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Minimum wage in the UK
Payroll in the UK
Statutory benefits in the UK
Other employee benefits in the UK
Compliant, seamless payroll and benefits in the UK and beyond
Payroll and benefits in the UK
Managing payroll is one of the most fundamental parts of hiring employees — but it can be complex and time-consuming. And, like in all countries, payroll in the UK is subject to its own rules, regulations, and customs that you’ll need to know about as an employer.
In this guide, we’ll take you through the complexities of payroll deductions like taxes, National Insurance and employer pension contributions. We’ll also cover the minimum wages that apply to different types of employees and the statutory benefits you’ll need to provide to your workers
Minimum wage in the UK
Employers in the United Kingdom are required to pay their workers at least the National Minimum Wage or, for employees aged twenty-one and over, the National Living Wage. The UK maintains different statutory wage rates depending on the worker’s age and apprentice status. In 2026, these minimum wage requirements continue to evolve under the UK’s annual wage-setting cycle, with updated rates taking effect each year on 1 April.
National Minimum Wage Rates
As of April 2024, the National Living Wage for workers aged twenty-one and above is £11.44 per hour. Younger workers are entitled to lower statutory minimum wage rates, with employees aged eighteen to twenty earning £8.60 per hour and those under eighteen earning £6.40 per hour. Apprentices, who fall under a distinct legal category, are also entitled to £6.40 per hour if they are under nineteen or are nineteen or older and in the first year of their apprenticeship. These wage floors set the legal minimum that employers must pay based on the employee’s age and employment status. Updated 2026 rates will take effect on 1 April 2026 and must be implemented promptly to remain compliant.
Annual Adjustment of Minimum Wage Rates
The UK adjusts its minimum wage and living wage rates every year following recommendations from the Low Pay Commission. The revised rates take effect on 1 April, and employers must update payroll practices, employment contracts and HR systems accordingly. Wage increases typically reflect broader economic conditions, including inflation, cost-of-living pressures and labour market trends.
Taxation of Minimum Wage Earnings
Minimum wage earnings in the UK are subject to the same income tax and National Insurance contribution rules that apply to all employees. The wage rates provided above represent gross pay before tax. Employees do not pay income tax on the first £12,570 of annual earnings, known as the personal allowance. A full-time worker earning the National Living Wage would therefore only pay tax on income exceeding that threshold. On this basis, a worker earning £23,795.20 per year would pay approximately £2,245.04 in income tax and would retain £21,550.16 in take-home pay, excluding National Insurance contributions. Employers must ensure accurate application of PAYE and NIC deductions as part of their payroll obligations.
Apprentice Minimum Wage Rules
Apprentices in the UK are subject to a distinct minimum wage framework. Apprentices are entitled to the apprentice rate of £6.40 per hour if they are under nineteen or are nineteen or older and still within the first year of their apprenticeship. Once an apprentice aged nineteen or over completes the first year of training, they become entitled to the minimum wage applicable to their age group. For example, a nineteen-year-old apprentice in their second year must receive at least £8.60 per hour. Employers must maintain accurate records to ensure the correct transition between apprentice and age-based wage rates.
Permitted Deductions from Minimum Wage Earnings
UK employers may lawfully deduct certain amounts from an employee’s wage without breaching minimum wage rules, provided that the deduction does not reduce pay below the applicable minimum wage threshold. Permissible deductions include income tax, National Insurance contributions, pension contributions, union fees, repayment of advances or overpayments and authorised accommodation charges. However, deductions for costs required for work, such as uniforms, tools, mandatory training fees or travel expenses, cannot reduce an employee’s pay below the statutory minimum. Employers must therefore ensure that any deductions applied are lawful and do not result in underpayment relative to minimum wage obligations.
Payroll in the UK
In the UK, payroll is generally monthly, and employers usually pay employees between the 25th and 30th of each month. That means employees typically get paid in 12 equal instalments throughout the year. However, there is no legal requirement for this payroll frequency, and employers can use a different payroll process if they choose to. For example, you could pay your employees weekly or biweekly.
PAYE in the UK
Employers in the UK have to use a system called Pay As You Earn (PAYE) to collect Income Tax (UK payroll tax) and National Insurance contributions (NICs). National Insurance is a sort of social security payment that entitles employees to the State Pension and other state benefits, as long as they have made enough contributions over the course of their working life.
Employers have to register for PAYE through the HM Revenue and Customs (HMRC) website, and then use payroll software to calculate deductions, report payments to HMRC and pay the necessary tax and National Insurance on behalf of their employees.
Workplace pensions in the UK
All employers in the UK have to provide a workplace pension scheme and automatically enrol eligible employees into the scheme. They have to inform their employees that they have been enrolled in a pension scheme and provide details on how much both they and the employee will pay into it.
By law, an employer and an employee must pay a minimum of 8% of the employee’s earnings into the pension scheme once they are enrolled. Of this, the employer must pay at least 3%, though they can choose to pay more. Employees can also choose to increase their contributions. The government also adds money to employees’ pension pots in the form of tax relief.
Employees can also choose to opt out of their workplace pension, in which case neither they nor their employer need to make any payments. However, employers can’t force or encourage their employees to opt out. They also have to re-enrol employees into the scheme after three years.
13th salary and bonuses in the UK
Unlike in some other countries, there is no statutory requirement for a 13th salary in UK payroll law. Employers can choose to give their employees an annual bonus, which is usually paid at the end of the year. Bonuses are taxed the same as an employee’s regular salary.
