Taxes are a fact of life and income tax is usually the most important for the majority of us. But income tax in the UK is not the same for everyone. Income tax brackets in the UK put people into different categories, with different levels of tax depending on your income.

We also calculate and pay our income tax in different ways, either through our workplace or through self-assessed tax returns. It is also the responsibility of employers to accurately deduct it from payslips and provide the correct information to HMRC.

Let’s take a look at how income tax works in the UK, including the brackets, the personal allowance and how it’s calculated.

What is income tax?

Simply put, income tax in the UK is a tax you pay on what you earn. This could be money you earn from working, income from renting a property, profits you make as a self-employed person, or things like pensions and other state benefits.

How much you pay depends on how much you earn, as well as a few other factors. This is divided into tax brackets, which dictate the rate you pay. As you earn more, you move into higher brackets, so you pay more on specific portions of your income.

Most people also get a personal allowance, which is an amount you don’t have to pay tax on. But we’ll come back to that later.

There are also many types of income which are not subject to income tax in the UK, including interest from certain bank accounts such as Individual Savings Accounts (ISAs), certain state benefits and winnings from the National Lottery or Premium Bonds.

How is income tax collected?

HMRC collects income tax in several ways, mainly depending on your employment status. Most people will pay their income tax via PAYE (Pay As You Earn), meaning their employer will deduct it from their salary using their tax code.

The other way to pay income tax in the UK is to complete a self-assessment, in which you provide details of your income from self-employment, rentals or other sources.

Accuracy and timeliness are essential with both methods, with penalties applied for late submission of returns or failure to deduct the correct amounts. This is why it is so important for business owners and managers to understand their UK income tax and payroll obligations. Even when you automate the process with software or outsource payroll to someone else, it’s still your legal responsibility to get it right.

What is the personal allowance?

In the UK, the personal allowance is the amount you can earn each financial year before having to pay income tax.

The standard personal allowance for the current tax year 2025/26 is £12,570. This is the same as the previous two years, but it may change from time to time due to the government setting new budgets and policies. So if your salary was £30,000 a year, you would only pay income tax on £17,430.

Your personal allowance also reduces if you earn more than £100, or £1 for every £2 over the threshold. This means it drops to zero once you earn more than £125,140, ​​meaning you will pay income tax on all your earnings.

UK Income Tax Bands and Rates 2025/26

In the UK, income tax is calculated using a tax bracket system. These brackets determine how much tax you pay on different parts of your income. As your income increases, each share falls into a specific bracket, with higher rates only applying to income above certain thresholds.

A common misconception is that moving to a higher tax bracket means you’ll pay that higher rate on all your income. In reality, each rate only applies to income falling within its range. For example, if you earn £55,000, you will pay 20% on the part between £12,571 and £50,270, and 40% only on the amount above £50,271. Everything up to your personal allowance is tax free.

Here’s how much you pay per tax bracket in the 2025/26 financial year:

Band	Taxable income	Tax rate
Personal allowance	Up to £12,570	0%
Base rate	£12,571 to £50,270	20%
Higher rate	£50,271 to £125,140	40%
Additional rate	over £125,140	45%

Although income tax applies across the UK, devolved governments may set their own rates or have slightly different tax brackets. Currently, the Welsh Government has set income tax rates in Wales to match those in England, while Scotland has slightly different tax bands above the standard personal allowance. Income tax in Northern Ireland is currently the rates in England and Wales.

How Employers Calculate and Deduct Income Tax

Taxpayers working full time generally have their income tax managed by the PAYE system. If you are an employer or HR professional responsible for payroll, you are very familiar with PAYE.

PAYE is the way most people pay their income tax and national insurance contributions. HMRC provides employers with tax codes to calculate these amounts. You’ll find more about tax codes in our downloadable guide.

The tax code gives an employer the information it needs to determine how much tax each employee owes. Employees will then see this information on their payslips, showing deductions such as income tax and national insurance as well as items such as student loan repayments.

What happens if employees pay too much or too little in taxes?

Accuracy is important when it comes to payroll and tax calculations, but errors can happen. Often this can be due to internal administrative errors or sending the wrong tax code due to a job change, for example. More than 90% of UK businesses admit to making payroll errors every month, resulting in thousands of losses each year.

An employee will only know whether they have underpaid or overpaid their taxes at the end of a tax year, after which HMRC will send a letter, known as a P800. These letters are sent starting in June of the following tax year, so it may take some time to know if there is a problem. The letter will tell the employee how to get a refund of the overpaid tax or how to pay the taxes owed.

Usually this can be done automatically by collecting the taxes due on their payslips the following year, while requesting a refund of overpaid tax can be done online. However, since April 2024, obtaining a tax refund via PAYE is no longer automatic and employees must actively pursue their claim.

Another type of communication from HMRC about income tax discrepancies is known as a straight assessment letter, sent if taxes owed exceed £3,000 or cannot be automatically deducted from an employee’s income as usual.

Reimbursements generally arise due to a change in circumstances during the financial year, such as overlaps in leaving or starting a new job or interruptions in employment.

Underpaying taxes can occur due to factors such as earning money outside of your regular job or being subject to an emergency tax code.

Advice for employers managing PAYE

Managing PAYE as an employer can be done in several ways, both manually and automatically through payroll software. Although your payroll systems will be responsible for running the calculations, it’s good to have an idea of ​​how PAYE works so you can recognize errors if they occur.

