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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.
Want to find out more?
FAQ's
How do companies run payroll in the UK?
Companies run payroll in the UK by calculating employee pay, deducting taxes and National Insurance, and reporting this information to His Majesty Revenue and Customs (HMRC) through the Pay As You Earn (PAYE) system.
When running payroll in the UK, employers are also responsible for submitting payroll information to HMRC in real time using the Real Time Information system. This means every time employees are paid, the employer must report earnings, deductions, and contributions. Failure to do this correctly or on time can result in penalties.
Aside from salary payments, UK’s payroll also involves managing statutory payments such as sick pay, maternity pay, and pension contributions. Employers must ensure employees are automatically enrolled in a workplace pension scheme if they meet eligibility requirements.
Managing payroll in the UK typically involves the following steps:
- Calculate gross pay based on basic salary and working hours, including any bonuses or allowances.
- Deduct income tax and National Insurance through PAYE, ensuring the correct amounts are taken from employee pay.
- Submit payroll reports to HMRC using Real Time Information (RTI), specifically via Full Payment Submission (FPS) on or before each payday (legal requirement clarified).
- Process statutory payments such as sick pay and maternity pay, in line with UK regulations.
- Manage pension contributions under auto-enrolment rules, making sure eligible employees are enrolled and contributions are paid
UK’s payroll is more than just paying salaries to your employees. It also includes tax deductions, reporting, statutory payments, and pensions, all of which need to be handled correctly to stay compliant.
How to set up payroll in the UK?
To set up payroll in the UK, companies must register with HMRC, choose a payroll system, and put the right processes in place for tax reporting and employee payments.
Setting up payroll in the UK starts with registering as an employer with HMRC so you can operate PAYE and handle employee taxes properly. Registration must be completed before the first payday, not after hiring. From there, you need a payroll system or provider that can calculate pay, apply deductions, and generate payslips. It also involves gathering the right employee information, such as tax codes, bank details, and deciding how often employees will be paid. Just as important, everything needs to be set up in a way that meets reporting deadlines and compliance requirements from day one.
To make this work smoothly, employers typically need to:
- Register with HMRC to operate PAYE, so you can legally process payroll in the UK.
- Choose payroll software or a provider, to handle calculations, deductions, and payslips.
- Collect employee data and tax details, including tax codes, bank information, and salary terms.
- Set pay schedules and reporting processes, whether weekly or monthly, and stay on track with deadlines.
- Ensure compliance with pension auto-enrolment, so eligible employees are enrolled and contributions are managed correctly.
Setting up payroll in the UK can be time-consuming and comes with risks, especially for companies unfamiliar with the UK market. That’s why many businesses hiring in the UK choose to partner with a workforce solution expert like CXC to manage payroll and stay compliant.
What payroll taxes do employers have to pay in the UK?
Employers in the UK must pay National Insurance contributions and may also be responsible for additional payroll-related costs such as apprenticeship levy and pension contributions.
Payroll in the UK includes both employee deductions and employer-paid taxes, and employers are responsible for managing both sides correctly. While employees pay income tax and their own National Insurance contributions through PAYE, employers must also pay employer National Insurance contributions based on employee earnings. Employer National Insurance is generally charged at 13.8% above the secondary threshold, subject to periodic updates and thresholds set by HMRC. This is a key cost to factor in when hiring in the UK, as it increases the total cost beyond the basic salary in the UK.
On top of this, employers must contribute to workplace pensions under auto-enrolment rules. Eligible employees must be enrolled, and both employer and employee contributions must be paid regularly. Larger employers may also need to pay the apprenticeship levy if their annual pay bill exceeds £3 million, which is another cost to consider when planning workforce budgets.
To stay compliant and manage payroll in UK properly, employers need to handle the following:
- Employer National Insurance contributions on employee earnings, which are paid on top of salaries.
- Workplace pension contributions under auto-enrolment, ensuring eligible employees are enrolled and contributions are made.
- Apprenticeship levy for qualifying employers, if the annual payroll threshold is met
- Accurate reporting to HMRC through payroll systems, using Real Time Information submissions.
Employers must manage National Insurance, pensions, and other payroll-related costs as part of UK’s payroll. These requirements can add complexity, especially for companies new to the UK market, which is why many choose to work with global employment experts like CXC to handle payroll accurately and stay compliant.
Should companies outsource payroll in the UK?
Yes, many companies choose to outsource payroll in the UK to improve accuracy, reduce risk, and save time.
