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Employment Compliance

Payroll & Auto-Enrolment Your Employer Obligations.

This guide explains Pay As You Earn (PAYE), Real Time Information (RTI) submissions, workplace pensions and statutory pay. Check the employee and payment conditions as well as the headline rates.

Registering as an Employer

Register for PAYE before the first payday when the registration conditions apply. Allow time for HMRC to issue the employer references. If you must pay before they arrive, follow HMRC instructions for recording the pay and sending the submission afterwards.

Register if an employee is paid GBP 96 or more a week, receives expenses or company benefits, gets a pension, has had another job or has received certain taxable benefits. These are PAYE registration conditions, not the National Insurance Lower Earnings Limit. Keep payroll records even if registration is not required.

Director-Only Companies

A director taking a GBP 12,570 salary needs PAYE registration. An annual payroll scheme is suitable only when all employees are paid once a year, in the same tax month, and the employer pays HMRC annually. It does not turn regular salary payments into one year-end report. See our director payroll guide.

RTI Submissions: FPS & EPS

Real Time Information (RTI) replaced the old year-end reporting system in 2013. Under RTI, you report payroll data to HMRC on or before every payday, not at the end of the year. There are two key submissions:

Submission What It Reports Deadline
Full Payment Submission (FPS) Employee pay, PAYE deducted, NI contributions, student loan deductions, pension contributions On or before each payday
Employer Payment Summary (EPS) Statutory pay recovery, Employment Allowance claims, CIS deductions suffered, nil payment months By the 19th of the following tax month

The FPS is the main submission. Late filing can attract penalties (see Penalties below). HMRC uses the FPS data to calculate your PAYE liability in real time, which is why the amounts must be accurate, not estimated.

PAYE & National Insurance

As an employer, you are responsible for deducting Income Tax (via PAYE) and employee National Insurance from each employee's pay, then paying these to HMRC along with the employer's National Insurance contribution.

2026/27 Employer NI Rates

From April 2025, the employer NI rate increased to 15% on earnings above the Secondary Threshold (£5,000 for 2026/27). This represents a significant cost that must be factored into your hiring decisions. The Employment Allowance (currently £10,500) offsets some of this for smaller employers.

Employment Allowance

Eligible employers can claim up to GBP 10,500 of Employment Allowance against employer National Insurance. The former GBP 100,000 prior-year liability restriction was removed from April 2025. A company is excluded where its only employee liable for secondary Class 1 National Insurance is a director. Other eligibility conditions and connected-company rules still apply.

Payment Deadlines

PAYE and NI must be paid to HMRC by the 22nd of the following month (if paying electronically) or the 19th (if paying by cheque). Small employers (monthly PAYE liability under £1,500) can pay quarterly instead. We track these deadlines and send reminders automatically as part of our payroll service.

Auto-Enrolment Pensions

The Pensions Act 2008 requires every employer to automatically enrol eligible workers into a qualifying workplace pension scheme. This is not optional, failure to comply results in escalating fines from The Pensions Regulator (TPR).

Who Must Be Enrolled?

Workers are categorised into three groups based on their age and earnings:

Category Criteria Employer Duty
Eligible Jobholder Aged 22 to State Pension age, earning above £10,000/year Must be auto-enrolled. Employer must contribute.
Non-Eligible Jobholder Aged 16-74, earning £6,240-£10,000/year (or aged 16-21 / SPA-74 earning above £10,000) Not auto-enrolled, but can opt in. Employer must contribute if they do.
Entitled Worker Aged 16-74, earning under £6,240/year Can request to join. Employer does not have to contribute.

Minimum Contribution Rates

Under the qualifying-earnings basis, pension contributions use earnings between GBP 6,240 and GBP 50,270 a year in 2026/27. These are pension limits, separate from the National Insurance Lower Earnings Limit of GBP 6,708. The minimum total is 8%, including at least 3% from the employer; another certified contribution basis may apply to the scheme.

Contribution Minimum Rate
Employer contribution 3% of qualifying earnings
Employee contribution 5% of qualifying earnings (inc. tax relief)
Total minimum 8% of qualifying earnings

Employer pension contributions are a deductible business expense for Corporation Tax purposes and are exempt from employer National Insurance, making them one of the most tax-efficient forms of remuneration. This is a key consideration in director extraction planning.

Choosing a Pension Scheme

Choose a qualifying workplace pension scheme that supports your workforce, contribution basis and payroll process. Check its charges, contribution collection dates and employee communications before setting it up.

Statutory Pay Obligations

Statutory pay depends on the employee and the reason for absence. Family-related payments can usually be recovered in part or in full under the rules below; sick pay cannot be recovered.

Statutory Sick Pay (SSP)

For sickness starting from 6 April 2026, pay the lower of GBP 123.25 a week or 80% of average weekly earnings for qualifying days from the first full day of sickness. There is no earnings floor or waiting period. The maximum entitlement remains 28 weeks; linked absences and April transitional rules must be checked.