• Make sure your tax codes are accurate – The heart of PAYE is using an employee’s tax code as provided by HMRC. This code dictates the amount of income tax an employee is liable to pay, provided the information held by HMRC is correct. As an employer, you will be notified of any changes to an employee’s code. Applying the correct tax code is essential for an employer, so make sure your records are always up to date.
• Use reliable payroll software – Payroll can be done in-house manually or using payroll software, or you can outsource it to a vendor. Regardless, you are legally responsible for carrying out PAYE tasks within payroll. Using a reliable and integrated payroll software system will make this much easier.
• Keep up to date with RTI submissions – Payroll is accompanied by submissions to HMRC, known as Real Time Information (RTI). This includes Full Payment Submission (FPS), done every time you pay an employee. It is essential that you follow them and pay them on time, otherwise you could be fined.
• Provide clear communication to employees – As with most aspects of managing a workforce, communication is key. Providing your employees with timely compensation information is essential to maintaining trust.

How Employment Hero can help you

Managing tax codes, PAYE, RTI and everything that comes with payroll can take over your working life – but it doesn’t have to be. Using Employment Hero’s payroll services can make compliance simple and scalable. Whether you’re just starting out or taking your business to new heights, we have the right solution for your needs.

From payroll software to outsourcing, we can make payroll effortless. Talk to us today to find out how.

As a business owner or HR professional, you’re probably juggling a dozen things at once. Growing your business, managing your team, and trying to stay ahead of the competition. It’s a lot to manage. So the last thing you need is to get bogged down in a sea of confusing HR acronyms. HRIS, HRMS, HCM… it’s enough to make your head spin. Especially when all you really care about is knowing what will work best for your business and make your life easier. 

Choosing the right HR software is a big decision that can either supercharge your business or create a whole new set of headaches. So it’s important to get it right. But the tricky thing is, it’s not always about choosing the platform with the most features;  it’s about finding the one that aligns best with your business goals. 

To cut through the noise, we’ll give you a practical, UK-specific comparison between HRIS vs HRMS. We’ll break down exactly what they are, what they do, and help you decide which one is the right partner for your business goals.

What is an HRIS?

An HRIS, or Human Resource Information System, is your digital filing cabinet. Its primary job is to take all your core, administrative HR tasks and put them in one clean, organised and secure place. Think of it as the foundation of your HR operations.

At its heart, an HRIS platform is about managing your people data effectively. It’s the single source of truth for everything from employee contact details and contracts to tracking annual leave and ensuring you’re compliant with UK-specific regulations like PAYE and GDPR. It’s designed to automate the repetitive tasks that eat up your time, freeing you to focus on the bigger picture.

Key features of an HRIS

An HRIS is built to handle the essential, data-heavy side of HR. Its core capabilities are focused on efficiency and accuracy for your day-to-day operations.

• Employee records management: A central, secure database for all employee information, from personal details and employment contracts to right-to-work documentation.
• Payroll integration: Streamlines the payroll process by automatically feeding employee data, hours worked and leave information into your payroll system, ensuring accurate and timely payment in line with PAYE requirements.
• Benefits administration: Manages employee benefits enrolment and tracking, such as pensions and private health insurance.
• Absence and leave management: Automates the process of requesting, approving and tracking all forms of leave, from holidays to sick days.
• Reporting and compliance: Generates standard reports and helps you manage compliance with UK employment laws, providing an essential audit trail for things like GDPR and workplace pensions.

What is an HRMS?

An HRMS, or Human Resource Management System, takes everything an HRIS does and builds on it. If an HRIS is the foundation, an HRMS is the entire house. It’s a broader, more strategic suite of tools designed not just to manage your people, but to develop and engage them.

An HRMS includes all the core administrative functions of an HRIS but adds a powerful layer of talent management features. It’s built for businesses that want to move beyond simple record-keeping and start actively nurturing their team’s performance, growth, and overall engagement. It’s about managing the entire employee lifecycle, from their first day to their last.

Key features of an HRMS

An HRMS provides a more holistic view of your workforce, with advanced functions that connect administrative HR to strategic business outcomes.

• Talent management: Covers the full spectrum of attracting, hiring and retaining top talent. This includes,  applicant tracking systems (ATS), recruitment tools, and succession planning.
• Performance management: Facilitates performance reviews, goal setting (like OKRs), 1:1 meetings and continuous feedback, helping you build a high-performance culture.
• Onboarding and offboarding: Creates structured, engaging onboarding experiences for new hires and streamlined exit processes for leavers, ensuring a positive impression at every stage.
• Learning and development (L&D): Manages training programs, tracks employee development and provides access to learning materials to help your team grow their skills.
• Workforce analytics: Offers more sophisticated reporting and dashboards that provide deep insights into workforce trends, from staff turnover rates to performance metrics, helping you make smarter, data-driven decisions.

HRIS vs HRMS: The key differences

We get it, they both manage people, but the difference is in the scope of that management. One is about administration, the other is about strategy. 

Understanding this difference is crucial to choosing the right HR system for your business. Let’s break down the core distinctions.