Managing payroll internally can be complex due to changing regulations, strict reporting requirements, and detailed calculations. For international companies, this complexity increases due to unfamiliarity with the UK laws and processes. Outsourcing UK’s payroll to a specialist provider like CXC helps ensure compliance and reduces administrative burden.
Payroll providers handle calculations, tax filings, and reporting, allowing businesses to focus on day-to-day operations instead of getting caught up in administrative work. This becomes even more valuable for companies managing a growing team or expanding into the UK market.
Working with a provider like CXC helps streamline the process and reduces the risk of mistakes, especially when dealing with tax codes, National Insurance, and HMRC submissions. Moreover, outsourcing payroll can help businesses:
- Improve accuracy and reduce errors, especially in calculations and deductions.
- Ensure compliance with HMRC requirements, including timely and correct submissions.
- Save time and internal resources, so teams can focus on core business activities.
- Provide access to local expertise, which is useful when navigating UK payroll regulations.
To avoid unnecessary risks and keep everything running smoothly, it’s important to partner with a reliable payroll provider that understands UK requirements and can handle the details properly.
How can payroll outsourcing help companies stay compliant in the UK?
Payroll outsourcing helps companies stay compliant in the UK by ensuring accurate tax calculations, timely reporting, and alignment with employment regulations.
Compliance in UK payroll requires constant attention to detail, especially as tax rules and employment regulations can change. For companies unfamiliar with payroll in the UK, it can be easy to miss updates or make small errors that lead to bigger issues. Outsourcing providers focus on these requirements every day, making sure payroll is processed correctly and submitted on time without added pressure on internal teams.
They also handle key areas such as statutory payments, pension contributions, and employee benefits, ensuring everything is managed in line with legal requirements. This not only reduces the risk of penalties but also helps ensure employees are paid accurately and consistently.
Payroll outsourcing supports compliance by helping companies:
- Handle accurate tax and deduction calculations, so the right amounts are applied every time.
- Submit payroll reports to HMRC on time, avoiding late filing penalties.
- Stay compliant with pension and benefits regulations, including auto-enrolment requirements.
- Keep up with legal and regulatory changes, so processes stay aligned with current rules.
Working with a reliable payroll outsourcing provider also makes it easier to reduce risk and avoid costly payroll mistakes.
What employee benefits must employers provide in the UK?
Employers in the UK must provide statutory benefits such as paid holiday, sick pay, and pension contributions, and these are not optional. These requirements form the primary part of employee benefits in the UK and are closely tied to compliance under UK employment law.
For companies hiring in the UK, especially those new to the market, understanding and managing these benefits can quickly become complex.
Employee benefits in the UK are not just about supporting employees. They are also a legal obligation that must be handled correctly through payroll in the UK. Mistakes in calculating holiday pay, missing pension contributions, or incorrectly applying sick leave UK rules can lead to penalties, employee complaints, and reputational risk.
Many employers also struggle with keeping up to date with changing rules, especially around pension auto-enrolment and statutory pay thresholds. To stay compliant and avoid these common issues, employers need to manage key statutory benefits carefully such as:
- Paid annual leave entitlement, ensuring employees receive at least 5.6 weeks of leave (this may include bank holidays and they are not required to be provided separately).
- Statutory sick pay, making sure eligible employees are paid during sick leave in the UK and records are properly maintained
- Workplace pension contributions, enrolling eligible employees under auto-enrolment and paying both employer and employee contributions on time.
- Maternity and paternity pay, applying the correct statutory payments and leave entitlements based on eligibility.
Employee benefits in the UK are a legal requirement, not just a perk. Getting them right is important for compliance, and many companies choose to work with experienced partners like CXC to avoid errors and manage these obligations with confidence.
What optional employee benefits are commonly offered in the UK?
Common optional employee benefits in the UK include private health insurance, bonuses, and flexible working arrangements, and these are often used by employers to stay competitive when hiring talent.
While statutory benefits are required by law, many companies hiring in the UK go beyond the basics to attract and retain skilled employees. The UK job market is competitive, especially in sectors like tech, finance, and professional services, so offering additional employee benefits UK can make a real difference. Candidates often compare total compensation packages, not just basic salary UK, and expect a level of flexibility and support that goes beyond minimum requirements.
For international companies entering the UK market, this can be a challenge. It is not always clear what benefits are considered standard, and offering too little can make roles less attractive, while offering too much without structure can increase costs. Finding the right balance is key.
