United Kingdom: A Guideline to Payroll and Employer of Record

Run your business seamlessly with Neeyamo as we help you go beyond borders to manage your international payroll and hire new talent in United Kingdom.

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You may be familiar with places such as Liverpool, Brighton, Belfast, Edinburgh and so much more, but what about Llanfairpwllgwyngyllgogerychwyrndrobwlllllandysiliogogogoch? The little town of Llanfairpwllgwyngyllgogerychwyrndrobwlllllandysiliogogogoch, also known as Llanfairpwll for ease of pronunciation, can be found in Wales and is the longest name in Europe. Apart from this unique name, the United Kingdom has so much more to offer like its intensely diverse and dedicated workforce. 

Do your organization’s expansion plans require you to hire employees in the United Kingdom? Do you lack a physical entity in the country – a key requisite to hire local talent? Neeyamo – global payroll providers, provide assistance for onboarding and management of employees in the UK along with the processing of a firm's payroll, compliance, benefits, and more.

Tools And Instances

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Global Payroll

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Global Work

A tech-based EOR solution to manage your extended workforce

Facts And Stats




British Pounds (GBP)

Official Language


Fiscal Year

6 April - 5 April

Date Format


Country Calling Code


Other Languages

Scottish, Welsh, Cornish, Irish

Time Zone

UTC +1 (Greenwhich mean time)

Global Payroll


How does Global Payroll work?

Handling payroll for a widespread workforce can pose a significant challenge for any organization, and the added complication of compliance can make things worse. If companies spend more time processing payroll, it directly impacts day-to-day operations and their overall productivity. 

What is a global payroll system? 

Over the years, Neeyamo has observed these complexities and strived to provide global payroll solutions through a single technology platform - Neeyamo Payroll. Neeyamos global payroll services ease the process for companies looking to outsource their global payroll requirements and aids them in maneuvering the tricky payroll system in the UK.

Payroll Taxes

Payroll tax is the percentage amount retained from an employee's salary and paid to the government to invest in the general population's welfare. These are statutory in nature and are levied from both the employer and employee. Additional statutory contributions are made by employers towards aiding both short-term and long-term benefits for their employees. 

Employee Taxes

The employee taxes in the United Kingdom are computed as follows:

Employees are required to contribute to the National Insurance scheme, and to a company pension fund, at the following rates: 

 £797.00 - £4189.00 per month: 12%

£4189.00 per month and above: 2% 

Pension Fund: 5%

Employee Income Tax: Deducted at Source  

0 to £12,570: 0%

£12,571 to £50,270: 20%

£50,271 to £150,000: 40%

Employer Taxes

The employer taxes in the United Kingdom are computed as follows: 

  • Up to 12,570: 0% 
  • 12,571 – 37,700: 20%
  • 37,700 – 150,000: 40% 
  • Over 150,000: 45% 

Payroll Cycle


Undoubtedly, payroll is a critical process for any organization. Pay cycle in the United Kingdom refers to the period for which an organization pays its employees, and this can vary depending on the pay frequency that the organization chooses to adopt.


Salary payments in the UK are normally made between the 25th and 30th of each month, with the payroll frequency being monthly.

13th Month Cycle

There are no legal requirements for 13th-month wage payments in the United Kingdom.

Global Work


What is Employer of Record?

An Employer of Record services (EOR) provider helps you eliminate the hassle of handling complexities while onboarding a new employee in an international location. An EOR meaning, they help bridge the gap that otherwise mandates organizations to have a local registered entity and a local bank account, prior to making a job offer to an international hire. 

An employer of record services provider acts as a legal employer, facilitates salary payments, and manages other statutory requirements such as health insurance, payroll taxes, and employee benefits ensuring compliance with local tax laws and regulations.  

This allows organizations to focus on collaborating with the employee in the United Kingdom for operational tasks, with the knowledge that they have a cost-effective solution support their global payroll & HR requirements, as they continue their global expansion. 

HR Mandates and Practices

Minimum Wage

The age of the employee affects the national minimum wage in the United Kingdom:

As of 1 April, 2023, the UK minimum wage has increased. The National Living Wage will consist of an hourly rate of £10.42. Additionally, the rate for 21-22 year olds will be £10.18, for 18-20 year olds £7.49 and for 16-17 year olds it will be £5.28.