Feature	HRIS (Human Resource Information System)	HRMS (Human Resource Management System)
Primary purpose	To manage and automate core administrative HR tasks.	To manage the entire employee lifecycle, from admin to strategic talent management.
Core focus	Efficiency, accuracy and compliance in HR administration.	Employee performance, engagement, development and retention.
Key functions	Payroll, benefits admin, time/attendance, employee records.	All HRIS features, PLUS onboarding, performance reviews, L&D, recruitment.
Ideal business	Small to mid-sized UK businesses who need to centralise and automate core HR.	Scaling or larger organisations focused on building culture and managing talent.
Strategic impact	Frees up HR time from administrative burdens.	Provides tools to actively improve workforce performance and engagement.

Focus and functionality

The simplest way to think about HRIS vs HRMS software is to look at their focus. An HRIS is fundamentally about managing the information related to your human resources. It excels at the quantitative aspects of HR, such as: 

• How many days leave has someone taken? 
• Is their payroll data correct? 
• Are our records GDPR compliant? 

It’s about creating an efficient, orderly system for your essential people data.

An HRMS, on the other hand, is about managing the people themselves in a more holistic way. It incorporates the strategic and qualitative aspects of HR. It asks bigger questions, like: 

• How can we improve this employee’s performance? 
• Are our new hires feeling engaged? 
• Who is our next generation of leaders?

 It includes the tools to act on the answers to these questions.

Business size and use case

There’s no one-size-fits-all answer, but your business size and complexity offer do play a role in deciding if HRIS vs HRMS is best for your business. 

For many small to mid-sized UK businesses, an HRIS is the perfect starting point. When your main priority is to get rid of spreadsheets, automate payroll and ensure you’re compliant, an HRIS provides exactly what you need without overwhelming you with features you won’t use. It solves the immediate pain points of HR admin.

As your business grows and your focus shifts towards culture, retention and performance, the need for an HRIS and HRMS becomes clearer. If you’re a scaling business, a company with multiple sites, or an organisation that sees talent development as a competitive advantage, you’ll quickly outgrow a basic HRIS. An HRMS gives you the integrated tools to manage a more complex workforce and invest in your people strategically.

Integration and scalability

This is a critical point of difference between HRIS and HRMS. While a good HRIS will integrate with your payroll software, an HRMS is designed to be a much more connected hub. It typically offers a wider range of integrations with other business systems, from accounting software to your internal communication tools.

More importantly, an HRMS is built for scalability. The talent management features it includes, like performance reviews and learning modules, are designed to support a growing team. As you hire more people, an HRMS helps you maintain a consistent and high-quality employee experience, something that becomes increasingly difficult with disconnected systems. An all-in-one platform like Employment Hero’s HR software is built on this principle, offering a single, scalable system that grows with you.

How to choose between an HRIS and HRMS

You know the difference, but how do you make the final call? This isn’t just an HR software comparison; it’s an exercise in understanding what your business truly needs, both today and in the future. 

This step-by-step breakdown will help you work out what’s the best solution for your business. 

Start with your organisation’s core needs

Before you look at a single feature, look at your own business. What are your biggest people-related challenges right now?

• Are you drowning in paperwork and spending too much time on manual data entry for payroll and leave requests? Your core need is administrative efficiency. An HRIS is a strong contender.
• Are you struggling with high staff turnover, inconsistent performance, or a lack of clear development paths for your team? Your core need is strategic talent management. An HRMS is likely the better fit.

Be honest about your pain points. Don’t pay for a suite of strategic tools if your most pressing problem is getting your holiday tracking out of a spreadsheet.

Consider business size and complexity

As we’ve discussed, size matters. A small UK business with 15 employees has vastly different needs than a 150-person company with employees in multiple locations. So keep this in mind when considering what type of software is right for your business. 

For smaller businesses, the simplicity and cost-effectiveness of a focused HRIS might be the best option. However, for larger or more complex businesses, having the robust capabilities of an HRMS to manage performance, development and engagement at scale is likely to be beneficial. 

Evaluate integration and future growth potential

When considering HRIS vs HRMS, it shouldn’t just be about the current needs of your business, but also future needs. Planning ahead not only helps you remain organised and focused, but it also ensures that you’re future-proofed. 

If you plan on significant growth, choosing a system that can scale with you is vital. While an HRIS might solve today’s problems, will you need to replace it in 18 months when you realise you need a proper performance management tool? 

An HRMS, or a platform that combines both, offers a more future-proof solution. Consider whether you need simple automation or a system that can become the central hub for all your people operations, from payroll and benefits to talent and engagement analytics.

Align with long-term HR strategy

Ultimately, your HR software should be a tool that helps you achieve your business goals. So finding a solution that aligns with your long-term HR strategy should always be front of mind. 

For example: 

• If your goal is to become the most efficient operator in your industry, an HRIS that automates admin and ensures compliance is perfectly aligned.
• If your goal is to build an award-winning company culture and become an employer of choice, you need the tools to deliver that. An HRMS that helps you manage performance, foster learning, and engage your team is essential.

Your HR platform shouldn’t just be a system of record; it should be a partner in building the business you want.

Choosing a future-ready HR platform

The debate over HRIS vs HRMS is becoming less about choosing one or the other. Modern, all-in-one platforms are blurring the lines, offering the best of both worlds in a single, integrated solution. You shouldn’t have to choose between efficient administration and powerful strategic tools. You need both.

