UK Payroll Legislation: What Employers Need to Know
Navigating UK payroll legislation can be complex, with strict rules around PAYE, pensions, statutory entitlements, and data protection. We take the stress out of compliance by ensuring your payroll runs smoothly, accurately, and in line with HMRC regulations — giving you peace of mind and your employees the confidence of being paid correctly every time.
- Employers must run PAYE as part of payroll to collect Income Tax and National Insurance Contributions (NICs).
- Payroll data must be reported to HMRC in Real Time (RTI) every payday.
- Late or inaccurate submissions can result in HMRC penalties.
- Employers must pay at least the National Minimum Wage (NMW) or National Living Wage (NLW) depending on age and status.
- Rates are updated every April.
- Strict enforcement: fines up to 200% of unpaid wages and potential public naming by HMRC.
- Employees must receive a written payslip every pay period.
- Protects rights around pay, deductions, and notice periods.
- Employees are entitled to 5.6 weeks of paid annual leave (pro rata).
- Maximum working hours: 48 hours per week on average (unless opted out).
- Recent case law affects holiday pay (e.g., inclusion of overtime and commission).
- Statutory Sick Pay (SSP)
- Statutory Maternity Pay (SMP)
- Statutory Paternity, Adoption, and Shared Parental Pay
- Employers are reimbursed for some statutory payments via HMRC schemes.
- Employers must automatically enrol eligible employees into a workplace pension.
- Minimum contributions: 3% employer + 5% employee of qualifying earnings.
- The Pensions Regulator enforces compliance and can issue fines.
- Requires equal pay for equal work, regardless of gender or protected characteristics.
- Employers must avoid discriminatory pay practices.
- Payroll data is personal data and must be stored and processed securely.
- Employers must comply with GDPR principles (lawfulness, fairness, transparency, security).
- Governs benefits in kind (e.g. company cars, medical insurance).
- Employers must submit P11D forms annually for benefits.
- Applies to employers with annual pay bills over £3 million.
- Levy charged at 0.5% of total pay bill, paid via PAYE.
- Special tax scheme for construction contractors and subcontractors.
- Contractors must deduct money from subcontractors’ pay and pass it to HMRC.
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