Running payroll

Skip contents

Employees' pay

Record your employees’ salary or wages in your payroll software. Include everyone you pay, even if they get less than £123 a week.

Recording other types of pay

Statutory pay

You may have to pay your employee:

Statutory pay for parents includes:

You must record these in your software - they’re taxed like normal pay.

You can reclaim statutory pay for parents.

Expenses and benefits

Expenses or benefits like uniforms or company cars are reported separately at the end of the tax year. Check the rules to find out what counts as expenses and benefits, and what you should record in your software as normal pay.

Tips and other pay

Treat tips to your staff as normal pay if they’re paid into your till - this includes tips added to your customers’ card or cheque payments. The rules are different if tips are given straight to your employees by customers or paid into a tronc.

Other payments you may give your employee that you should record as normal pay include:

  • bonuses
  • commission
  • holiday pay (unless you pay it in advance or use a holiday pay scheme)
  • payments for time your employee has spent travelling
  • passenger payments, except the first 5 pence per mile
  • medical suspension payments, given to an employee you’ve suspended for health reasons
  • maternity suspension payments, given to an employee you’ve suspended for her, or her baby’s, health
  • guarantee payments, paid to an employee for a day they do not work (and not paid holiday)
  • office holders’ payments (honoraria), given to employees for providing a service, for example being your company’s sports-club secretary
  • payments that can be converted into cash, for example cheques, Savings Certificates or Premium Bonds
  • inducement payments (‘golden hello’ payments)
  • cash prizes for competitions you run

You must follow different rules for:

View a printable version of the whole guide

Part of Employ someone: step by step

  1. Step 1 Check your business is ready to employ staff

    1. Prepare your business to take on employees

  2. Step 2 Recruit someone

    You need to advertise the role and interview candidates. You can use a recruitment agency to do this or do it yourself.

    1. Find out about recruiting someone yourself on Acas
    2. Find out about using a recruitment agency

    As an employer you must make sure you recruit employees fairly.

    1. Avoid discrimination during recruitment
    2. Make your application process accessible for employees with disabilities or health conditions

  3. and Check they have the right to work in the UK

    1. Find out how to check an applicant's right to work

  4. and Find out if they need a DBS check

    You may need to check someone's criminal record, for example, if they'll be working in healthcare or with children.

    1. Find out if you need a DBS check
    2. How to do a DBS check

  5. Step 3 Check if they need to be put into a workplace pension

    Check if you need to put your employee into a workplace pension scheme:

  6. Step 4 Agree a contract and salary

    When someone accepts a job offer they have a contract with you as their employer.

    1. Check what the National Minimum Wage is for different ages
    2. Check what the National Minimum Wage is for different types of work
    3. Check what to include in a contract
    4. Agree a written statement of employment particulars

  7. Step 5 Tell HMRC about your new employee

    You must tell HMRC about your new employee on or before their first pay day.

    1. Tell HMRC about a new employee
    2. Get their personal details and P45 to work out their tax code
    3. If you don’t have their P45, use HMRC’s ‘starter checklist’
    4. Check what to do when you start paying your employee