A future-ready platform is one that can handle your payroll and leave management flawlessly today, while also giving you the tools you need to build a world-class performance management system tomorrow. It’s a solution that grows with you, not one you’ll outgrow.

How Employment Hero Brings HRIS and HRMS Together

At Employment Hero, we don’t believe you should have to compromise. Our Employment Operating System was built to put the traditionally isolated elements of employment all into one place. 

We combine the core administrative power of an HRIS—automating payroll, managing leave, and helping you stay compliant—with the strategic talent features of an HRMS. With integrated tools for recruitment, onboarding, performance reviews, learning and recognition, you have everything you need to manage the entire employee lifecycle.

Stop wrestling with disconnected systems and confusing acronyms. It’s time to choose a single, powerful platform that can handle your needs today and support your ambitions for tomorrow.

Ready to see how an all-in-one platform can transform your business?make payroll effortless. Talk to us today to find out how.  

Releasing licensees is one of the most difficult decisions that a business can be faced. In addition to the management of the fair process, it is important to comply with your legal obligations concerning the remuneration of redundancy. Being can lead to expensive litigation and court complaints.

We will guide you through what the statutory redundancy salary is, which is qualified, how it is calculated and what you need to do to stay in conformity. It also covers current errors, tax considerations and frequently asked questions so that you can feel confident to manage redundancy payments in accordance with British law.

What is the statutory remuneration of redundancy?

The statutory redundancy salary is the minimum amount that an employer must provide to eligible employees who are dismissed. This is a legal obligation under the British employment law and acts as a financial cushion when a role is no longer required.

The eligibility is based on age and continuous service. Employees must have worked for their employer for at least two years to qualify. The exact amount depends on their age, duration of service and their weekly salary (up to the fixed limit of government).

For personalized calculations, employers and employees can use the legal calculator of redundancy wages of the British government.

Who is eligible for a statutory redundancy salary in the United Kingdom?

Not all employees will be eligible for statutory remuneration. The law establishes clear rules on which is entitled and not to follow them may put employers at risk of non-compliance.

To be eligible, an employee must meet the following criteria:

• Service duration: The employee must have at least two years of continuous service with the same employer. The service includes time spent on statutory leave, such as maternity or parental leave.
• Reason for dismissal: The dismissal must be due to redundancy, not misconduct or resignation. If an employee is dismissed for gross fault, he is not entitled to redundancy.
• Type of contract: Full -time and part -time employees are covered. Fixed -term employees can be eligible if their contract is completed early due to redundancy. If a fixed -term contract naturally ends on its agreed date, the redundancy salary is generally not due.
• Work provisions: Employees on maternity leave, paternity leave, adoption leave or shared parental leave still retain the right of redundancy if they are eligible by time of service.
• Age: There is no age restriction on law, but age is a factor in the way payments are calculated.

Who is not entitled?

Some workers are not covered by statutory redundancy remuneration rules. These include:

• Independent entrepreneurs or workers from the agency.
• Members of the armed forces.
• Servants of the crown and police (because they have separate provisions).
• Employees who refuse an appropriate alternative role offered by their employer for no valid reason.
• Employees who work for less than two continuous years.

It is important for employers to carefully assess eligibility before making redundancy payments. Errors in this area are a common cause of disputes and can lead to complaints through a job court.

How is the statutory redundancy salary calculated?

The legal redundancy of redundancy follows a formula defined according to age, duration of service and weekly remuneration. The weekly salary is capped at a maximum set of the government. For the 2025 taxation year, the maximum weekly salary is £ 719.

The calculation is:

• A semi-emaine salary for each full year under 22 years old.
• A salary week for each full year between 22 and 40 years.
• A week and a half of salary for each full year on the age of 41.

Example worked

If a 45 -year -old employee has 10 years of continuous service and earns £ 600 per week:

• 5 years a week per year = 5 weeks of salary.
• 5 years a week and a half per year = 7.5 weeks of salary.
• Total = 12.5 weeks salary at £ 600 = £ 7,500.

Employers who are not sure of the exact amounts should consider using payroll software or asking for advice from a payroll professional.

Is statutory redundancy taxable?

No. Redundancy payments of up to £ 30,000 are exempt from tax and national insurance. This means that the statutory redundancy salary is not taxable in most cases.

If an employer offers an improved redundancy reduction or other termination payments which take the total of more than £ 30,000, the surplus will be subject to taxes.

How employers can remain in conformity

Redundancy payments are a legal right and employers must manage them correctly to avoid penalties or court complaints. Compliance is not only to pay the correct amount, but also to follow the appropriate processes, to keep specific registers and to communicate clearly with the employees.

Here are the main responsibilities for employers:

• Provide written details: Employees must receive a written declaration explaining how their redundancy salary has been calculated. This should include their service life, their age band, their weekly salary figure and the final amount due. Clear written ventilation helps prevent disputes.
• Pay on time: Remuneration of redundancy should normally be carried out no later than the last day of employment of the employee. In some cases, employers may agree to pay shortly after, but delay payment for no reason may result in complaints in a job court.
• Hold the precise records: Employers must keep copies of redundancy calculations, letters and payment confirmations. The good hold of files supports HR compliance and helps defend the company if it is disputed later.
• Report special circumstances: Employees on maternity leave, adoption leave or shared parental leave are always entitled to a reduction in redundancy if they meet the service requirement. Employers should not ignore these cases.
• Clearly communicate: Redundancy is a sensitive process, so clear communication is essential. Written confirmation should describe not only payment, but also notice periods, the last working day and any other right. Employers can use our redundancy notice model to ensure that they cover the essentials.
• Understand improved redundancy: Some employers choose to offer more than the statutory minimum, either in the context of business policy, or as a gesture of good will. Although this is optional, it must be clearly identified as “improved” to avoid confusion with legal obligations.
• Follow fair redundancy procedures: Even when the payment itself is correct, the fact of not following a fair process can lead to allegations of unfair dismissal. Employers should ensure the consultation, the criteria for selecting fair fairness and an appropriate opinion. For more information, see our redundancy process guide.

