United Kingdom — Hiring & Payroll Setup

A business hiring employees in the United Kingdom must register as an employer with HM Revenue and Customs (HMRC) for Pay As You Earn (PAYE) before the first payday. PAYE is the statutory system for withholding income tax and National Insurance contributions (NICs) from wages and salaries. This obligation applies to all UK employers—including foreign companies with UK-based staff but no UK entity—and to single-director limited companies employing only the director.

Registration triggers – change effective April 2025

Historically, the main PAYE registration threshold was the Lower Earnings Limit (LEL). However, as of April 2025, employers must register for PAYE if they pay any employee at or above the Secondary Threshold for employer NICs, set at £96 per week (equivalent to £5,000 per year, effective 6 April 2025 and confirmed for 2026–27). This is a material shift from previous years: registration may now be required even if no employee earns enough to trigger National Insurance payments or tax deductions. PAYE registration is also required if the employee receives taxable expenses or benefits, or has another job or pension income, regardless of pay.

Employers must register before the first payday on which they pay employees at or above any of these registration triggers. Registration in advance (up to 2 months prior) is permitted, but payroll must not operate before HMRC confirmation. Employers are subject to penalties and interest if they fail to register and deduct at the proper time, though details of penalty assessment are not laid out in the cited GOV.UK sources.

Employer references and PAYE Online enrolment

Upon successful registration, HMRC supplies two key references: (1) the Employer PAYE reference (a unique code for tax reporting); and (2) the Accounts Office reference (used for PAYE/NIC payments). Employers registering online get automatic access to PAYE Online, with activation sent by post within 10 working days. PAYE Online is used to receive HMRC notices, submit RTI reports, and manage tax codes.

RTI and reporting obligations

Under Real Time Information (RTI), employers must file a Full Payment Submission (FPS) for every pay cycle on or before the payday, reporting all required pay, deductions, and employee data. Payroll software is mandatory for most employers, except for those classed as exempt (very small businesses without internet access) who may use HMRC's Basic PAYE Tools. Registration and reporting obligations apply to foreign/non-UK entities employing UK-based staff as well; a UK address for correspondence may be required for non-resident employer registration.

Summary — Thresholds (2026–27):

• PAYE registration trigger: Secondary Threshold, £96 per week/£5,000 per year gross pay (from 6 April 2025)
• Other triggers: Employee receives taxable benefits/expenses, or has another job/pension
• Registration timing: Before the first payday triggering any of the above

Source: Register as an employer – GOV.UK Source: PAYE and payroll for employers – GOV.UK Source: Rates and thresholds for employers 2026 to 2027 – GOV.UK Source: The Social Security (Contributions) (Rates, Limits and Thresholds Amendment) Regulations 2026 Source: PAYE Online for employers: Using PAYE Online – GOV.UK

An employer in the United Kingdom must pay Class 1 secondary National Insurance contributions (NICs) on each employee's earnings above the secondary threshold. This is a mandatory payroll cost separate from the income tax and employee NICs withheld through PAYE. The employer's NIC liability is reported in each Full Payment Submission (FPS) and paid to HMRC alongside PAYE tax and employee NICs.

Class 1 employer NIC rate and secondary threshold (2026–27)

For the tax year 6 April 2026 to 5 April 2027, the employer Class 1 NIC rate is 15% on all earnings above the secondary threshold of £5,000 per year (equivalent to £96.15 per week or £416.67 per month). The 15% rate was set in the National Insurance Contributions (Secondary Class 1 Contributions) Act 2025, and the £5,000 threshold took effect 6 April 2025 under regulations made under that Act. There is no upper earnings limit for employer NICs; the 15% rate applies to the full amount of earnings above the secondary threshold with no cap.

The £5,000 annual secondary threshold remains frozen for 2026–27 under the Social Security (Contributions) (Rates, Limits and Thresholds Amendment) Regulations 2026. Before April 2025, the secondary threshold stood at £9,100 per year, so the lower threshold materially increases the employer NIC cost per employee.

Calculation and payment

Employer NICs are calculated on earnings in each pay period using HMRC's published tables or payroll software. For a monthly-paid employee earning £3,000 gross, the employer calculates NICs on earnings above the monthly secondary threshold of £416.67:

• Earnings subject to employer NIC: £3,000 − £416.67 = £2,583.33
• Employer NIC due: £2,583.33 × 15% = £387.50

The employer reports the NIC liability in the FPS submitted on or before payday and pays HMRC the total employer and employee NICs plus PAYE tax by the 22nd of the following month (or the 19th if paying by post).

Reduced-rate reliefs for younger workers and apprentices

Employers pay no secondary NICs (a 0% rate) on earnings up to the Upper Secondary Threshold (UST) for two categories of employees, as set out in HMRC's National Insurance Contributions Tables (CA38 2026):

1. Employees under 21 years old — the employer pays 0% on earnings up to the UST of £50,270 per year (£967 per week / £4,189 per month), then 15% on earnings above that level. The employee must be under 21 at the start of the pay period. The relief is codified in NIC Table letter M (under-21s).

1. Apprentices under 25 years old — the employer pays 0% on earnings up to the Apprentice Upper Secondary Threshold (AUST) of £50,270 per year, then 15% on earnings above that level. The apprentice must be on a government-recognised apprenticeship scheme and under 25 at the start of the pay period. The relief is codified in NIC Table letter H (apprentices under 25).

These reliefs significantly reduce the marginal cost of hiring younger workers. An employer paying a 20-year-old apprentice £30,000 per year owes zero employer NICs; an employer paying the same individual £60,000 owes NICs only on the £9,730 above the UST (£9,730 × 15% = £1,459.50 per year).

Employment Allowance

Eligible employers may claim Employment Allowance, which reduces the employer's total Class 1 secondary NIC liability by up to £10,500 for the tax year 2026–27. The £10,500 annual maximum was introduced effective 6 April 2025 and remains in effect for 2026–27. The allowance is offset against each employer NIC payment as it becomes due; the employer pays no secondary NICs until the cumulative allowance has been consumed, after which the standard 15% rate applies.

Employment Allowance must be actively claimed through the employer's payroll software or RTI submission. It is not applied automatically. Failure to claim means the employer pays the full liability with no retrospective adjustment beyond the current tax year.