Statutory Maternity Pay (SMP)

Maternity pay lasts up to 39 weeks: 90% of average weekly earnings for six weeks, followed by the lower of GBP 194.32 or 90% for 33 weeks. Eligible small employers recover 109%; others generally recover 92%. Small Employers' Relief uses total Class 1 National Insurance of GBP 45,000 or less in the relevant preceding complete tax year, before Employment Allowance reductions.

Statutory Paternity Pay (SPP)

Paternity pay is the lower of GBP 194.32 a week or 90% of average weekly earnings for up to two weeks. Service and earnings tests still apply to pay. In Great Britain, paternity leave itself became a day-one right on 6 April 2026.

Claim eligible family-pay recoveries through the EPS. Our statutory pay guide also covers adoption, shared parental, bereavement and neonatal care payments, evidence, transitional rules and Northern Ireland differences.

Year-End Reporting & P11D

After the tax year ends on 5 April, you must complete several year-end tasks:

Final FPS Submission

Send the final FPS on or before the last payday of the tax year and mark it as the final submission where appropriate. An EPS can carry the final-submission indicator if needed, for example where nobody is paid in the final tax month. The 19 April deadline for that EPS does not replace the FPS payday deadline.

P60 Certificates

Every employee on your payroll at 5 April must receive a P60 showing their total pay and deductions for the year. Deadline: 31 May. We generate these automatically through BrightPay and make them available via the employee self-service portal.

P11D: Benefits in Kind

For 2026/27, report taxable benefits not validly payrolled on P11D by 6 July 2027. Payrolled benefits generally do not need a P11D, but the employer normally still files P11D(b) for Class 1A National Insurance. Electronic payment is due by 22 July 2027, or 19 July for non-electronic payment. From 6 April 2027, mandatory payrolling starts for company cars, car fuel, vans, van fuel and employer-provided medical benefits. Most other benefits follow from April 2028; loans and accommodation remain voluntary under the announced approach.

Penalties & Enforcement

Late filing and late payment are separate failures. The figures below need to be read with HMRC's exceptions: the first late report is usually unpenalised, but that exception does not apply to annual schemes. New-employer and three-day easements may also apply.

HMRC Penalties (RTI & PAYE)

Number of Employees Monthly Late Filing Penalty
1 - 9 £100
10 - 49 £200
50 - 249 £300
250+ £400

Late monthly or quarterly PAYE payments can attract penalties of 1% to 4%; the first late payment is excluded from that count. A further 5% applies to amounts still unpaid after six months and again after twelve months, even for a single late payment. Interest is separate. See payroll penalties and appeals.

Pensions Regulator Penalties

The Pensions Regulator (TPR) has separate enforcement powers for auto-enrolment non-compliance:

  • -Compliance Notice, a formal instruction to take specific action within a deadline.
  • -Fixed Penalty Notice, £400 if the compliance notice is not met.
  • -Escalating Penalty Notice, daily fines ranging from £50/day (1-4 staff) to £10,000/day (500+ staff) until you comply.
  • -Criminal prosecution, for wilfully failing to comply or for inducing employees to opt out.

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Director payroll for 2026/27: salary thresholds, National Insurance, Employment Allowance, qualifying years and annual PAYE reporting.

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Real Time Information Payroll Penalties

How Real Time Information payroll penalties arise, what HMRC checks and how small employers can keep submissions on time.

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Statutory Pay Guide for Small Employers

A guide to statutory pay for small employers, including sick pay, maternity pay, paternity pay, recovery rules and payroll records.

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Frequently Asked Questions

What are the penalties for late RTI submissions?

Late payroll reports can attract monthly penalties of £100 to £400, depending on employee numbers. Exceptions include the first failure in a tax year (except annual schemes), a new employer reporting within 30 days of first paying staff, and the three-day easement where lateness is not persistent. File on or before payday. Late-payment interest and penalties are separate.

Do I need to auto-enrol a director with no employment contract?

A company with only one director and no other staff has no automatic-enrolment duties. With more than one person, check the employment contracts: duties generally arise where at least two people work under employment contracts. Directors without employment contracts do not create duties simply because there is more than one director. Tell The Pensions Regulator if it contacts a company that has no duties.

Can an employee opt out of auto-enrolment?

Yes. An employee can opt out within one month of being enrolled. If they opt out, you must refund any contributions already deducted. However, you must re-enrol them every three years (on your re-enrolment date) if they still meet the eligibility criteria. You cannot encourage or incentivise employees to opt out, this is a criminal offence.

What is the difference between an FPS and an EPS?

A Full Payment Submission (FPS) reports what you have paid each employee and the deductions made (PAYE, NI, student loans). It must be submitted on or before each payday. An Employer Payment Summary (EPS) reports adjustments, such as statutory pay recoveries, Employment Allowance claims, or months where no employees were paid. An EPS is submitted by the 19th of the following month.

Official sources

Sources checked on 6 September 2026.