United Kingdom — Hiring & Payroll Setup

A business that hires employees in the United Kingdom must register with HM Revenue and Customs (HMRC) for Pay As You Earn (PAYE) before the first payday. PAYE is the UK's system for withholding income tax and National Insurance contributions (NICs) from employment income. The registration obligation applies to any employer with staff in the UK, including foreign companies without a UK legal entity, and extends to sole directors of a limited company who employ only themselves.

Registration triggers

An employer must register for PAYE if, in the current tax year (beginning 6 April), any employee meets any of the following conditions:

• The employee is paid £129 or more per week (the Lower Earnings Limit for 2026–27, effective 6 April 2026).
• The employee receives expenses or benefits from the employer.
• The employee has another job or receives a pension.

The registration deadline is before the first payday. Employers who fail to register on time face penalties and interest charges on unpaid PAYE and NIC liabilities.

Employer references and PAYE Online enrolment

When HMRC processes a registration, it issues two references to the employer:

1. Employer PAYE reference — a unique identifier used for tax reporting (three-digit tax office number followed by an alphanumeric reference, for example 123/AB45678).
2. Accounts Office reference — a 13-character reference used when making payments to HMRC.

Employers who register online are automatically enrolled in PAYE Online. HMRC sends an activation code by post within 10 working days. Employers use PAYE Online (or compatible payroll software) to view messages from HMRC, download tax-code notices, and submit Real Time Information (RTI) reports. Under RTI, employers must send a Full Payment Submission (FPS) on or before each payday, reporting every employee's pay, tax deductions, and National Insurance contributions for that pay period.

Payment frequency

Employers pay HMRC the total PAYE and NICs liability monthly. If the employer's average monthly PAYE bill is below £1,500, the employer may arrange with HMRC to pay quarterly instead. Payment is due by the 22nd of the month following the tax month (or the 19th if paying by post rather than electronically).

Payroll software requirement

HMRC requires employers to use payroll software to calculate tax and NICs and to send FPS reports electronically. The software works out the correct deductions based on each employee's tax code and NICs category letter. A small number of employers who are exempt from online filing (typically employers with fewer than 10 employees and no internet access) may use HMRC's Basic PAYE Tools or manual deduction working sheets, but they must still register for PAYE.

Foreign employers without a UK entity

A foreign company may register for PAYE directly with HMRC without incorporating a UK subsidiary. HMRC permits non-resident employers to register and operate UK payroll provided they comply with RTI reporting and payment obligations on the same schedule as UK-resident employers. The employer will receive the same PAYE and Accounts Office references and must use payroll software (or arrange for a payroll agent) to meet monthly FPS filing and payment deadlines.

Source: Register as an employer – GOV.UK Source: PAYE and payroll for employers: Introduction to PAYE – 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