The following rates will be in effect from April 1, 2024:


NMW Rate

Increase in Pence

Percentage increase

21 and over

£ 11.44

£ 1.02


18-20 Year olds

£ 8.60

£ 1.11


16-17 Year olds 

£ 6.40

£ 1.12


Apprentice Rate

£ 6.40

£ 1.12


Accommodation Offset

£ 9.99

£ 0.89



All work performed in excess of the required number of hours per week is considered overtime and must be compensated accordingly. Employers may give written notice to employees when they need them to work overtime or on a holiday.

All overtime hours that exceed 48 hours per week are compensated at a rate that is outlined in the employment contract and collective bargaining agreements. The hourly overtime rate is not permitted to be less than the federal minimum wage.

If an employee opts out of 48 hours working hours as per the Working Time Regulations (WTR) 1998, it does not guarantee them overtime pay. This should be agreed upon in a separate agreement or employment contract.

Employers must ensure workers receive at least the national minimum wage for all hours worked (including overtime).

Data Retention Policy

HMRC generally recommends that records in the United Kingdom should be kept for six years. With regards to PAYE records, HMRC requires employers to maintain records for three years. 

Employers must keep records of any information used to calculate apprenticeship levy payments for at least three years after the tax year to which they relate. Employers must keep records about employees' pension arrangements for six years in an electronic or paper format. Records on opt-outs from NEST must be kept for four years. 

Employers must keep records of the following for the current and previous three tax years in either an electronic or paper format for each employee

  • The employee's name and address; 
  • Payslips or some other record showing gross earnings, taxes, NICs, any student loan repayments, and net pay; 
  • Pension payments; 
  • Statutory Sick Pay, Statutory Maternity Pay, Statutory Adoption Pay, Statutory Paternity Pay, and Shared Parental Leave and Pay; 
  • leave and sickness absences, overtime, commissions, and bonuses. 

Such detailed records are not required for an employee whose wages are below the Lower Earnings Limit (LEL). However, records of the employee's name and address and the payments made each pay period are still required.

Employers must keep records of night workers' hours worked for at least two years.

New requirement to report hybrid or remote working patterns for sponsored employees: 

With effect from April 1, 2023:

  • The worker is, or will be, working at a different site, branch or office of your organization, or a different client's site, not previously declared to Home Office.
  • The worker is, or will be, working remotely from home on a permanent or full-time basis (with little or no requirement to physically attend a workplace). 
  • The worker has moved, or will be moving, to a hybrid working pattern.

New Advisory Fuel Rates:

With effect from June 1, 2023. 

  • The updated guidance includes the continuation of the 0.09 British pounds (US$0.11) advisory electric rate per mile for fully electric cars and revised AFRs for petrol, liquefied petroleum gas (LPG), and diesel. 
  • The new rates take effect on June 1, 2023, and employees can use the previous rates for up to one month after the date the new rates take effect.

Hiring and Onboarding Requirements


In the UK, there is no legal requirement to give preferences in hiring to, or not to discriminate against, particular people or groups of people. 

Positive discrimination is generally unlawful in the United Kingdom; however, there are certain additional positive requirements imposed on public bodies, and ‘reasonable adjustment’ in disability discrimination is regarded as a form of partial positive discrimination. 

Under the Equality Act 2010, employers in the United Kingdom may (although they are not required to) take the under-representation of those with protected characteristics into account when selecting between two equally qualified candidates for recruitment or promotion, provided that there is no automatic selection of under-represented groups, and decisions are not made irrespective of merit (ie, by the use of mandatory quotas, which is an increasingly common phenomenon in mainland Europe). 

Regardless of the new provisions, the selection of a less-qualified candidate, because he or she is in a protected category, remains unlawful. 


Following are the documents required while onboarding an employee in the United Kingdom: 

  • Name of candidate 
  • Address 
  • Date of Birth 
  • Education and qualification certificate 
  • Work experience certificate (if applicable) 
  • Emergency contact details 
  • employment history with the organisation 
  • Bank Account Details (for purpose of paying employees) 
  • National Insurance Number (tax purpose) 


A probationary period should be specified in the contract of employment and can last for as long as the employer wishes. However, in practice, probationary periods generally last for between three to six months.


Public Holiday

England and Wales recognize eight public holidays, also known as bank holidays, while Scotland recognizes nine and Northern Ireland recognizes 10. 

