation.

“You’ll need to be able to carry out salary calculations, check tax and net pay against the computer calculations, and carry out high volumes of work under pressure, as it can often be a time-sensitive environment to work in,” she says.

Awareness of legislation is key

“You’ll also need a strong awareness of current legislation in terms of tax, payroll and pensions. It’s said that you have to have 174 pieces of payroll legislation in your head, 338 if you count all statutory instruments and hundreds of pieces of case law.

“There may be legislation that applies to a case that doesn’t crop up very often, so you need to be aware of that possibility and know how to research and access information which isn’t always obvious.”

In summary

Payroll accounting requires keen attention to detail and excellent communication skills, as well as mathematical ability and strong organisational skills.

It’s a fast-moving, challenging role which would suit someone who is able to:

• work under time pressure
• prioritise tasks
• use technology effectively
• handle confidential information and data on a daily basis.

Payroll accounting is an essential part of a business – employees definitely notice if they’re not paid on time, and HMRC needs to be notified on the correct dates – so there’s a lot of responsibility.

Read more on careers available with AAT qualifications here;

• Career profiles on a range of finance-related roles
• 4 Bookkeeping challenges faced by small businesses that you can solve
• 14 different accounting roles: Which is right for you?

Marianne Curphey is an award-winning financial writer and columnist, and author of the book How Money Works. She worked as City Editor at The Guardian, deputy editor of Guardian online, and has worked for The Times, Telegraph and BBC.