Statutory benefits in the UK
Statutory benefits are the minimum benefits that employers need to provide for their employees, according to employment law. In the UK, statutory benefits include various types of paid leave, protection against unfair dismissal, redundancy pay and the right to request flexible working. We’ll discuss some of these in more detail below.
Differences in statutory benefits for UK workers and employees
In the UK, the statutory benefits that employers have to grant depend on whether a person is an employee or a worker. This is a specific employment status that typically refers to people who work on a more casual basis than full employees.
Employers have to give both employees and workers the statutory minimum paid annual leave, which is 5.6 weeks for full-time employees. This applies to agency workers and workers with irregular working patterns as well as full-time and part-time employees. For part-time employees, annual leave is calculated based on the number of hours they normally work.
Employees in the UK are also entitled to leave if they or their partner gives birth or adopts a child. Workers (casual employees) usually don’t get parental leave, though they may be entitled to pay. The amount of time employees can take off work depends on the type of leave they’re taking. For example, they could take:
- Statutory Maternity Leave: Up to 52 weeks
- Statutory Paternity Leave: Up to two weeks
- Statutory Adoption Leave: Up to 52 weeks
- Shared Parental Leave: Up to 50 weeks shared between the two parents
Statutory Sick Pay in the UK
Employers have to pay their employees at least GBP 116.75 per week for up to 28 weeks if they are too sick to work. Employers can choose to pay their employees more than the statutory minimum, but they can’t pay less. If you choose to offer a more generous sick pay package, this is known as contractual or occupational sick pay. It should be included in employees’ contracts. Workers are not entitled to Statutory Sick Pay.
Flexible working requests in the UK
Employees in the UK have the right to request flexible working arrangements. This includes flexibility in the number of hours they work, when they start or finish work and the days they work or where they work. For example, an employee could request to work remotely or to start and finish work later in the day to better fit their job around their childcare needs.
The rules about flexible working requests changed in 2024. Employees can now make a flexible working request from day one of employment, and they can make two requests in any 12-month period. When an employee makes a flexible working request, their employer has two months to respond. Employers have to properly consider all requests and must provide a valid business reason if they want to refuse.
Healthcare and social security in the UK
In addition to statutory benefits, the UK has a comprehensive social security system and free healthcare, which are both funded by general taxation and National Insurance. Under the social security system, citizens have access to various state benefits, including financial support for jobseekers, low-income earners, people with disabilities, families, carers and more. All employees also have access to the state pension as long as they make enough contributions into the system over their working life.
Healthcare in the UK is also free at the point of service, which means that employer-provided healthcare benefits are less common in the UK than in some other countries. However, some employers do choose to provide their employees with private coverage as an additional benefit.
Other employee benefits in the UK
Employers can choose to grant their employees additional benefits, even when they’re not part of the employee’s statutory rights. Building the right benefits package can be a valuable tool for attracting and retaining top talent in the UK.
Additional time off
Employers can choose to give their employees more paid time off work than they are legally required to provide. For example, some employers give employees an additional day’s annual leave for each year they work at the company, up to a certain limit. Other companies have unlimited leave policies, which allow employees to take as much annual leave as they want to.
Other employee benefits related to time off work include generous maternity, paternity, and parental leave packages. Employees are usually only entitled to a certain amount of pay when they take various types of parental leave, but employers can choose to top this up to their normal salary or pay them for longer than the Statutory Maternity Pay period. This can be a valuable additional benefit for young employees who want to start families.
Private medical insurance in the UK
The UK’s National Health Service (NHS) provides free or significantly subsidised healthcare for all UK residents. That means that employers are not obliged to provide healthcare coverage as an employee benefit. However, unfortunately, the NHS is currently overstretched, which means that waiting times can be long and the quality of care provided may not always be adequate.
This means that many employers in the UK choose to offer private healthcare insurance to their employees as an additional benefit. This may cover any healthcare needs that are not covered by the public system, or allow them to access higher quality healthcare when needed.
Remote or flexible working in the UK
These days, more and more employees in the UK are interested in working according to a flexible schedule or in the location of their choosing. Giving employees freedom over when, where and how they work can be a valuable benefit, as it both demonstrates trust and allows them to work in the way that works best for them.
Remote or flexible working is becoming a more popular employee benefit in the UK because it’s much more cost-effective for employers than other employee benefits but still provides value to employees.
Employee assistance programmes
Employee assistance programmes (EAPs) are employee benefits programmes that provide employees with free and confidential advice and counselling. They can help employees with anything from legal issues to financial guidance to mental health support.
Access to an EAP can be a highly valuable resource for employees because it allows them and their immediate family members to access support when they need it. Not only does this show employees that you value and care for them as an employer, but it can also make them more engaged and productive at work.
Additional perks and benefits in the UK
There are all sorts of other benefits and perks that employers in the UK can offer their employees. For example, you could consider:
- Company cars
- Employee wellness resources
- Learning and development budgets
- Childcare benefits
- Bike-to-work schemes
- Gym memberships
- Remote working expenses
Compliant, seamless payroll and benefits in the UK and beyond
Getting payroll and benefits right is not just a legal issue. Every country also has its own customs, norms and expectations about employee compensation. And if your operations aren’t in line with your workers’ expectations, they may not stick around for long.
Thankfully, we know what we’re doing. When you work with CXC to engage workers in the UK, we’ll handle everything from tax withholding to employee bonuses on your behalf.
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