Scottish local councils may set their own lists of public holidays that in general partially overlap with the Scotland-wide list but contain differences. 

Employers are not required to provide employees with paid leave for public holidays, although it is customary for employers to provide employees with paid leave for some or all of these holidays. 

If a public holiday falls on a weekend, a substitute weekday becomes the holiday, usually the immediately following Monday. Employers can choose to include these holidays as part of a worker's statutory annual leave.

The seven holidays that England collectively recognizes, Wales, Scotland, and Northern Ireland are as follows:

  • Jan. 1: New Year's Day.
  • April 7: Good Friday, the Friday immediately before Easter Sunday.
  • April 10: Easter Monday
  • May 1: Early May Bank Holiday, which generally is the first Monday in May.
  • May 8: Bank holiday for coronation of King Charles III
  • May 29: Spring Bank Holiday, also known as the Late May Bank Holiday, the last Monday in May.
  • August 7: Summer Bank Holiday, which for Scotland is recognized as the first Monday in August and for England, Wales, and Northern Ireland is recognized as the last Monday in August.
  • Dec. 25: Christmas Day.
  • Dec. 26: Boxing Day.

England and Wales

The additional public holiday recognized by England and Wales is Easter Monday, the Monday immediately after Easter Sunday.

The additional public holidays recognized by Scotland are:

  • Jan. 2: The second day of the new Gregorian Calendar year.
  • Nov. 30: St. Andrew's Day.

Northern Ireland

The additional public holidays recognized by Northern Ireland are:

  • March 17: St. Patrick's Day.
  • Easter Monday, the Monday immediately after Easter Sunday.
  • July 12: Battle of the Boyne (Orangemen's Day).

Paid Time off / Annual Leave

Employees are entitled to a minimum of 28 days (5.6 weeks) of paid annual leave each year. Employees start to accrue annual leave from the start of their employment. During the first year of employment, annual leave accrues at the rate of one-twelfth of a full year’s entitlement at the beginning of each month. In the case of leaves accrued constituting a fraction of a day, which is less than half-day, such fraction of a day shall be treated as a half-day to calculate leaves accrued. And in case such a fraction of a day is longer than a half-day, it shall be treated as a full day. If an employee gets 28 days’ leave, they can carry over a maximum of 8 days to the next year. If an employee cannot take all of their leave entitlement because they’re already on a different type of leave (for example sick, maternity, or parental leave), they can carry over some or all of the untaken leave into the next leave year.

Sick Leave

An employee is entitled to Statutory Sick Pay (SSP) if he/she is not able to perform work due to incapacity for 4 or more consecutive days. The weekly rate for Statutory Sick Pay (SSP) is £96.35 for up to 28 weeks. Employees who are off work sick for more than 4 weeks may be considered long-term sick. Employees do not receive SSP for the first three days of any sickness absence. SSP is paid by the employer and is not recoverable from the government. 

Employers are not allowed to require employees to contribute toward sick leave payments.  

Maternity Leave

Eligible employees can take up to 52 weeks of maternity leave. The first 26 weeks are known as ‘Ordinary Maternity Leave’, and the last 26 weeks as ‘Additional Maternity Leave’. 

Although employees do not have to take all 52 weeks of their maternity entitlement, they must take two weeks’ leave once the baby is born. The earliest that leave can be taken is 11 weeks before the expected week of childbirth.

It is a criminal offense for an employer to allow an employee to return to work within two weeks of giving birth. Pregnant employees also are entitled to receive up to 39 weeks of statutory maternity pay (SMP) if they have worked for the employer for at least 26 weeks and meet minimum earnings requirements.

Employees can claim Maternity Allowance as soon as they have been pregnant for 26 weeks. Payments can start 11 weeks before the child is due. Maternity pay is currently 90 percent of the employee’s average earnings for the first six weeks of maternity leave, £151.97 or 90% of your average weekly earnings (whichever is lower) for the next 33 weeks.

Paternity Leave

Employees with at least 26 weeks of continuous service are entitled to two weeks of paid paternity leave. The amount of time is the same even if they have more than one child (for example twins). 

