Reviewed: 17 June 2026
Payroll and HR processes connect employee pay, tax reporting, employment records and workplace responsibilities. This hub explains the main UK workflows and routes readers to detailed guidance on payroll processing, outsourcing, HR compliance and employee benefits.
2026/27 payroll facts employers should check
- The main employer National Insurance rate is 15% above the relevant threshold.
- The employer secondary threshold is £5,000 a year.
- From 1 April 2026, the National Living Wage for workers aged 21 and over is £12.71 an hour.
- Full Payment Submissions are normally due on or before payday.
- PAYE and National Insurance are normally due by the 22nd of the following tax month when paid electronically.
Always confirm current figures using HMRC employer rates and thresholds and the National Minimum Wage rates.
Payroll processing
Payroll processing covers collecting approved inputs, calculating gross-to-net pay, applying deductions, producing payslips, reporting to HMRC and paying employees and HMRC. The employer remains responsible for accuracy even when software or an external payroll provider performs the calculations.
Read Payroll Processing Services UK for the end-to-end monthly workflow.
Outsourced payroll
Outsourcing can reduce operational workload, but it does not transfer the employer’s legal responsibilities. A good arrangement defines data cut-off dates, approval responsibilities, correction procedures, security controls and what happens when information arrives late.
See Outsourced Payroll Services UK.
HR compliance
HR compliance covers recruitment, right-to-work checks, written employment particulars, pay and working time, leave, equality, performance management, discipline, grievance, data protection and termination. Policies should match current law and actual workplace practice.
Use HR Compliance in the UK for the wider framework.
Employee benefits
Benefits can affect payroll, tax reporting, employment contracts and workplace communications. Employers should distinguish statutory entitlements from discretionary benefits and check whether a benefit is taxable, reportable or subject to employer National Insurance.
Read Employee Benefits in the UK.
A practical monthly control cycle
- Collect approved starters, leavers, hours, pay changes, leave and benefit information.
- Validate payroll inputs against contracts and authorised changes.
- Run payroll and review exception reports.
- Approve the payroll before releasing payments.
- Submit RTI and retain the confirmation.
- Pay employees, pension providers and HMRC by the relevant deadlines.
- Store payslips, reports, approvals and supporting evidence securely.
Software and records
Payroll software can automate calculations and submissions, but configuration, employee data and review controls determine whether the output is reliable. See Payroll Software Explained for UK Employers.
Employers should keep payroll records, evidence of statutory payments and documents supporting employment decisions for the applicable retention periods. Access should be limited because payroll and HR data is sensitive personal information.
Official starting points
This hub provides general educational information, not personalised payroll, employment, tax or legal advice.
Explore this section
Payroll and employment processes are time-sensitive. Businesses remain responsible for accurate inputs, approvals, records and submissions even when work is outsourced.
Key guides
- Payroll Processing Services UK
- Outsourced Payroll Services UK
- HR Compliance in the UK
- Employee Benefits in the UK
- PAYE Compliance in the UK
Official starting points
For how we research, update and correct our guides, read the Editorial Policy. See the Disclaimer for the limits of this educational content.
Building a joined-up payroll and HR control system
Payroll and HR are closely connected but they are not the same function. HR records explain who is employed, the terms that apply and what changed during the period. Payroll converts approved information into pay, deductions, reports and payments. Errors often arise when the hand-off between the two is informal. A strong system therefore begins with one agreed source for employee data, named owners and cut-off dates.
The business remains responsible even when software, a bureau, an accountant or an HR adviser performs part of the work. Outsourcing changes who carries out a task; it does not transfer the employer’s legal obligations or the need to approve accurate information.
The employee lifecycle and its control points
- Recruitment: define the role, pay basis, working pattern and approval route. Carry out relevant right-to-work and pre-employment checks consistently and lawfully.
- Onboarding: issue the required written particulars, collect payroll information, establish pension and benefit status, record bank details securely and tell HMRC about a new employee through the payroll process.
- Routine employment: maintain working-time, holiday, sickness, family-leave, pay-change, benefit and performance records. Changes should be approved before the payroll cut-off.
- Payroll processing: calculate gross pay, statutory pay, deductions, pension contributions and net pay; review exceptions; submit RTI reports; pay employees, HMRC and pension providers.
- Changes: document promotions, pay rises, changes in hours, family leave, long-term absence, deductions, benefits and status changes. Check whether a change affects the contract, payroll, pension or tax reporting.
- Leaving: confirm the final pay date, holiday balance, deductions, benefits, return of property, P45 information and removal of system access.
A practical responsibilities matrix
| Activity | Typical owner | Evidence to retain |
|---|---|---|
| Job and pay approval | Manager or director | Approved role, salary and start date |
| Contract and policy records | HR or responsible manager | Signed or acknowledged terms and policy versions |
| Employee master data | HR/payroll administrator | Starter information, bank details, tax and pension data |
| Variable pay and absence | Line manager | Approved timesheets, overtime, bonus and leave records |
| Payroll calculation | Payroll team or bureau | Draft payroll, exception report and calculation outputs |
| Payroll approval | Independent approver | Dated approval and evidence of reviewed exceptions |
| Payments and filings | Finance/payroll | Bank payment, FPS/EPS receipt and HMRC/pension confirmations |
Monthly and annual timetable
A documented calendar should work backwards from payday. It should specify when managers submit changes, when payroll is calculated, when the draft is reviewed and when payments are released. HMRC’s Full Payment Submission is generally due on or before the employee’s payday. Where an Employer Payment Summary is needed, the payroll owner should also understand the relevant reporting date and how it affects the amount payable.