Why compliance is important

Obtaining poor redundancy salary can have serious consequences. Employers can be confronted:

• Court complaints for reducing unpaid redundancy.
• Remuneration ordinances with added interest.
• Reputation damage for poor management layoffs.
• Higher legal costs if disputes increase.

The use of HR compliance tools and payroll software can facilitate the calculation of payments with precision, issue correct documents and maintain compliance with British employment law.

How is improved redundancy differs?

The reduction in improved redundancy is any additional amount that an employer chooses to offer beyond the statutory minimum. This can be part of a company policy, a contractual agreement or a goodwill gesture.

It is important for employers to make a clear distinction between the statutory redundancy salary (the legal minimum) and improved remuneration (optional recharge).

Current errors Employers do with a wage redundancy

Redundancy remuneration errors can lead to disputes and court complaints. Some of the most common errors include:

• Poorly calculating the service duration (for example, excluding part of a notice period).
• Do not include part -time employees in redundancy salary calculations.
• Do not issue written confirmation of redundancy payments.
• Displaying statutory redundancy pay with an improved package.

To avoid problems, employers can use our redundancy notice model.

Take out the stress of compliance with pay with the hero of employment

Redundancy is never easy, but properly management of legal redundancy is essential to stay in conformity and support your employees by change. By understanding the rules, by calculating payments with precision and keeping clear recordings, you can reduce the risk of disputes and protect your business.

If you want to simplify payroll, automate calculations and stay informed of compliance, the employment hero’s pay software can help. From the management of the redundancy of daily payroll tasks, our tools give you precision, efficiency and peace of mind.

Redundancy FAQ

Are part-time workers eligible for redundancy payments?

Yes. Part -time employees are eligible for the remuneration of legal dismissals as long as they meet the two -year continuous service requirement. Their redundancy salary is calculated in the same way as full -time workers, depending on their real weekly income. If the weekly salary of an employee varies, the redundancy salary is based on the average hourly rate over a period of 12 weeks.

Is redundancy the same for part-time employees?

The formula is the same, but the weekly remuneration figure is lower because it is based on the employee’s contract.

Can we offer more than the statutory minimum?

Yes. Employers can choose to offer an improved redundancy salary, but this should be specified in the letter of redundancy and the employee’s contract conditions.

What if an employee refuses another role?

If an employee is offered an appropriate alternative role and unreasonably refuses, he can lose his right to the remuneration of statutory dismissals.

Can an employee give up redundancy?

Employees cannot generally give up their right to statutory redundancy. The exception is if they accept a settlement agreement, which must be signed with independent legal advice.

To what extent should redundancy payments be made to employees?

Redundancy must be carried out or shortly after the employee’s last day of employment. If payment is late, employees can bring the case to a job court.

This week, the government has published several amendments proposed to the bill on employment rights, some with support, others still uncertain. Although it remains to be seen what proposals will be underway, the changes suggested may have a major impact on the way companies manage the rights of employees, workplace driving and contractual agreements.

Experts from the compliance of employment heroes closely follow developments to help employers remain informed and prepared.

Below, we describe the main proposed modifications, including NDA prohibitions for harassment cases, extended protections of denunciators and more.

1. Prohibit NDAS / Confidentiality agreements in cases of discrimination and harassment

The government has introduced an amendment which will mean confidentiality clauses in employment contracts, settlement agreements and NDAs will be inapplicable when they relate to discrimination or harassment. This will apply to current and old employees.

In addition to having to update standard documents, employers will have to walk even more carefully when they deal with discrimination or harassment at work. It will no longer be possible to agree with employees that they will not discuss these questions in the future, even if they agree to delete legal complaints against the employer and / or to leave employment (which are usual terms in the settlement agreements).

Given this, the importance of preventing discrimination and harassment at work will be more vital than ever.

2. Limits in fire and rehiring: not as strict as originally planned

The bill on employment rights initially proposed a total ban on the prohibition and reception practices. This means that it would be an automatic automatic dismissal when an employee was dismissed to re -enter them on a varied employment contract and / or where he was dismissed for refusing any modification of his contract.

However, the new amendment of the bill softens this approach. By carrying out an automatic automatic dismissal only applicable to certain “limited variations” to an employment contract, including changes in remuneration, hours, holidays, pensions or a change which inserts a variation clause in the employment contract (that is to say that which allows the employer to modify the provisions of the employment contract without the consent of the employee).

As before, there will always be a limited exception of a conclusion of automatic unjust dismissal where the employer can show that the modifications are absolutely necessary to avoid bankruptcy. Which will always be a very difficult test to meet.

For other changes to the contract, the employer must follow a strict consultation process with the employees affected, but will always be able to argue that any dismissal was just overall.