Leave cannot start before the birth. The start date must be one of the following: 

  • the actual date of birth 
  • an agreed number of days after the birth 
  • an agreed number of days after the expected week of childbirth 

Leave must finish within 56 days (8 weeks) of the birth (or due date if the baby is early)

Statutory Paternity Pay for eligible employees is either £151.97 a week or 90% of their average weekly earnings (whichever is lower). Tax and National Insurance need to be deducted. 

Shared Parental Leave

Up to 50 weeks of leave can be shared by parents if they meet certain eligibility criteria. To be eligible for Shared Parental Leave (SPL) and Statutory Shared Parental Pay (ShPP), both parents must:

Share responsibility for the child at birth

Meet work and pay criteria – these are different depending on which parent wants to use the shared parental leave and pay.

Mothers must still take the initial two weeks after birth, but they can then shorten their maternity leave and exchange it for shared parental leave. The parents will then have the choice of how to split up the remainder of the leave entitlement. An employee can book up to 3 separate blocks of Shared Parental Leave instead of taking it all in one go, even if he/she is not sharing the leave with his/her partner. Parental leave pay is currently 90 percent of the employee’s average earnings or 151.97 pounds per week, whichever is lower. The same amount of leave is available to adoptive parents after the adoption of a child.

Adoption Leave

Adoption leave is available to parents and civil partners who adopt a child up to 18 years of age. Only 1 person in a couple can take adoption leave. The other partner could get paternity leave instead. Eligible employees are entitled to 52 weeks of adoption leave. It’s made up of 26 weeks of Ordinary Adoption Leave & 26 weeks of additional Adoption Leave. Adoption leave can start:

  • Up to 14 days before the date the child starts living with the employee (UK adoptions)
  • When the child arrives in the UK or within 28 days of this date (overseas adoptions)
  • The day the child’s born or the day after (if the employee used a surrogate to have a child).
  • Statutory Adoption Pay starts when you take your adoption leave. Statutory adoption pay is available for 39 weeks, and employees receive the benefit at the rate of 90 percent of their earnings for the first six weeks or 151.97 pounds (whichever is lower) for the next 33 weeks. Tax and National Insurance will be deducted.

Paid Leave for Adoption Appointment:

Eligible employees are entitled to time off to attend adoption appointments in the period between being notified of a match with a child and the date that the child joins the family:


(i) Single adopters are entitled to paid time off to attend up to five adoption appointments

(ii) In the case of joint adoptions (ie a couple who have been jointly matched to adopt the child) one of the adopters will be entitled to paid time off to attend up to five adoption appointments. The other adopter may be entitled to unpaid time off work to attend up to two adoption appointments

(iii) Up to 6.5 hours is allowed for each appointment, although individuals should take only the time that they need to attend the adoption appointment

(iv) The appointment must have been arranged by or at the request of the adoption agency

(v) Where there are joint adopters, the adopter who took paid time off to attend adoption appointments cannot claim paternity leave and pay

(vi) Parental Order parents are entitled to take unpaid leave to enable them to accompany the surrogate mother to up to two of her antenatal appointments.

Parental Bereavement Leave

An employee is entitled to 2 weeks of paid parental bereavement leave if the child dies before the age of 18 or if the employee has a stillbirth after 24 weeks of pregnancy. The death or stillbirth must have happened after April 6, 2020. The leave can start on or after the date of death or stillbirth and must finish within 56 weeks of the date of the death or the stillbirth. Employees taking the leave will be entitled to statutory parental bereavement pay (‘SPBP’), paid at 151.97 per week or 90% of their normal weekly earnings, so long as they meet certain qualifying criteria.

Leave for Ill Family and Dependent

An employee is entitled to take time off from work during working hours to assist on an occasion when a dependant falls ill, gives birth, or is injured or assaulted, in case of death of the dependant, etc for a reasonable time.

Unpaid Carer Leave

Effective December 04, 2023, A new statutory entitlement to unpaid carers leave is now in effect in the UK. This means employees can take time off work, without pay, to care for dependents experiencing long-term illness or injury, disability, or old age.

Other Leave

Parental Leave

An employee is entitled to 18 weeks of unpaid parental leave for each child & adopted child until the child reaches 18 years of age. Each parent is entitled to 4 weeks of parental leave and shall take the leave in one week’s duration unless otherwise agreed upon between the employer and employee. The employee must take parental leave as whole weeks (eg 1 week or 2 weeks) rather than individual days, unless your employer agrees otherwise or if your child is disabled. You don’t have to take all the leave at once. 