Employers not eligible for Employment Allowance under the Employment Allowance (Excluded Persons) Regulations include:

• Single-director companies where the director is the only employee paid above the secondary threshold (companies with only one director and no other employees on payroll).
• Public bodies, including government departments, NHS bodies, and local authorities.
• Employers whose sole business is providing services to a connected company and the employee is also engaged by the connected company (anti-avoidance rule for intermediaries).

A small employer with five employees each earning £25,000 has a gross employer NIC bill of approximately £15,000 per year. After claiming the £10,500 Employment Allowance, the net liability is £4,500. Many small employers with lower-wage employees pay no employer NICs at all once the allowance is applied.

Class 1A and Class 1B NICs on benefits and expenses

Employers also pay Class 1A NICs at 15% on the taxable value of benefits in kind provided to employees, such as company cars, private medical insurance, beneficial loans, and gym memberships. The Class 1A rate for 2026–27 is set at 15%, matching the Class 1 employer rate. Class 1A NICs are reported and paid annually (not through monthly payroll) via forms P11D and P11D(b), due by 6 July and payable by 22 July following the end of the tax year.

Employers with a PAYE Settlement Agreement (PSA) pay Class 1B NICs at 15% on the total tax and NICs covered under the PSA. A PSA allows the employer to settle tax and NICs due on minor or irregular expenses and benefits (such as staff entertainment or small gifts) in a single annual payment rather than processing each item individually through payroll or on forms P11D.

Foreign employers without a UK entity

A foreign company that hires employees working in the UK must register for PAYE and pay employer NICs on the same basis as a UK-resident employer, even if the foreign company has no UK subsidiary or permanent establishment. HMRC permits non-resident employers to register for PAYE directly using the standard employer registration process; the employer receives a PAYE reference and Accounts Office reference and must comply with RTI reporting and monthly NIC payment obligations. The 15% employer NIC rate and £5,000 secondary threshold apply identically to non-resident employers.

Source: Rates and thresholds for employers 2026 to 2027 – GOV.UK Source: The Social Security (Contributions) (Rates, Limits and Thresholds Amendment) Regulations 2026 Source: National Insurance contributions Tables A, D, F, H, J, L, M, N, V and Z (CA38 2026) – HMRC

An employer hiring an employee or worker in the United Kingdom must provide a written statement of employment particulars on or before the first day of employment. This obligation is set out in Part I of the Employment Rights Act 1996 (ERA 1996), as amended by the Employment Rights (Employment Particulars and Paid Annual Leave) (Amendment) Regulations 2018, which came into force on 6 April 2020. The written statement is a statutory minimum; failure to comply exposes the employer to tribunal awards and dismissal-protection claims.

Who must receive a statement

The right to a written statement extends to both employees (individuals working under a contract of employment) and workers (a broader category that includes employees plus individuals who personally perform work or services but are not genuinely self-employed). Since 6 April 2020, this right applies from day one of employment or engagement, with no minimum service requirement. The employer must provide the statement regardless of the number of hours worked per week, the expected duration of the engagement, or whether the individual is on a permanent, fixed-term, casual, or zero-hours contract.

A foreign company that hires an individual to work in the UK must comply with the written-statement requirement even if it has no UK subsidiary or registered presence. The obligation runs with the employment relationship, not the employer's place of incorporation.

Timing: principal statement on day one, additional particulars within two months

The written statement is divided into two parts:

1. Principal statement — must be provided on or before the first day of employment. The principal statement must be contained in a single document and must include the particulars set out in ERA 1996 s.1(3) and (4)(a)–(c), (d)(i), (f), and (h). In practice, the employer must prepare and deliver the statement during recruitment and onboarding, before the individual begins work.

1. Additional particulars — may be provided in instalments, provided all are given within two months of the start of employment (ERA 1996 s.2(4)).

Content of the principal statement (day one)

The principal statement must include the following particulars as at a specified date not more than seven days before the statement is given (ERA 1996 s.1(3) and (4)):

• Names of the employer and the employee or worker.
• Start date of the employment.
• Date of commencement of continuous employment (for employees, taking into account any previous employment with another employer that counts toward the period of continuous employment).
• Scale or rate of remuneration, or the method of calculating remuneration.
• Intervals at which remuneration is paid (weekly, monthly, or other specified intervals).
• Terms and conditions relating to hours of work, including:
• Normal working hours or days of the week;
• Whether hours or days are variable, and if so, how variation is determined.
• Entitlement to holidays, including public holidays, and holiday pay. The particulars must be sufficient to enable the worker's entitlement, including accrued holiday pay on termination, to be precisely calculated.
• Job title or a brief description of the work the individual is employed to do.
• Place of work, or (if the individual is required or permitted to work at various places) an indication of that fact and the employer's address.

The principal statement must be a single document. The employer may not require the employee or worker to refer to other documents (such as a staff handbook or collective agreement) for these core terms; they must be set out in full in the statement itself (ERA 1996 s.2(4)).

Additional particulars (within two months)

The following particulars may be provided separately or in instalments, provided they are given within two months of the start of employment (ERA 1996 s.1(4) and s.2):

• Incapacity for work due to sickness or injury, including any provision for sick pay.
• Pensions and pension schemes.
• Length of notice the employee is obliged to give and entitled to receive to terminate the employment.
• Where employment is not permanent: the period for which it is expected to continue, or (if fixed-term) the date when it is to end.
• Any collective agreements that directly affect the terms and conditions of employment, including the parties to the agreements.
• Where the individual is required to work outside the UK for more than one month: the period of work outside the UK, the currency in which remuneration will be paid, and any additional pay or benefits provided by reason of working outside the UK.
• Any probationary period, including its length and conditions (ERA 1996 s.1(6), inserted 6 April 2020).
• Details of any other paid leave to which the worker is entitled.
• Details of any training entitlement provided by the employer, and any mandatory training the employer requires the worker to complete but does not bear the cost of (added 6 April 2020).

For these additional particulars, the employer may refer the worker to other documents (such as a pension scheme booklet or collective agreement) or to statutory provisions, provided those documents or provisions are reasonably accessible to the worker (ERA 1996 s.2(2) and (3)).

