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What is the Payroll Payment Process Like? (Step-by-Step)


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Payroll sounds simple until you realise how much goes into it. Here’s a breakdown of what the payroll payment process actually involves, step by step.


Key Takeaways


  • The payroll payment process involves multiple steps from collecting employee details to calculating wages, deducting taxes, and filing reports with HMRC.

  • Mistakes in payroll (like incorrect tax codes or late RTI submissions) can lead to fines and frustrated employees.

  • Automating payroll with the right system saves time, reduces errors, and ensures employees are paid accurately and on time.


Step-by-Step Payroll Payment Process 

Managing payroll can be complex, but breaking it down into clear steps makes it easier. If you’re wondering how to make payroll for employees, this guide walks you through each step. Here are the payroll process steps.


Step 1: Register for Payroll & Get a PAYE Reference

Before you can pay employees, you must register as an employer with HMRC. Once registered, HMRC provides a PAYE (Pay As You Earn) reference number, which is needed to report employee payments and deductions.


How long does it take? Up to 20 working days for HMRC to issue the PAYE reference.


Step 2: Collect Employee Information

You’ll need to gather:


  • Employee tax code & National Insurance (NI) number

  • Salary or hourly wage details

  • Bank account details for direct deposit

  • Pension scheme status


Step 3: Track Employee Hours & Earnings

For salaried employees, use their agreed monthly or weekly salary. For hourly workers, you need to keep track of total hours worked, overtime, and bonuses and commissions.


How long does it take? Ongoing, depending on your pay cycle (weekly, monthly, etc.).


Step 4: Calculate Gross Pay & Deductions

Payroll isn’t just about wages - it involves deductions, including:


  • Income tax (PAYE) – Based on the employee’s tax code.

  • National Insurance (NI) – Both employer and employee contribute.

  • Pension contributions – If employees are enrolled in a workplace pension.

  • Student loan repayments (if applicable).


How long does it take? 1-2 hours with payroll software, longer if done manually.


Step 5: Process Payroll & Pay Employees

  • Run payroll through software or manually.

  • Pay employees via direct deposit, bank transfer, or cheque.

  • Provide payslips showing wages, deductions, and final net pay.




Step 6: Submit Payroll Reports to HMRC

  • HMRC requires Real-Time Information (RTI) reports every payday.

  • These reports show wages paid, tax deductions, and employer NI contributions.

  • Pay any employer NI contributions and owed taxes to HMRC before the deadline.


Step 7: Keep Payroll Records

Businesses must store payslips, tax filings, and payroll summaries for compliance for at least 3 years.


What We Think

Many small business owners don’t realise how complicated it can be until they have to calculate wages, apply the right tax codes, and meet deadlines. A small mistake, like missing an RTI submission or using the wrong tax code, can lead to fines and unhappy employees.


From our experience, manual payroll causes the most stress for small businesses. It’s time-consuming, confusing, and easy to get wrong. Even using spreadsheets can lead to errors when tracking pay, deductions, and taxes.


How JAFA Can Help

At JAFA, our payroll system automates calculations, tax deductions, and HMRC reporting, so you don’t have to worry about errors or deadlines.


✅ No more manual calculations – Our system ensures wages, tax codes, and deductions are accurate every time.

✅ Automatic RTI submissions – Avoid HMRC fines with real-time reporting that’s done for you.

✅ Payroll made simple – Pay employees on time with automated payments and payslip generation.


Contact our expert accountants based in Birmingham, UK, either by booking a FREE discovery call or calling us on +44 121 227 6277. 

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