Leave for looking for a job and attend training: 

An employee who is given notice of dismissal because of redundancy is entitled to be permitted by his employer to take reasonable time off during the employee’s working hours before the end of his notice to look for new employment etc. Time off is usually unpaid unless the employer agrees to pay it. 
Leave for Ante-Natal Care: 

An employee who is pregnant and has made an appointment to receive antenatal care is entitled to be permitted by her employer to take time off during working hours to receive antenatal care. 

An employee who has a qualifying relationship with a pregnant woman or her expected child is entitled to be permitted by his/her employer to take time off during the employee’s working hours so that he/she may accompany the woman when she attends by appointment at any place to receive ante-natal care. Such time off can be permitted on two or more occasions and shall be allowed for a duration of six and half hours.  

Training Leave: 

Employers with at least 250 employees are eligible for this leave. Employees shall have the right to ask for time off work for training or study. To ask for training or study employees must have worked for their employer for at least 26 weeks and the training must be work-related. Time off is usually unpaid unless the employer agrees to pay it. Employees can only make 1 request for leave a year. 

Time Off for Public Duties: 

Employees can get time off work for certain public duties as well as their normal holiday entitlement. Employers can choose to pay them for this time, but they don’t have to. All employees must be allowed to take time off for jury service. 


Notice Period

Minimum notice periods are prescribed by legislation. Those are as follows:  
For employees with more than one month’s service but less than two years – one week’s notice.  

  • For employees with more than two years’ service but less than twelve years – one week’s notice for every complete year of service.  
  • For employees with 12 years’ service or more – 12 weeks’ notice.  

These are minimum notice periods only, that is, they will override shorter contractual notice provisions. Employees are entitled to longer notice than the statutory minimum if this is set out in their contract.  

If no notice was expressly agreed between the parties, the court or tribunal will imply one. This will be the customary notice period for that business or the parties would have agreed if they had thought about it, but, of course, it cannot be less than the statutory minimum.

Severance Pay:

Severance pay is only required in the case of redundancy. The amount of severance is dependent on the age of the employee, if they have served at least two years of service as follows: 

  • Half a week’s pay for each full year for employees under the age of 22 
  • One week’s pay for each full year for employees between the ages of 22 to 41 years of age 
  • One and half weeks’ pay for each full year for employees over the age of 41 
  • Length of service is capped at 20 years 
  • Weekly pay is capped at 571 GBP 



It is mandatory for UK employers to acquire a sponsor license to hire from outside the UK, which takes several weeks to acquire. 

Without a visa, foreign visitors can stay in the UK for up to six months to travel, visit family and friends, pursue short-term studies, go on job interviews, etc. To stay more than 6 months, a foreigner needs to apply for VISA through the UK immigration points-based system. 

There are numerous varieties of work visas available for both short- and long-term visits to the UK. Depending on the position being offered or sponsored, the type of labor involved, and whether bringing the family is required, each requires a varying amount of information regarding the foreigners' talents and qualifications.

Employee Background Checks

Legal and Background Checks

Employers must not ask questions about a job applicant’s health before a job offer (either conditional or unconditional) has been made to that person. If a disabled applicant makes a claim for disability discrimination based on an employer having asked a prohibited health question, the employer will have to prove that no disability discrimination took place. It is permissible to ask such questions once a job offer has been made. It is also permissible to make a job offer conditional on a satisfactory health check if this is relevant to the role. 

Employers can carry out other background checks at any stage during the hiring process, but there are some limits on how far an employer can go in doing so.

For most jobs, employers cannot ask applicants about ‘spent’ criminal convictions (i.e. those which have expired after a specific period of time). There are exceptions to this for certain types of jobs, including lawyers entry into the profession, healthcare workers, and teachers. 

Data protection legislation limits the extent to which employers can ask for personal data about job applicants. In outline, the employer must be transparent about the data that it is collecting (i.e. outline what it is asking for and why), and act ‘proportionately’ in obtaining personal information through background checks. This includes only obtaining information that is relevant to the particular job and recruitment decision, and not asking for or collecting any more information than is necessary for this purpose.

Last updated on March 19, 2024

If you have any queries or suggestions, reach out to us at irene.jones@neeyamo.com

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