Employer's note on disciplinary and grievance procedures

The written statement must also include a note (ERA 1996 s.3) specifying:

• Any disciplinary rules applicable to the worker, or referring the worker to a document that sets them out (which must be reasonably accessible).
• A person (by name or job title) to whom the worker can apply if dissatisfied with any disciplinary decision or if the worker has a grievance.
• Any further steps in the employer's grievance or disciplinary procedure, or a reference to a document setting them out.

This note may be provided as part of the principal statement or separately within two months.

Changes to the written statement

If any of the particulars included in the statement change, the employer must give the employee or worker a written statement of the change within one month of the change taking effect (ERA 1996 s.4(1)). The change statement may refer to other documents for certain matters (sick pay, pensions, disciplinary and grievance procedures) if those documents are reasonably accessible.

If the change arises from the employee moving to a new employer and the new employer's period of continuous employment began with the previous employer (for example, on a TUPE transfer), the new employer is not required to issue a fresh statement under s.1, but must issue a change statement under s.4(1) within one month.

Consequences of non-compliance

An employer's failure to provide a compliant written statement carries several enforcement consequences:

1. Employment tribunal award (section 38 uplift) — Under section 38 of the Employment Act 2002, if an employee or worker brings a successful tribunal claim on any ground (unfair dismissal, unlawful deduction from wages, discrimination, etc.) and the tribunal finds that the employer was in breach of its duty to provide a written statement or statement of changes at the time proceedings commenced, the tribunal must award the claimant either two or four weeks' pay. The tribunal awards two weeks' pay unless it considers that a higher award of four weeks' pay is just and equitable in all the circumstances. The only exception is if the tribunal finds exceptional circumstances that would make any award or increase unjust or inequitable. A week's pay is subject to the statutory cap set out in ERA 1996 s.227, which is indexed annually.

This uplift is in addition to any substantive award (such as compensation for unfair dismissal or discrimination). It applies even if the employer's failure to provide the statement was not the cause of the underlying claim, provided the claimant succeeds on at least one head of claim.

1. Automatically unfair dismissal — Dismissing an employee or worker for asserting the statutory right to receive a written statement is automatically unfair dismissal under ERA 1996 s.104. No minimum service period applies to this claim.

1. Evidential risk — In any dispute over terms and conditions—pay, hours, holiday entitlement, notice period—the absence of a written statement means the employer must prove the agreed terms without a contemporaneous document, which often places the employer at a disadvantage in tribunal proceedings.

Relationship between the written statement and the contract of employment

The written statement of employment particulars is not the same as the contract of employment, though the two often overlap in practice. A contract of employment is formed when the individual accepts the offer and begins work, and it can be oral, written, or partly written and partly oral. The contract comprises all agreed terms, including implied terms and terms incorporated from collective agreements or custom and practice.

The written statement, by contrast, is a statutory information document required by ERA 1996 Part I. It sets out the employer's view of the main terms as at the date of the statement. If the written statement conflicts with the actual agreed terms, the contract (as proven by evidence of what was actually agreed) will prevail, but the employer will still be in breach of the statutory duty to provide an accurate statement.

Many UK employers issue a single written contract of employment that satisfies the written-statement requirements by including all mandatory particulars. Provided the contract is given on or before day one and contains every particular required for the principal statement in a single document, it will discharge the employer's s.1 obligation.

Foreign employers and cross-border considerations

A foreign company that hires an individual to work in the UK (whether as an employee or a worker) must comply with the written-statement requirement even if it has no UK-registered entity or office. The obligation is triggered by the fact of UK employment, not by the employer's place of registration.

If the employer engages the individual through a UK subsidiary, the subsidiary is the legal employer and must issue the statement. If the foreign parent company employs the individual directly, the parent is the employer for ERA 1996 purposes and must issue the statement, including its legal name and registered address (which may be outside the UK).

Where the individual will work outside the UK for more than one month within the first two months of employment, the written statement must be provided before the individual leaves the UK to begin that work (ERA 1996 s.1(5)). The statement must include the additional particulars set out in s.1(4)(k): the period for which the individual will work outside the UK, the currency in which remuneration will be paid while working abroad, and any additional remuneration or benefits provided by reason of working outside the UK.

Source: Employment Rights Act 1996, Part I (sections 1–12) Source: The Employment Rights (Employment Particulars and Paid Annual Leave) (Amendment) Regulations 2018 (SI 2018/1378) Source: Employment contracts and conditions: Written statement of employment particulars – GOV.UK

Every employer hiring a staff member to work in the United Kingdom must complete a statutory right to work (RTW) check before employment begins. This duty remains based on the Immigration, Asylum and Nationality Act 2006 and is enforced by the Home Office. A compliant check provides a “statutory excuse” (defence against civil penalty) if a worker is found to lack permission. Civil penalties remain up to £20,000 per illegal worker (rate confirmed as of February 2024 per the Immigration (Employment of Adults Subject to Immigration Control) (Maximum Penalty) (Amendment) Order 2024).

Statutory methods (June 2026):

• Manual document check: Inspect, in the individual’s presence, original documents from List A (permanent right) or List B (time-limited right) in the Home Office guide. Common examples: unexpired UK or Irish passport, biometric residence permit, immigration status document. Copy the documents, record the check date, and retain on file.
• Online (eVisa) check: For digital status holders, employer uses the Home Office service at https://www.gov.uk/view-right-to-work after the worker provides a “share code.” Download and keep the result page.
• Employer Checking Service (ECS): Used where the worker cannot present acceptable documents (e.g., pending application), the employer may request a Positive Verification Notice. This provides a statutory excuse for six months from the notice (see Statutory excuse: time-limited right to work, Home Office guide).

Timing and recordkeeping:

• RTW check must occur before work commences. If permission is time-limited, a repeat check must be done before expiry (details in Home Office guide’s “Follow-up checks”).
• Keep evidence (copies, dates, method) for the entire employment plus at least two years after it ends. See the Retaining evidence section of the Home Office guide.

