Employing in the United Kingdom
Payroll Services United Kingdom
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UK Payroll Services
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In the United Kingdom, pay and taxation are based on a Pay As You Earn (PAYE) system, where tax and social contributions are deducted directly from your salary.
The UK has a statutory minimum wage set by the UK government. The minimum wage as of April 2026 is £12.71 per hour for workers 21 and over, based on an average of 35-40 hours per week.
Most employees are taxed through PAYE, in which the employer deducts income tax and National Insurance contributions. Tax is then automatically paid to HM Revenue & Customs (HMRC). Employees must be provided with a payslip showing their gross pay, any deductions and their net pay.
The UK uses tax bands to determine how much tax you will pay. For example:
- Personal Allowance:
- Taxable income on your personal allowance is taxed at 0% on anything up to ~£12,570.
- Basic rate:
- This contribution is made at a rate of £12,571 to £50,270, at a 20% tax rate.
- Higher rate:
- Higher rates apply to those earning £50,271-£125,140, with a 40% rate.
- Additional rate:
- This is available to those earning £125,140+ at a rate of 45%.
National Insurance funds are paid to support state pensions, the NHS, and unemployment benefits. Employees will pay ~8% on earnings between the threshold and upper limits, and ~2% on amounts above the upper limits.
Other payroll deductions may include student loan repayments, private pension contributions, union fees or salary sacrifice schemes.
In the United Kingdom, pension contributions are mainly operated through the State Pension system and workplace pensions, which are automatically enrolled.
The UK State Pension is funded through National Insurance contributions. To qualify, you must pay or be credited with National Insurance contributions, with generally 10 qualifying years. To qualify for the new full State Pension, you must have 35 qualifying years.
For workplace pensions, employees are automatically enrolled to pay. Any employees who are aged 22 up to the State Pension age, earn above the minimum earnings threshold, and work in the UK will be involved.
The legal minimum total contribution for pensions is 5% from employees and 3% from employers.
The minimum age to access your pension is 55, which will be rising to 57 in 2028. At retirement, you may either take a lump sum, drawdown income, buy an annuity or a combination of the options.
In the United Kingdom, working hours are mainly governed by the Working Time Regulations 1998. This law sets limits on weekly working hours, rest breaks and paid leave.
The typical working week is 35-40 hours, often averaging 8 hours per day for full-time employees.
The maximum number of hours any employee can work is 48 per week, calculated over 17 weeks.
There are no legal requirements to pay overtime at a higher rate. Overtime pay will depend on employment contracts, company policies and collective agreements. The common practice for overtime pay is to pay at time-and-a-half.
In the United Kingdom, statutory leave and time off are governed by the Working Time Regulations 1998 and the employment legislation, covering family and sickness rights.
Full-time employees are entitled to 28 days per year. Part-time employees will receive leave on a pro rata basis. Unused leave typically cannot be carried over, but the rules vary by company.
There are typically 8 public holidays per year in England and Wales, with Scotland and Northern Ireland having slightly different dates. Employers can either include them in the 28-day entitlement or offer them on top of it. There is no automatic right in the UK to paid leave, specifically for bank holidays. Instead, this ultimately depends on the contract and the management decision.
Employees may be entitled to Statutory Sick Pay (SSP) if they earn above the minimum threshold, or they are sick for at least 4 consecutive days. SSP is paid by the employer starting on day 4 of sick leave. Sick pay is available up to 28 weeks.
For maternity leave, eligible employees may take up to 52 weeks, split into 26 weeks of ordinary maternity leave and 26 weeks of additional maternity leave. Maternity pay is provided for up to 39 weeks, with the first 6 weeks at 90% of the average weekly earnings and the remaining weeks at a fixed statutory rate or 90%, whichever is lower. Full job protection is provided during this period.
Paternity leave is available for 1 or 2 weeks and is paid at the statutory rate.
For shared parental leave, parents can take up to 50 weeks of leave or 37 weeks of pay, providing flexibility for both parents. Additionally, they may take up to 18 weeks of unpaid leave per child, available until the child turns 18.
In the United Kingdom, termination of employment is regulated by the employment law, under the Employment Rights Act 1996. The system provides a balance for employer flexibility and employee protection.
An employer must have a valid reason for dismissal and follow a strict procedure. Legally fair dismissal grounds may include misconduct, capability, redundancy, or a statutory restriction. If an employee claims unfair dismissal, they typically need 2 years of service to make the claim.
If an employee terminates their employment themselves, they must provide a notice period. This may vary depending on the company, but the standard notice periods are:
- 1 week for 1 month – 2 years of service.
- 1 week per year of service for 2 – 12 years of service.
- 12 weeks maximum for 12+ years of service.
However, employers will often provide longer notice periods, typically around 1 month.
If an employee has 2 or more years of service, they may qualify for statutory redundancy pay. This is calculated based on age, length of service and weekly pay.
After 2 years of service, an employee can claim unfair dismissal if there is no fair reason for termination, if there has been discriminatory behaviour, or if the dismissal is pregnancy-related. Remedies may include either compensation or reinstatement.
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