To stay competitive and meet candidate expectations, employers commonly offer:
- Private health insurance, which is a popular benefit in the UK and helps employees access faster healthcare services.
- Performance bonuses, used to reward results and stay competitive in attracting top talent.
- Flexible working arrangements, including hybrid or remote work, which is now widely expected by UK employees.
- Life insurance and wellness programs, supporting employee wellbeing and long-term security.
Optional employee benefits in the UK play a big role in attracting and retaining talent. For companies hiring in the UK, offering the right mix of benefits can make roles more competitive while supporting employee satisfaction.
What are the minimum wage and salary expectations in the UK?
The minimum wage in the UK sets the lowest legal pay employers must provide, while salary expectations still vary depending on the role, industry, and location.
As of April 2026, the UK government has confirmed that the National Living Wage for workers aged 21 and over is £12.71 per hour. Lower rates apply to younger workers, including £10.85 per hour for ages 18 to 20 and £8.00 per hour for under 18s and apprentices.
For companies hiring in the UK, especially those new to the market, getting this right is important. Minimum wage compliance is closely monitored by HMRC, and underpaying employees can lead to back payments, penalties, and reputational damage. At the same time, most roles are paid above the legal minimum, so employers also need to consider market expectations when setting a competitive basic salary in the UK.
To stay compliant and competitive, employers need to consider how minimum wage fits into their wider pay structure:
- Minimum wage UK varies by age group, with £12.71 per hour for workers aged 21 and over, and lower rates for younger workers and apprentices.
- Applies to most workers, including full-time, part-time, and many contract workers under UK employment law.
- Must be reflected in payroll calculations, ensuring employees are paid correctly for every hour worker.
- Basic salary in the UK depends on role and market conditions, and is often higher than the statutory minimum to attract talent
Minimum wage in the UK sets the legal baseline for pay, but employers hiring in the UK need to balance compliance with competitive salary expectations. Getting both right is key to avoiding risk while attracting the right talent.
Does minimum wage apply to temporary or contract workers in the UK?
Yes, minimum wage UK applies to most temporary and contract workers in the UK.
In the UK, minimum wage rules are based on employment status, not just contract type. This means that even if someone is on a fixed-term contract, agency contract, or short-term assignment, they are still entitled to receive at least the minimum wage in the UK if they qualify as a worker. This is a key compliance point for companies hiring flexible or project-based talent, which is very common across industries like retail, healthcare, logistics, and professional services.
A common challenge for employers, especially international companies, is understanding the difference between employees, workers, and independent contractors. Misclassification can lead to underpayment risks, which HMRC actively enforces. For example, agency workers and many contractors working under supervision or control are usually entitled to minimum wage protections, even if their contract looks different on paper.
When managing payroll in the UK, employers need to ensure that minimum wage is correctly applied across all types of engagements:
- Applies to temporary workers, including those hired for seasonal roles or short-term projects
- Applies to most contract workers, especially those classified as “workers” rather than genuinely self-employed
- Covers agency workers, who are common in sectors like warehousing, healthcare, and admin roles
- Must be reflected in payroll calculations, ensuring every hour worked is paid at or above the legal minimum
- Requires correct worker classification, to avoid compliance issues and potential penalties
Minimum wage in the UK applies broadly across different types of workers, not just permanent employees. For companies hiring in the UK, getting classification and pay right is essential to stay compliant and avoid legal and financial risks.
Why is CXC the right partner for managing payroll and benefits for international companies in the UK?
CXC is the right partner because it brings decades of experience in managing global payroll and workforce solutions, helping international companies handle payroll and benefits in the UK with confidence and ease.
When you partner with CXC, you are not figuring things out on your own. You are working with a team that understands UK regulations inside out and knows how to keep everything running smoothly. This means fewer compliance worries and less back and forth trying to fix issues.
Here’s how CXC can support your organisation:
- Accurate payroll processing and reporting, so employees are paid correctly and on time without constant rechecks
- Compliance with UK tax and employment laws, helping you stay aligned with HMRC requirements and avoid penalties
- Management of employee benefits in the UK, including pensions and statutory entitlements, handled properly from the start.
- Support for global workforce expansion, making it easier to hire and manage teams in the UK alongside other markets.Support includes keeping processes aligned with ongoing updates to UK payroll, tax, and employment regulations.
This way, you have more time to focus on growing your business while CXC takes care of your payroll and keeps everything compliant behind the scenes.
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