Scope, sponsor obligations, and foreign employers – legal developments in 2026:

• The core statutory regime applies to all employers hiring individuals to physically work in the UK, regardless of employer residence. Home Office guidance continues not to exempt non-UK employers with UK-based staff, but does not explicitly impose obligations on entities with no UK establishment; as of June 2026, unable to confirm whether any exemption exists for such employers.
• Sponsor check reversal (May 2026): Guidance issued in May 2026 confirms that sponsors (i.e. employers holding a sponsor licence) are not required to complete RTW checks on non-sponsored, directly engaged individuals—reversing an earlier, short-lived expansion. RTW obligations for sponsors apply only to sponsored visa workers and direct employees, not to other associated individuals, as of this update.
• Upcoming expansion (from 1 October 2026): The government has confirmed that, effective 1 October 2026, RTW check duties will expand in scope to cover a broader category of contingent labour—contractors, zero-hours staff, and platform workers—requiring RTW checks similar to those for employees. Employers should monitor Home Office updates and prepare internal processes.

Recent process notes:

• Since 6 April 2022, checks for UK/Irish citizens with a valid passport must usually be made manually unless using a certified Identity Service Provider. The digital check is not permitted except via a Home Office-recognised provider for this group.

Source: Right to work checks: an employer’s guide – GOV.UK Source: Immigration (Employment of Adults Subject to Immigration Control) (Maximum Penalty) (Amendment) Order 2024 Source: Right to work checks guidance update May 2026 – gov.uk

Note: The prior citation “Legal update: right to work checks expansion October 2026” on the Home Office news page (formerly https://www.gov.uk/government/news/employers-expanded-right-to-work-check-duties-october-2026) could not be relinked as of July 2026. All other content and authority remain current as of the latest official guidance review.

Every employer hiring staff in the United Kingdom—including foreign entities with employees in the UK—must comply with automatic enrolment duties under the Pensions Act 2008 and supporting regulations. These obligations include identifying eligible workers, enrolling them in a qualifying workplace pension scheme, and completing mandatory declarations with The Pensions Regulator (TPR) by specific deadlines. Failure to comply exposes employers to escalating penalties and enforcement action by TPR.

Who must comply Any legal person or entity that employs a worker based in the UK and who "ordinarily works in the UK under their contract" (Pensions Act 2008, s1–3) is subject to the duties, regardless of corporate residency. There is no minimum threshold: duties arise with the first eligible employee. A "worker" includes most employees and some categories of agency and fixed-term staff, but not genuinely self-employed contractors or office holders where no contract of employment or service exists.

Staging date and immediate duties Since October 2017, new employers trigger their auto-enrolment duties on the first day they pay their first employee. There is no staged roll-in for new entities: the legal obligation attaches immediately. The employer must—by the employee’s start date or as soon as eligible pay is made—assess whether each worker is an “eligible jobholder” (aged 22 to State Pension Age and earning over the annual earnings trigger—£10,000 for 2026–27, frozen since April 2019 per the TPR guidance, see updated figures). If they are, the employer must enroll them in a qualifying pension scheme and make the minimum employer contribution (currently 3% of qualifying earnings).

Registration and declaration of compliance Every employer must complete an online "declaration of compliance" with The Pensions Regulator within five months of the date their first employee starts ("duties start date"). This obligation applies whether or not they have eligible jobholders—declaration is mandatory even if all staff opt out or if there are no eligible workers at the time. The declaration is submitted online via TPR and requires establishing an account and supplying company payroll details, details of the pension provider (if any), and details of the workforce assessment. TPR uses this data to monitor ongoing compliance.

Contributions and ongoing duties Each pay period, the employer must assess the workforce for eligibility, enroll any new eligible jobholders, deduct employee contributions, pay employer contributions, and remit funds to the pension scheme. Minimum total contributions are currently 8% of qualifying earnings (3% employer, 5% worker; Pensions Act 2008 s20, Workplace Pension Regulations 2010). The employer must also provide specific statutory information to each worker about their rights and enrolment status.

Penalties Non-compliance with assessment, enrolment, or declaration duties is subject to compliance notices, fixed penalty fines starting at £400, and daily fines up to £10,000 for persistent breaches (Penalties: Pensions Act 2008 s40–45).

Source: Pensions Act 2008 Source: Employers’ workplace pension duties – GOV.UK Source: Automatic enrolment for employers – The Pensions Regulator

Any business hiring staff to work in the United Kingdom—whether UK-based or a foreign company with no UK establishment—must register as an employer with HM Revenue & Customs (HMRC) before operating payroll. This registration enables the business to operate Pay As You Earn (PAYE) and fulfill income tax and National Insurance obligations for UK-based employees. The process for registering as an employer and the references issued (including the Unique Taxpayer Reference, or UTR) differ for UK and non-UK entities.

UK-incorporated businesses:

• A UK company is automatically registered with Companies House on incorporation. HMRC is notified by Companies House and will issue a Corporation Tax UTR to the company. This UTR is primarily for Corporation Tax, but will also appear on some employer-facing correspondence. The company then registers as an employer for PAYE, either online or using an agent. The PAYE reference (and Accounts Office reference) is the key requirement for running payroll; the UTR is not always requested in PAYE interactions for UK entities.

Foreign (non-UK) employers:

• A non-UK entity can register with HMRC to operate UK payroll without incorporating a UK company. The process does not require Companies House registration. Instead, the employer completes form RT1 (Register as an employer and pay PAYE), providing business details and a UK or UK-care-of address for correspondence. On completion, HMRC issues a PAYE reference; it may optionally assign a UTR if the business is subject to UK Corporation Tax (for example, if deemed to have UK permanent establishment) but the UTR is not universally required for non-resident employers solely operating PAYE. The process centers on the PAYE reference.

• Supporting documents (identity or address evidence) may be requested by HMRC where the business is not established in the UK or cannot be verified electronically, but documentation requirements vary case by case and are not listed as universal prerequisites in published guidance.

Key practical notes:

• Registration must occur before the first payday. For most UK companies, this is seamless if using HMRC’s online registration. For non-UK businesses, submission and processing of form RT1 may take several weeks, and delays are common if information is incomplete or HMRC makes additional information requests. Published examples do not guarantee a set processing timeline.
• The entity registered for PAYE (named on the reference letter) is the legal employer from a UK payroll and remittance perspective—whether it is a UK limited company, a foreign parent, or another overseas entity. For further detail on permanent establishment exposure, see /guides/united-kingdom/hiring-and-payroll-setup.
• Using a payroll agent is common for non-UK businesses, but every employer must have its own employer PAYE reference—an agent cannot substitute for business registration.