This relaxation on the prohibition of fire and rehiring can offer a certain flexibility necessary to employers who sail on real commercial needs, although the practice remains subject to strict conditions.

3. Workers at zero-hour / hours: right for the worker to ask for guaranteed hours, rather than the employer’s duty to offer them

As currently written, the bill on employment rights obliges employers to offer guaranteed hours to workers and employees on zero hours / low -hour contracts, depending on the hours they end up working.

The new proposals to modify the bill (although not supported by the government currently) want to change this so that workers have the right to request Guaranteed hours, rather than putting an obligation for the employer to offer guaranteed hours.

If this change passes, it will be good news for employers, as if the employee did not make this request, workers can be engaged without guaranteed hours indefinitely.

The right to request guaranteed hours will only apply if a worker has worked on average 8 hours or more per week over a period of 26 weeks. This is an important concession to employers who wish flexibility in the workplace, because in many occasional arrangements, employees will not work as many hours.

There are also modifications proposed to reduce the obligations concerning the guaranteed hours for the workers of the agency currently proposed in the bill.

4. Hours / Hours Support

The bill currently proposes that workers and employees can be awarded compensation if their quarter of work is canceled without reasonable notice.

A new amendment to the bill (and not supported by the government) proposes to limit this remuneration, so that the remuneration will only be triggered if the cancellation is carried out less than 48 hours before the start of the quarter work.

5. major changes to denunciation laws

A number of amendments have been proposed, which will considerably change the law around denunciation. The laws of denunciation protect people who raise problems of reprehensible acts from their employers or certain other people.

These changes have not (yet) received the government’s support, it is therefore not clear whether or not they will go to the final version of the bill on employment rights.

The changes propose to do the following:

• Simplify and widen the definition of “protected disclosure” (that is to say a disclosure which is protected by denunciation laws) to include “mismanagement of public funds” and “abuse of authority”.
• Demand that disclosure must actually be in the public interest (while the current requirement is that the denunciator “reasonably believes” that disclosure is in the public interest).
• The creation of a “Bureau of the Denunciator” who can:
  • Set minimum standards for employers’ denunciation policies.
  • Provide an independent hotline to the denunciators to report the problems.
  • Have powers of application for violation of denunciation laws.
• A new obligation for employers with more than 50 employees, a turnover of 10 million pounds sterling or certain sectors appointed to take reasonable measures to investigate any protected disclosure.
• A new offense to intentionally or recklessly submit a denunciator to the damage (for example, treating them unfavorably, reducing services, dismissal, etc.), the employment courts being able to issue a maximum fine of up to 10% of the global turnover of a company.

6. parental mourning leave extended to early pregnancy

The government has announced a new amendment to the bill on employment rights which is currently before parliament. The amendment will allow families to suffer a loss of pregnancy of new rights to a time of leave.

Currently, parental mourning leave is only available for parents who lose a child under the age of 18 or know the mortinity after 24 weeks of pregnancy. There is no specific right right for parents who are loss of pregnancy earlier during pregnancy.

The current law is that each parent has the right to leave up to two weeks, which is a right available from the first day of employment. However, the leave is only paid when the parent has at least 26 weeks of continuous employment with his employer.

The rate of remuneration is either £ 187.18 per week, or 90% of the average weekly income of the employee (depending on the eventualities).

How will the law change?

The government wants to change the law so that families who suffer a loss of pregnancy for 24 weeks, whether by miscarriage or otherwise will also be entitled to parental mourning leave.

The proposal is that employees will be eligible for at least a week off, but the exact amount will be confirmed in subsequent regulations as a result of a public consultation. However, it currently seems that the leave will not be paid.

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The changes proposed to the bill on employment rights may have a significant impact on how your company manages the contracts, driving and rights of employees. Ready to navigate these changes with expert advice? Find out how the HR advice for heroes can guide you through compliance updates, policy changes and employee complex problems.

In addition, our all-in-one HR platform allows you to easily keep your contracts, documentation and internal processes aligned with the last legislation.

We bet you didn’t know that 58% of employers don’t use any tools to help their employees understand their payslips. We know no one wants to be in the 58%, so here’s how you can avoid it. 

The reality is, helping your employees understand their salary statement is really important, but payslips explained is challenging without having a solid understanding yourself. Whilst we all know what should be included on a salary statement, having a deeper understanding of what that means is a rarity. 

Here we’re going to take a deep dive into UK payslips explained, to help you empower your employees to understand their pay. 

UK Payslips explained: What is a payslip?

We’ve all received one, and for business owners or HR professionals, you’ve probably created a few. So we get that this sounds like a simple question, but for the sake of making sure we are all on the same page, we thought it would be wise to identify what a salary statement actually is. 

Lets break it down – a payslip is a written statement that shows an employee’s earnings and deductions for a specific pay period. Although employers can opt to either provide them electronically or in print (we recommend electronically!), they must be made available to employees on or before their payday. 

Why are salary statements important?

