United Kingdom HR Glossary

Employers must register as a PAYE employer, operate payroll software that calculates deductions, and submit a Full Payment Submission (FPS) to HMRC on or before each pay day. Late or inaccurate FPS submissions attract automatic penalties. Employers must also submit an Employer Payment Summary (EPS) when no employees are paid or to claim HMRC offsets.

In 2025/26, employees pay Class 1 NICs at 8% on earnings between £12,570 and £50,270 (2% above), while employers pay 15% on earnings above the Secondary Threshold (£5,000 from April 2025). Employers can reduce their NIC bill via the Employment Allowance (up to £10,500 for eligible employers). NICs must be remitted to HMRC alongside PAYE deductions.

From April 2025 the NLW is £12.21/hr for those 21+. Paying below the NMW is a criminal offence. HMRC's National Minimum Wage compliance team actively investigates complaints and conducts targeted employer audits, with arrears, a penalty of up to 200% of underpayments, and public naming for persistent offenders.

The 48-hour limit is averaged over a 17-week reference period and workers may opt out in writing — but the opt-out cannot be a condition of employment. Workers are also entitled to 11 consecutive hours' rest in each 24-hour period and an uninterrupted 24-hour rest period per week. Breaches expose employers to Employment Tribunal claims.

SSP is payable from the fourth consecutive qualifying day of sickness (Waiting Days). Employees must earn at or above the Lower Earnings Limit (£123/week in 2025/26) to qualify. SSP is treated as earnings and is subject to PAYE and NICs. Employers can no longer reclaim SSP from HMRC (the recovery scheme ended in 2014) so it is a direct cost to the business.

Minimum total contributions are 8% of qualifying earnings (employer: at least 3%, employee: at least 5%). Employers must re-enrol opted-out workers every three years. The Pensions Regulator monitors compliance and can issue fixed (£400) or escalating penalties (£50–£10,000/day) for non-compliance.

Following a series of Employment Tribunal rulings (Bear Scotland, Flowers v East of England Ambulance), employers must include regular voluntary overtime, standby pay, and commission in holiday pay calculations. For workers with irregular hours, holiday pay is calculated at 12.07% of hours worked (the 'rolled-up' method) from 2024 legal reforms.

Since April 2021, medium and large private-sector clients determine IR35 status and issue a Status Determination Statement (SDS). If a contractor is inside IR35, the fee-payer withholds Income Tax and NICs before payment. Incorrect determinations expose both the client and the contractor's Personal Service Company to back-tax, interest, and penalties.

Zero-hours workers retain statutory rights to the National Minimum Wage, rest breaks, and 5.6 weeks' paid annual leave (accrued pro-rata). The Employment Rights Act 2025 reforms introduce a right for qualifying workers to request a 'guaranteed hours' contract after 26 weeks. Exclusivity clauses in zero-hours contracts are unenforceable.

Employees need their P60 to complete a self-assessment tax return and to claim tax refunds. A P45 must be given on or before the employee's last pay day and submitted to HMRC via FPS. Failure to issue these documents on time is a PAYE non-compliance matter that HMRC can penalise.