Summary: Employers should focus on successfully registering for PAYE before running payroll, ensuring all required information is supplied accurately and allowing for additional time if registering as a foreign business. The UTR is essential for Corporation Tax purposes, but may not be assigned automatically if the business is non-resident and solely runs PAYE.

Source: Register as an employer – GOV.UK Source: Non-UK employers operating PAYE: HMRC International Manual INTM162110 Source: PAYE for employers: How to register and set up payroll – GOV.UK

Every UK employer must provide a statutory minimum of paid annual leave under the Working Time Regulations 1998 (WTR 1998), as amended. The WTR apply to all "workers"—including employees, part-timers, agency staff, and certain casual/zero-hours workers engaged in the UK—regardless of whether the employer is UK-based or foreign (Reg. 2, 3).

Minimum paid holiday entitlement (Reg. 13, 13A) Workers are entitled to 5.6 weeks' paid annual leave per leave year. For a full-time worker on a five-day week, this means 28 days per year. This entitlement includes (not in addition to) UK public/bank holidays unless the contract provides extra. Part-time/irregular workers accrue leave pro rata: e.g., three days/week × 5.6 = 16.8 days. Workers with variable/zero hours accrue entitlement based on hours worked, as detailed in Reg. 15A and GOV.UK guidance.

Accrual, first year, and carrying forward (Reg. 13, 13A, 15A) Entitlement accrues from day one. During the first year, leave may be limited to 1/12th of entitlement per month worked. Statutory leave must generally be used in the relevant leave year. Carryover is only permitted if: (a) the contract allows it, (b) the worker has not been able to take leave due to statutory leave (parental, maternity) or sickness (Reg. 13(10), 13A(7)), or (c) the employer fails to give a reasonable opportunity (backed by UK and CJEU case law and implemented in the 2020 amendments).

Holiday pay rules (Reg. 16, 16A; effective 6 April 2020) Holiday pay must reflect the worker’s "normal remuneration"—not just basic pay—including regular overtime or commission where these form part of normal pay (Reg. 16, as clarified by recent UK Supreme Court decisions and implemented at Reg. 16A). For workers with variable pay/hours, the 52-week reference period for averaging pay applies for leave taken on/after 6 April 2020 (Reg. 16A(3)(a)). If no pay in a week, use the most recent previous normal week.

Employer control and notices (Reg. 15) Employers may require leave to be taken or restrict timing, provided they give notice at least twice the length of leave to be taken (e.g., two weeks’ notice for one week’s leave) unless the contract specifies otherwise.

Key traps

• There is no statutory right to "additional" paid public holidays—unless offered by contract.
• Failure to pay correct holiday pay or to allow statutory leave entitles the worker to tribunal claims for unlawful deductions or breach of Working Time Regulations.

Source: The Working Time Regulations 1998 Source: Holiday entitlement – GOV.UK Source: Holiday pay: Calculating average weekly pay – GOV.UK

A foreign employer does not strictly need to incorporate a UK company, branch, or permanent establishment (PE) solely to hire and payroll UK-based employees. HM Revenue & Customs (HMRC) allows non-UK entities to register directly as an employer for PAYE, issue payroll, and withhold tax and National Insurance for UK staff—even if the employer has no registered legal presence in the UK. Registration occurs using form RT1 and requires appointing a UK or UK-care-of correspondence address, but does not itself trigger incorporation or Companies House registration. (See: PAYE for employers – GOV.UK; HMRC International Manual INTM162110.)

Permanent establishment risk: Separate from payroll registration, creating a PE for UK tax purposes depends on the business's activities in the UK. Under the Corporation Tax Act 2010 s.1141 and OECD Model Article 5, a non-resident company has a PE in the UK if it has a fixed place of business through which business is wholly or partly carried on, or if someone habitually concludes contracts in the name of the company in the UK. Simply hiring local administrative staff, or seconding a home-based worker whose activities do not amount to core business generation, normally does not create a PE. However, a UK-based employee concluding contracts, managing operations, or acting as a principal sales contact may trigger PE status and UK corporate tax liability. (See: HMRC INTM264040; Corporation Tax manual CTM36100.)

Companies House registration: Registering a branch or "UK establishment" with Companies House is only required if the business has a physical place of business or "some degree of physical presence" in the UK—typically an office or location where business is conducted, or where key people are routinely based. Hiring a remote or home-based UK employee does not of itself trigger registration, provided there is no fixed UK office, warehouse, or similar base. If the employer rents/leases UK premises or operates under the company name at a public UK location, a branch registration is required within one month under the Overseas Companies Regulations 2009 (SI 2009/1801; regs 2 & 4).

Source: HMRC International Manual INTM162110 (Non-UK employers and PAYE) Source: Corporation Tax Act 2010, s.1141 (permanent establishment definition) Source: Companies House: UK establishment registration by overseas companies (SI 2009/1801)

Every employer running payroll in the United Kingdom—including foreign companies registered for PAYE—must report pay, tax, and National Insurance contribution data to HM Revenue & Customs (HMRC) using the Real Time Information (RTI) system. RTI is a statutory framework (mandated since 6 April 2013) that requires employers to file payroll data electronically, for each pay period, on or before payments to employees are made.

Key RTI submissions

1. Full Payment Submission (FPS): Must be filed on or before the date employees are paid (Reg. 67B, The Income Tax (Pay As You Earn) Regulations 2003). FPS includes each employee's pay, tax, National Insurance, statutory payments, and starter/leaver details for that period. Omission or late filing triggers an automatic penalty unless one of the recognised exceptions applies:

• It’s your first FPS of the tax year
• The employee’s pay date falls on a non-banking day (e.g., weekend or bank holiday)
• No employees were paid in the pay period
• The employer is a new employer and the first FPS is late because you’re waiting for your PAYE reference

(See: GOV.UK, “Payroll errors: late reporting”)

1. Employer Payment Summary (EPS): Filed as needed to report periods of no payment, recoverable statutory payments (e.g. maternity/paternity), apprenticeship levy due, or Employment Allowance claims. EPS is due by the 19th of the month following the relevant tax month for most claims to be processed correctly.