For businesses

Although statements of earnings are given to employees, they are also important records for businesses. Here are some of the key reasons why: 

• Legal compliance – By law (Employment Rights Act 1996), employers must give all their employees and workers salary statements from their first payday. Therefore, to remain compliant, all businesses must be providing written proof of earnings to all employees and workers. 
• Tax reporting – Salary statements include important information that is needed for filing tax returns and ensuring accurate tax reporting. 
• Dispute resolution – While all business owners hope they will never encounter a dispute, they do occasionally happen. Salary statements can help to protect your business and serve as evidence to help resolve issues. 
• Financial auditing – Proof of pay serves as documentation for internal financial audits. This allows businesses to track payroll expenses and to identify any discrepancies. 

For employees

Everyone loves getting paid, so there’s a certain satisfaction to receiving your salary statement. But they’re helpful for far more than just admiring your earnings! 

• Proof of income and employment – When applying for loans, mortgages, or renting a property, you will often need to provide salary statements as proof of your earnings and employment. 
• Tax filling – Salary statements provide the information you’ll need to complete your tax return. 
• Dispute resolution – If there is a discrepancy with your pay, your salary statement can serve as evidence to support your claim.
• Checking accuracy –  You can review your documents to ensure your hours worked, pay rate, and deductions are all calculated correctly. 

What should be on my payslip in the UK?

In order to comply with UK law, a payslip must include:

• Gross amount – this is the total pay before deductions.
• Net amount – this is the total pay after deductions.
• Variable deductions – this is where the amounts depend on the amount of pay, for example tax, National Insurance, student loan repayments and pension contributions.
• Amounts of any fixed deductions – for example trade union subscriptions.
• A breakdown of how the wages will be paid if more than one payment method is used – for example bank transfer and cash.

Although not a requirement, salary statements might also include: 

• Time period the pay covers.
• Tax code of the employee or worker.

Fixed deductions can be given in a separate statement, known as a ‘standing statement of fixed deductions’. It should include:

• What the deduction is for.
• How much it is.
• How often it’s paid.

If the standing statement is separate from the main payslip, it’s only valid for 12 months. It must be reissued every year, or earlier if the fixed deductions change. 

What are deductions?

If you want to help your employees understand their salary statement, you need to make sure they understand what deductions are. 

Deductions are amounts withheld from an employee’s pay. They are taken out of a salary to cover taxes, benefits and garnishments. It’s important to keep in mind that deductions can be mandatory or voluntary. 

Mandatory deductions include: 

• • Income Tax: Withheld from an employee’s paycheck to fund the UK’s infrastructure, social care, and healthcare.  It’s calculated based on an employee’s annual earnings and is deducted through Pay As You Earn (PAYE). The amount of tax deducted depends on how much employees earn annually.
  • National Insurance: Also deducted directly from an employee’s salary. Employers make separate payments based on the wages of their staff. Similar to income tax it also helps to support state services, like NHS and unemployment benefits. 
  • Pension Contributions: A statutory deduction taken directly from an employee’s salary and placed into their company pension scheme. Employers are legally required to automatically enrol all eligible employees into a workplace pension, helping them to save for their retirement. Contribution rates vary based on the employee’s contract and employment status, but there are statutory minimum rates set out by the UK government.

• Student Loans: Only applicable if an individual has borrowed from the government to pursue higher education and whose earnings exceed a certain threshold. 

Voluntary deductions cover: 

• Pension Plans: Employees may wish to contribute more to their pension via salary sacrifice schemes. This means a portion of an employee’s earnings are exchanged for pension contributions. This is a perk offered by some employees through private pension providers.

• Health Insurance: Some employers may wish to offer health insurance for their employees, which gives them access to private medical care. To cover the cost of the employee’s membership in these health insurance schemes, a payroll deduction is taken from their salary. 

• Employee Benefits: Employers can opt to offer additional benefits in order to improve employee satisfaction. Benefits such as gym memberships, cycle to work schemes and childcare vouchers are included. The cost of these benefits is then covered by salary deductions from their salary statement.

What is the difference between gross and net pay?

As an employee, the element on a salary statement you’re likely to be most interested in is how much you’ve been paid. But as you will have noticed, there are two areas that outline pay amount, gross and net pay. 

So what’s the difference?

Gross pay 

Gross pay is that total amount an employee earns before any deductions are taken out. Gross pay includes salary, bonuses and overtime. 

Net Pay 

Net pay is the amount of money an employee receives after deductions have been taken out of their gross pay. Net pay is also often known as take-home pay. 

How to help employees understand payslips 

Improve clarity around payroll

One of the main challenges with payroll is a lack of clarity and understanding. And this is exactly why payslips explained UK is so important. 

Employees often don’t know how their pay is calculated, or how other elements (like pensions) are documented. This can cause issues for small business owners or HR professionals, as they may get recurring questions from employees asking for elements of their payslips explained. 

The best way to reduce questions about what is included on a salary statement, where information is documented, or how to read one is by being transparent. This could be achieved through adding further detail on salary statements and expanding fields to include future itemisation. 

Customise payslips

A standard payslip layout may not contain enough for employees and workers to get the full picture of what they are being paid for, or what deductions have been taken. By adjusting salary statements  to include more detail, HR teams running payroll, and business owners, are likely to get less queries. 

Instead of just using one template, HR managers of business owners should compare different layouts and details to establish what else should be included. To get further insights on what employees would value, consider conducting a survey about payslips explained and base a new template off of these findings. 

Use payroll software

Arguably the most significant change in payroll over recent years is digitalisation. The ability to provide these documents via email or an online platform has benefits for both employers and employees. 

