UK Payroll: What HR Teams Must Get Right From Day One

Hiring employees in the UK feels familiar to many HR teams expanding internationally.

The language is the same. The employment framework is clear. The market is mature and well-regulated.

That familiarity can be misleading.

Because while the UK is one of the easier markets to enter, it's also one of the least forgiving when it comes to UK payroll compliance. Small mistakes made early, incorrect tax codes, missed statutory filings, and misaligned contracts don't disappear. They compound.

If you're setting up UK payroll for the first time, here's what HR teams must get right from day one to avoid rework, risk, and internal disruption later.

1. Payroll Registration and Setup

Before you run your first UK payroll, you need:

 ✔ PAYE registration (Pay As You Earn system with HMRC)
✔ Correct tax codes for each employee based on their employment status
✔ Reporting timelines set up for Real Time Information (RTI) submissions

These aren't administrative formalities you can handle "eventually." They must be correct before the first payroll run.

Early mistakes in UK employer payroll setup cascade quickly. Incorrect PAYE codes lead to incorrect deductions. Missed RTI submissions trigger penalties. And fixing these issues retroactively takes time, money, and credibility with both employees and regulators.

2. Full Cost Visibility

UK payroll isn't just gross salary.

When you're budgeting for a new hire, you need to account for:

• - Employer National Insurance contributions (13.8% on earnings above the threshold)

• - Auto-enrolment pension contributions (minimum 3% employer contribution)

• - Statutory benefits (sick pay, parental leave, etc.)

These costs need to be mapped upfront for accurate budgeting not discovered later when payroll costs come in higher than expected.

For HR teams managing multi-country operations, UK payroll compliance means understanding the full cost structure before making offers, not after employees start.

3. Contract Alignment

Your global employment contract template probably won't work in the UK without modification.

UK employment law has specific requirements around:

• - Notice periods (statutory minimums based on tenure)

• - Termination clauses (fair dismissal procedures)

• - Statutory rights (holidays, sick leave, parental leave)

• - Working time regulations (48-hour average working week unless opted out)

Generic templates create exposure. Contracts need to reflect UK labor standards, not just translated versions of what works in other markets.

If you're working with an Employer of Record in the UK, they should handle this alignment. If you're managing it internally, make sure contracts are reviewed by someone who understands local employment law.

4. Clear Ownership

One of the biggest risks in UK payroll setup isn't technical—it's organizational.

Who owns:

• Payroll accuracy?

• Statutory filings with HMRC?

• Compliance updates when UK payroll compliance regulations change?

If ownership is unclear—split between internal teams, vendors, or platforms—things fall through the cracks.

In the UK, ambiguity around accountability is a risk in itself. The market rewards clear ownership and penalizes gaps.

Before you make your first hire, make sure everyone knows who's responsible for what.

5. Exit Readiness

Here's a question most teams don't ask early enough:

"If this role ends in a year, are we set up correctly to handle the exit?"

UK employment law has strict requirements around:

• Final pay and statutory entitlements

• Notice period calculations

• P45 forms (tax documentation for departing employees)

• Settlement agreements (if applicable)

Employee exits expose everything you did or didn't do correctly at the start.

If payroll was set up with shortcuts, misaligned contracts, or unclear tax treatment, those issues surface during offboarding. And by then, fixing them is more expensive and more disruptive.

Exit readiness isn't just about termination processes. It's about knowing your UK payroll setup will hold up under scrutiny when the time comes.

Final Thought

UK payroll works best when it's planned, not patched.

The UK allows fast hiring, but only teams that set up payroll correctly from day one avoid the rework, penalties, and internal disruption that come from early mistakes.

If you're expanding into the UK and want a quick clarity check before or after your first hire, we're here to help.

👉 Book a 15-minute clarity call with our UK payroll and compliance experts. No selling. Just practical guidance on getting your setup right.