Deadlines and late-filing penalties

• The FPS deadline is strict—on or before each payday. Missing this can generate late-filing penalties ranging from £100 to £400 per month (depending on payroll size), per Reg. 67G and Sch. 4A, PAYE Regs 2003.
• EPS must be submitted by the 19th following the end of the tax month (6th to 5th) for adjustments to be recognised in time. Late EPS may lead to incorrect charge notices.

Data fields required

The FPS must include, for every employee paid:

• Name, National Insurance number, date of birth, address
• Pay date, pay frequency
• Taxable pay, tax deducted, NICs, pay for National Minimum Wage assessment
• Statutory payments (SSP, SMP, ShPP, etc.)
• Starting/leaving indicators

Penalties and traps for cross-border/payroll leads

• Penalties for repeated late RTI returns escalate and can trigger in-year monthly and annual penalties based on payroll size.
• Employers must keep electronic or paper records of RTI filings for at least three years (PAYE Reg. 97Z), or risk penalties for incomplete payroll records.
• Non-UK employers must use either HMRC-recognised payroll software or appoint a UK payroll agent but remain legally responsible for RTI filing under their own PAYE reference.

Source: What payroll information to report to HMRC – GOV.UK Source: The Income Tax (Pay As You Earn) Regulations 2003, Regs. 67B–67G and Sch. 4A Source: Payroll errors: late reporting – GOV.UK

The legal minimum wage for most workers in the United Kingdom is set by the National Minimum Wage Act 1998 and the National Minimum Wage Regulations 2015, with annual uprating each April. The minimum wage applies to employees, workers (including agency, zero-hours, and part-time staff), and most apprentices, regardless of nationality or residency status, for work physically performed in the UK. It binds both UK-based and non-UK employers payroll processing for UK-based staff.

2026–27 minimum wage rates (effective 1 April 2026)

• National Living Wage (23+): £12.18 per hour
• Ages 21–22: £10.85 per hour
• Ages 18–20: £8.60 per hour
• Ages 16–17: £6.50 per hour
• Apprentices (under 19 or in first year): £6.50 per hour

If the apprentice is aged 19 or over and not in their first year, the age-appropriate NMW band applies. These rates are set in the National Minimum Wage (Amendment) Regulations 2026 (SI 2026/357) and reviewed annually based on Low Pay Commission recommendations. The rates are legally binding and cannot be waived by contract.

Who is covered The NMW applies to all "workers" working or ordinarily working in the UK under their contract. This includes permanent employees, part-time workers, agency workers, casual labour, seasonal staff, and, in most cases, home/remote workers physically based in the UK for UK or non-UK employers. Certain exclusions exist (company directors without contracts, some family members in family businesses, au pairs, and the genuinely self-employed), but exceptions are narrow and should be reviewed against NMW Regulations, Regs. 57–59.

Global mobility and foreign payroll Non-UK employers must pay UK NMW rates for all UK-based staff, regardless of whether payroll is processed abroad or in the UK. If an employee works abroad, NMW applies if they are regarded as "ordinarily working in the UK". The NMW does not apply to time worked wholly outside the UK but will apply to time worked in the UK by a foreign national, even for a global group.

Penalties for shortfall Failure to pay the legal minimum exposes employers to claims for back pay and financial penalties. HMRC enforces NMW compliance, with penalties up to 200% of arrears (capped at £20,000 per worker, as per the 2016 enforcement regulations) and potential "naming and shaming" of non-compliant employers. Workers may also bring tribunal claims directly.

Calculation and traps NMW is assessed by "pay reference period"—usually the period over which pay is calculated/paid (weekly, monthly). The calculation includes only basic pay and eligible allowances (not overtime, tips, premium rates, or most benefits in kind). Traps include underpayment for training time, travel time between assignments, or deductions not permitted by NMW Regulations.

Source: National Minimum Wage (Amendment) Regulations 2026 (SI 2026/357) Source: National Minimum Wage Act 1998 Source: National Minimum Wage: workers eligible – GOV.UK

An employer hiring staff in the United Kingdom must ensure correct PAYE tax code allocation and fulfil statutory duties around employee starter, leaver, and annual payroll forms. These requirements are specified primarily in the Income Tax (Pay As You Earn) Regulations 2003 (SI 2003/2682), as updated, and are managed through HMRC’s Real Time Information (RTI) system.

Starter process: Allowing correct tax code allocation (P45 and starter checklist)

• When onboarding a new employee, the employer must determine the PAYE tax code by collecting either a current P45 (pay and tax summary from a previous employer in the same tax year) or, if unavailable, require the employee to complete the official "starter checklist" (which replaced the P46; see HMRC guidance and Reg. 36).
• The starter checklist asks if the employee has another job, receives a pension, and other essential details affecting tax code and student loan deductions (Reg. 36, Sch. 3). The employee’s responses yield one of three statements:
• Statement A: This is their first job since 6 April; no other job or pension
• Statement B: They have another job, but no pension
• Statement C: They receive a pension (or both; for most secondary employments)
• Employers use these statements, guided by the current HMRC instructions, to apply the proper tax code—usually the default code for that tax year (emergency code) until HMRC provide another.
• Failing to collect this information results in the emergency tax code being applied to earnings from this employer, possibly leading to over-withholding or incorrect deductions until corrected after reporting or by contacting HMRC.

Leaver (P45) and year-end form (P60) obligations

• When an employee leaves, the employer must prepare a P45 showing total pay and tax deductions to date (Reg. 36A). Part 1A of the P45 is given to the employee; the relevant data is reported automatically to HMRC via RTI as part of the final FPS, not as a separate form.
• At the end of the tax year (as at 5 April), the employer must provide each employee who is still employed with a P60 by 31 May (Reg. 92). This summarises total pay and tax deducted for that year.

Electronic reporting (RTI)

• All these processes—from starter to leaver—are now handled electronically using payroll software or HMRC’s Basic PAYE Tools (Reg. 67B). There are extremely limited circumstances for paper submission.

Foreign employer applicability

• Non-UK businesses registered for PAYE must comply with these processes for all UK-based employees. Missing these steps may result in incorrect tax, employee disputes, and HMRC penalties.