Payroll software enables HR teams to be flexible and update templates based on employee queries.

For employees, a platform that can be accessed at any time allows for a “self-service” approach. Having the ability to easily view current and previous salary statements assists with payslips explained UK and  is likely to reduce confusion and give power back to your team regarding their pay. 

Understanding tax codes

Another aspect of a salary statement that both employers and employees should be aware of are tax codes. But what are they?

At their core, tax codes are numbers that are issued by HMRC to everyone who is employed through PAYE in the UK. Their purpose is to ensure that employees are paying the right amount of tax for their salary. It’s important to note, though, that it’s up to individuals to check that they are on the correct tax code. 

Luckily, finding your tax code is pretty simple, and there are several places you can look for it: 

• On a ‘Tax Code Notice’ letter from HMRC
• On a salary statement
• On the HMRC app 

Breaking down tax codes

Looking at a tax code can be really confusing, and without taking a deep dive, most people don’t understand what the numbers and letters in the code mean. So as part of our mission to simplify employment, we thought we should break it down. 

What do the numbers in a tax code mean?

The numbers shown in a tax code tell an employer how much tax-free pay an individual is allowed. The last digit of your tax free pay is removed to create the code (so a £12,570 personal allowance becomes the digits 1257 in the code). 

As an example, if your code number is 1257, you are entitled to tax-free pay of £12,570. This means if an individual earns £1,047 or less per month (£12,570 divided by 12 months), you will not need to pay any income tax. Any earnings above this amount will be taxed at the correct rate for their salary. 

As an employer, you are responsible for working out how much tax is due and taking it from an employee’s pay. The tax is paid over to HMRC.

What the letters in a tax code mean

The second part of a tax code is a letter. Take a look at the list below to understand what the letters on a tax code stand for. 

• L – Standard tax free personal allowance, under 65.
• M – Marriage allowance where you’ve received 10% of your partner’s personal allowance.
• N – Marriage allowance where you’ve transferred 10% of your personal allowance to your partner.
• T – Tax code includes other calculations to work out pension.
• 0T – Personal allowance has been used up, you’ve started a new job or your employer doesn’t have details required to issue a tax code.
• BR – Income from this job or pension is taxed at basic rate (applicable if you have more than one job or pension).
• D0 – Income from this job or pension is taxed at a higher rate (applicable if you have more than one job or pension).
• D1 – Income from this job or pension is taxed at an additional rate (applicable if you have more than one job or pension).
• NT – No tax payable on this income.
• S – Income taxed using Scotland rates.
• S0T – Personal allowance (in Scotland) has been used up, you’ve started a new job or employer doesn’t have details required to issue a tax code.
• SBR – Taxed at basic rate in Scotland.
• SD0 – Taxed at intermediate rate in Scotland.
• SD1 – Taxed at a higher rate in Scotland.
• SD2 – Taxed at top rate in Scotland.
• C – Income or pension taxed at Wales rates.
• C0T – Personal allowance (in Wales) has been used up, you’ve started a new job or employer doesn’t have details required to issue a tax code.
• CBR – Taxed at basic rate in Wales.
• CD0 – Taxed at higher rate in Wales.
• CD1 – Taxed at additional rate in Wales.

What should employers know about tax codes?

Whenever a new employee joins your company, there is plenty of admin to get through, and working out a tax code is usually part of this. Most of the time, assigning a tax code is straightforward, and you can work it out by looking at a P45. 

It’s also important to remember to update employees’ tax codes at the start of a new tax year. If a tax code changes during the year, HMRC will email you with a reminder to update payroll records. 

Worried about deducting the right amount of tax based on your employees tax codes? Not on our watch. Take the stress out of tax deductions by putting your employees tax codes into your payroll software, and let the software work out how much needs to be deducted throughout the year. 

Common payslip queries

How do I read my UK payslip?

To read a salary statement, pay attention to details such as gross pay, net pay, your tax code and deductions. This information will give you an understanding of what you have earned throughout your pay period as well as where any deductions are going. 

If you have questions about particular items on your, or need your payslip explained, contact your HR department.

What is the law on payslips UK?

According to the Employment Rights Act 1996, employers must provide all of their employees and workers with payslips from their first payday. 

Workers can include agency workers, and people on flexible hour contracts. 

Should holiday pay be shown on a salary statement?

Yes, holiday pay should be outlined on a salary statement, and our experts recommend it is noted down as a separate line item. 

What is the PAYE in the UK salary slip?

PAYE stands for Pay As You Earn. Most employees in the UK pay Income Tax through PAYE. It’s the system an employer or pension provider uses to take Income Tax and National Insurance contributions before wages or pension are paid. 

Tax codes determine how much should be deducted. 

Improve your payroll with Employment Hero

Running payroll, sending salary statements and making sure your business is compliant with UK law is a lot of work. And who has time for all that? As a small business owner or HR professional, we know you don’t.  

This is where Employment Hero can help you out. Employment Hero is the world’s first Employment Operating System (OS) that helps to launch businesses on the path to success by powering more productivity every day. 

We offer everything your business needs, from finding and hiring top talent using SmartMatch to seamlessly onboarding new hires, automating complex payroll, and driving employee engagement and morale – all backed by UK-based expert support. 

Supporting over 25,000 UK businesses, why not see how we can supercharge your business? Book a demo today to learn more. 

One system. Everything Employment.