Year-end work includes final payroll reporting, employee documents, benefits reporting where relevant, tax-code and rate updates, software checks and reconciliation of payroll control accounts. Pension re-enrolment and re-declaration dates, policy review dates and benefit renewal dates should be included in the wider compliance calendar.
Core controls for a small employer
- Separate the person who changes bank details from the person who approves the payment file.
- Review a change report for starters, leavers, pay changes and bank-account amendments.
- Compare gross pay, employer costs and net pay with the previous period and investigate material movements.
- Reconcile payroll reports to the bank, HMRC liabilities, pension submissions and accounting records.
- Restrict payroll and HR access to people who need it and remove access promptly when responsibilities change.
- Keep a correction log showing the issue, cause, approval, employee communication and amended filing.
2026–27 figures that affect planning
From April 2026, the National Living Wage for workers aged 21 and over is £12.71 an hour. The rates for workers aged 18 to 20 and for the under-18 and qualifying apprentice categories are different. For 2026–27, the employer National Insurance secondary threshold is £5,000 a year and the main employer rate is 15%. Statutory family-pay rates and Statutory Sick Pay also changed. These figures should be maintained in supported payroll software and checked against current HMRC guidance rather than copied permanently into an internal spreadsheet.
When specialist support is appropriate
Consider qualified payroll, tax, HR or employment-law support when status is uncertain, a worker operates across borders, deductions or salary sacrifice are unusual, a payroll report may be wrong, an employment process could lead to dismissal or redundancy, or a benefit has complex tax treatment. General guidance cannot determine the correct outcome without the facts and documents.
Related ASH guides
- Payroll Processing Services UK
- Outsourced Payroll Services UK
- HR Compliance in the UK
- Employee Benefits in the UK
- PAYE Compliance in the UK
- Payroll Software Explained for UK Employers
Official starting points
- PAYE and payroll for employers
- Reporting payroll to HMRC
- Employer rates and thresholds for 2026–27
- Acas: employment contracts and the law
- Workplace pension duties
First 90 days for a new employer
Before the first payday, register where required, choose supported payroll software or a provider, agree the payday and cut-off, obtain employee starter information, assess pension duties and create secure access. During the first month, reconcile the first FPS, bank payment, HMRC liability, pension submission and accounting journal. By the end of the first quarter, review whether managers submit changes on time, whether employees understand payslips and policies, and whether any recurring manual adjustments should be built into the process.
Management information worth monitoring
- Total gross pay, employer National Insurance, pension and benefit cost
- Overtime, bonus and temporary-labour movements
- Headcount, starters, leavers and vacancies
- Absence, holiday liability and long-term cases
- Late payroll inputs and corrections after approval
- Employee queries and the time taken to resolve them
- Upcoming contract, probation, visa, pension and benefit-review dates
Measures should support decisions, not encourage managers to avoid legitimate leave or adjustments. Sensitive information should be aggregated and restricted appropriately.
Common signs that the system needs attention
Warning signs include payroll relying on one person, repeated late inputs, unexplained HMRC differences, managers keeping separate employee spreadsheets, benefit invoices that are not reconciled, missing written terms, access remaining open after a leaver and frequent emergency payments. Address the cause rather than treating every exception as a one-off.
Annual governance review
At least annually, confirm that the payroll calendar, contracts, policies, privacy information, pension procedures, benefit rules and provider agreements remain current. Test a sample of starter, change and leaver files from beginning to end. Record findings, owners and target dates so the review leads to measurable improvements.
Document control and ownership
Keep one current payroll procedure and one current HR policy set. Record who owns each document, when it was reviewed and which version employees or managers received. Where a provider supplies templates, the employer should still confirm that the wording matches its contracts, systems and actual practice.
Build an employer change-control calendar
Payroll and HR failures often begin before the payroll calculation. Create one calendar that records pay dates, input cut-offs, approval dates, HMRC reporting, pension activity, employee changes and policy reviews. Give each event an owner and a backup owner so holidays or absence do not turn a routine deadline into an emergency.
Control changes before payroll is calculated
Use a standard form or controlled workflow for starters, leavers, salary changes, overtime, bonuses, deductions, family leave and bank-detail changes. Require evidence and approval before the payroll cut-off. Sensitive changes, particularly bank details and large one-off payments, should be independently checked through a trusted contact route rather than approved solely from an email request.
Reconcile the completed payroll
Compare the payroll summary with the previous period and investigate unusual movements in gross pay, deductions, employer costs and net pay. Reconcile the payment file, payroll control accounts and amounts reported to HMRC. Retain the approved input, review evidence, submission receipt and payment confirmation so a later query can be traced without rebuilding the whole process.
Link payroll and HR records
Payroll data should agree with employment records. A starter should have the required employment information and right-to-work process; a leaver date should agree across HR, payroll and access systems; and changes to hours, pay or benefits should be supported by the relevant approval. Keep access limited to people who need it and remove permissions promptly when roles change.
HMRC states that employers normally use payroll software to send a Full Payment Submission and that it should generally be sent on or before payday. Check the current official guidance whenever a report is late, corrected or affected by an unusual payment.