Source: PAYE starter checklist – GOV.UK Source: P45: How to issue – GOV.UK Source: P60: End of year certificate – GOV.UK Source: The Income Tax (Pay As You Earn) Regulations 2003 (Reg. 36, 36A, 67B, 92)

Employers hiring staff to work in the United Kingdom—including non-UK companies registered for PAYE—must pay Statutory Sick Pay (SSP) to qualifying staff who are absent due to illness, as set out in the Social Security Contributions and Benefits Act 1992 (ss. 151–154) and the Statutory Sick Pay (General) Regulations 1982. SSP is a key statutory payroll right and is subject to detailed eligibility and reporting rules.

Who qualifies for SSP?

• SSP applies to “employees” and many “workers”, including agency staff, as defined by the 1992 Act and the 1982 Regulations. Agency workers typically qualify for SSP as soon as they start an assignment and perform some work (Reg. 2, 3). Genuinely self-employed or office holders do not qualify; check Reg. 3 for exclusions.
• The employee must earn at least the Lower Earnings Limit for National Insurance in the relevant period (for 2026–27, £129 per week—see GOV.UK for future changes).
• SSP is due when an eligible worker is absent for 4 or more consecutive calendar days due to sickness (a “period of incapacity for work”, or PIW: Reg. 2(1)). The first 3 qualifying days are usually unpaid (“waiting days”) unless the absence is linked to an earlier PIW (Reg. 7). Employers may not pay SSP for these waiting days unless a linked period applies.
• SSP is paid for up to 28 weeks per period of incapacity (Reg. 9). If absences are separated by 8 weeks or less, they are “linked” and the previous count of waiting or paid days applies (Reg. 7, 9).
• Notification: Employers can require prompt notification by the employee, but cannot withhold SSP for minor notification failures unless prescribed by written procedures and not unreasonably (Reg. 7A). Fit notes (doctors’ statements) can only be demanded after 7 days’ sickness.

SSP rate and payroll process

• The standard SSP rate is £116.75 per week for 2026–27 (uprated April each year; see GOV.UK for the current figure). SSP must be paid and reported through payroll, subject to PAYE income tax and National Insurance (1992 Act, s. 154; Reg. 5 of 1982 Regs).
• If the contract provides for occupational sick pay (OSP), the employer may offset SSP against OSP but must pay at least the statutory minimum.
• Employers must keep payroll and absence records to evidence compliance (Reg. 13).
• There is no general right for employers to reclaim SSP from HMRC; COVID-19 reimbursement arrangements ended in 2022.

Does this apply to non-UK (foreign) employers hiring in the UK?

• Any employer registered for PAYE and employing staff “ordinarily working in the UK under their contract” must pay SSP if all other conditions are met, regardless of place of incorporation (1992 Act s. 163; see also GOV.UK/ssp-employer-guide).

Failure to comply may result in claims at employment tribunal or HMRC penalties. Review both the statute and detailed GOV.UK employer guidance for edge-case scenarios or agency/atypical worker categories.

Source: Statutory Sick Pay: employer guide – GOV.UK Source: Social Security Contributions and Benefits Act 1992, ss. 151–154 Source: Statutory Sick Pay (General) Regulations 1982 Source: SSP rates and thresholds – GOV.UK

Employers who provide taxable expenses or benefits in kind to employees in the UK must report these annually to HM Revenue & Customs (HMRC) using official forms P11D and P11D(b). Common examples of reportable benefits include company cars, private medical insurance, home office equipment, relocation payments, and interest-free or low-interest loans over £10,000. The statutory framework is set out in the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) and the Social Security (Contributions) Regulations 2001, with method and deadlines governed by HMRC’s annual benefits guidance and the online P11D/P11D(b) portal.

What must be reported and when Employers must report to HMRC the value of all taxable benefits and reimbursed expenses (unless they are exempt—see below) provided during the tax year ending 5 April. The P11D must be filed by 6 July following the end of the tax year (ITEPA 2003 s. 715(5)). The P11D is employee-specific: one form per relevant employee. The accompanying P11D(b) covers the employer’s total Class 1A National Insurance contributions (NICs) due for all reported benefits. Both forms can be filed electronically via HMRC’s PAYE Online service. Late filing or incorrect/incomplete reporting may trigger penalties.

Benefits covered and valuation Examples include:

• Company cars and fuel (taxed by reference to CO2 emissions tables)
• Medical or dental insurance
• Relocation costs above £8,000 per move (first £8,000 may be tax/NIC-free subject to conditions)
• Interest-free/low-interest loans (taxed if >£10,000 total outstanding at any point in the year)
• Private travel or accommodation, non-cash vouchers, and more (see HMRC manuals for detail)

Valuation generally follows the "cash equivalent" rule in ITEPA 2003 ss. 203–205, with specific computational rules for cars, loans, and certain other benefits.

Tax and National Insurance treatment Most benefits reported on the P11D are subject to:

• Income tax (payable by the employee, typically through PAYE code adjustment)
• Employer Class 1A NICs (currently 15%, payable by 22 July after the tax year; Social Security (Contributions) Regs 2001 reg. 40)
• Some benefits are subject to Class 1 NICs at the time of payment rather than Class 1A (e.g., cash allowances, some reimbursed expenses)

PAYE settlement agreements and exemptions Employers may enter a PAYE Settlement Agreement (PSA) to cover minor or irregular benefits so that tax/NICs are paid directly by the employer, without reporting to each employee individually; the PSA must be agreed in advance with HMRC. Exemptions apply for certain "trivial" benefits (up to £50 per item, subject to conditions) and for allowable business expenses where a tax-exempt deduction would have applied. No reporting is needed in these cases (ITEPA 2003 s. 323A).

Foreign/global employers A non-UK employer operating PAYE for UK-based staff must comply with P11D/P11D(b) obligations for any benefits provided, regardless of payroll location or where the benefit is provided. Failing to report or pay Class 1A NICs on UK-taxable benefits will expose both UK and foreign businesses to penalties and audits.

Source: Expenses and benefits for employers – GOV.UK Source: P11D forms: employer obligations – GOV.UK Source: Income Tax (Earnings and Pensions) Act 2003, s. 715 Source: Social Security (Contributions) Regulations 2001, reg. 40

Employers hiring apprentices in the United Kingdom must comply with specific statutory requirements, including a compliant apprenticeship agreement, special minimum wage rules, and distinct payroll/National Insurance contributions (NIC) treatment.

1. Apprenticeship agreement requirement (ASCLA 2009, ss.32–36) To employ an apprentice under the statutory framework, the employer must enter into an Apprenticeship Agreement as defined in sections 32–36 of the Apprenticeships, Skills, Children and Learning Act 2009 (ASCLA). The agreement must:

• Be in writing;
• Refer to an approved apprenticeship framework or standard (registered with the Institute for Apprenticeships in England or relevant devolved authority);
• State the occupation, training framework/standard, and intended duration.

The contract should be signed before the apprenticeship starts (best practice), but ASCLA does not mandate a signature in advance of start unless required by the funding or framework rules. A statutory Apprenticeship Agreement distinguishes the engagement from a traditional “common law” apprenticeship, making dismissal and redundancy processes follow normal employment law, and is required for government apprenticeship funding eligibility.

2. Apprentice minimum wage: rates and eligibility Under the National Minimum Wage Act 1998 and the National Minimum Wage Regulations 2015 (with amendments), most apprentices qualify for the “apprentice rate.” As of 1 April 2026, the apprentice minimum wage is £6.50 per hour (per SI 2026/357). This rate applies to:

• Apprentices under 19;
• Apprentices aged 19 or older in the first year of their apprenticeship.

Once an apprentice is both 19 or over and has completed the first year, the age-appropriate minimum wage band applies. Penalties for non-compliance include back pay, financial penalty up to 200% of arrears (capped at £20,000 per worker), and potential "naming and shaming"—subject to HMRC enforcement discretion and remedial action.

3. Working time and holiday rules Apprentices are workers for the purpose of the Working Time Regulations 1998 (SI 1998/1833). They are entitled to:

• Maximum 48 weekly working hours (subject to opt-out);
• 5.6 weeks’ paid annual leave per year;
• Standard rest breaks and periods.

There is no statutory carve-out for apprentices in these areas.

4. PAYE and National Insurance—special NIC relief Employers must process PAYE on all apprentice earnings. For apprentices under age 25 in government-approved apprenticeships, employer NICs are 0% on earnings up to the Upper Secondary Threshold (£50,270 for 2026/27; Table H, NIC Tables CA38 2026). Standard NIC rules apply for older apprentices or those not in an approved apprenticeship.

Employers must keep records demonstrating the apprentice’s status and compliance with the statutory rules. Non-observance can risk HMRC penalties, clawback of government funding, and employment tribunal claims.

Source: Apprenticeships, Skills, Children and Learning Act 2009, ss.32–36 Source: National Minimum Wage (Amendment) Regulations 2026 (SI 2026/357) Source: PAYE and payroll for apprentices – GOV.UK Source: National Insurance contributions Tables CA38 2026 – HMRC

Transition from Apprenticeship Levy to Growth & Skills Levy (April 2026)

The UK Apprenticeship Levy was imposed on employers with annual UK pay bills exceeding £3 million. It applied at a rate of 0.5% of the pay bill, with a £15,000 annual allowance, and covered both UK and non-UK employers operating UK PAYE payrolls. Reporting was monthly via the PAYE system (Employer Payment Summary). This regime was established under the Finance Act 2016 and supplemented by HMRC guidance.

Material change effective 1 April 2026:

From 1 April 2026, the Apprenticeship Levy has been renamed and restructured as the Growth & Skills Levy. This represents a fundamental change in both scope and administration. Key changes include:

• Name change and legal framework: The Apprenticeship Levy was replaced by the Growth & Skills Levy, as announced in the 2024 budget and implemented from the 2026/27 tax year (effective 1 April 2026 for pay bill calculations; some new funding mechanisms phased in from August 2026).

• Liability threshold and rate: Employers remain liable if their annual UK pay bill exceeds £3 million. The rate remains 0.5%, with a £15,000 annual allowance, but see below for significant allocation and usage changes.

• Expanded fund usage: Up to 50% of Growth & Skills Levy funds (apprenticeship levy paid) can now be spent on modular “apprenticeship units”—course elements of 30 to 140 hours—rather than full apprenticeships only. This introduces new flexibility for employer upskilling strategies. (Available from August 2026.)

• Shortened fund expiry: Levy funds now expire after 12 months (previously 24 months), increasing the pace at which employers must allocate funds for training or risk forfeiture. (Effective for funds generated after August 2026.)

• 10% top-up abolished: The government’s automatic 10% top-up on new levy funds has been abolished for new funds generated after August 2026.

• Co-investment rate raised: Once Levy funds are exhausted, employers must now pay 25% (previously 5%) of further eligible apprenticeship or unit costs, with government paying the remaining 75%. (From August 2026.)

• Employer groups and aggregation: The requirement for connected companies/charities to aggregate pay bills and split allowance remains, with reporting and compliance duties as before. Non-UK employers with UK-based employees and PAYE payrolls are still in scope.

• Access and limitations: Only employers with a physical establishment in England can access the digital apprenticeship service to spend Growth & Skills Levy funds on English apprenticeships/units. Non-UK entities without an English presence cannot directly access funding and must hire via a UK-registered entity/branch to use funds.

Recordkeeping and reporting Employers must continue reporting pay bills and levy calculations on monthly PAYE returns (Employer Payment Summary). Fund usage, modular spend, and co-investment contributions must be carefully tracked. Records must be retained for at least 3 years. Late or incorrect payments incur statutory interest and HMRC penalties.

Summary of timelines:

• Up to 31 March 2026: Apprenticeship Levy rules apply as previously described.
• From 1 April 2026: Growth & Skills Levy rules take effect for all eligible employment.
• From August 2026: Modular funding, higher co-investment, shorter expiry, and top-up abolition phased in.

For further details and ongoing updates, employers should consult the most recent GOV.UK guidance and DfE/Skills England publications.

Source: Pay Apprenticeship Levy – GOV.UK Source: Growth & Skills Levy: DfE employer guidance (interim, April 2026) Source: Skills England evidence: defunding of Level 7 Apprenticeships