The UK employee lifecycle in payroll: what gets collected, what gets paid, and what gets filed at each stage

From day one, the employer must give the worker a written statement of employment particulars. Section 1 of the Employment Rights Act 1996 requires the core particulars to be "included in a single document" and the statement "given not later than the beginning of the employment" — the day-one right, in force since 6 April 2020. GOV.UK states the split plainly: "The employer must provide the principal statement on the first day of employment and the wider written statement within 2 months of the start of employment." It is not the employment contract; it is the mandatory record of the main terms (names, start date, pay, hours, holiday, sick pay, pensions and more).

The starter's tax code drives every PAYE calculation from the first pay. If the new employee hands over a P45 from a previous job, its details set the code; if not, a starter checklist supplies them. Where the employer "does not have the details they need to give you a tax code," the 0T code applies (no allowance), and a new starter is commonly put on an emergency code — shown as 1257L W1 (weekly), 1257L M1 (monthly) or 1257L X (irregular). An emergency code is non-cumulative: "your tax is worked out based on what you're paid in that week or month only," and HMRC usually corrects it once it has the full picture.

The workplace-pension duty attaches immediately: The Pensions Regulator states that "your workplace pension legal duties begin on the day your first member of staff starts work" (the duties start date). At that point the employer assesses the worker against the enrolment test — GOV.UK: automatically enrol a worker "aged between 22 and [State Pension age]," earning "at least £10,000 per year," classified as a worker and ordinarily working in the UK (Pensions Act 2008 s.3). An eligible jobholder must be put into a scheme; the employer may postpone assessment for "up to three months," but that only delays it — staff can opt in during the window.

You register as an employer with HMRC "before the first payday to get your employer PAYE reference number," and you "cannot register more than 2 months before you start paying people." If the reference has not arrived in time, GOV.UK's stated workaround is to "run payroll, store your full payment submission, and send a late full payment submission to HMRC" once it comes through. The one-off set-up steps are gathered in Payroll setup checklist.

The core RTI rule bites from the first pay: "you need to report your employee's pay, any payrolled benefits, and deductions in a Full Payment Submission (FPS) on or before their payday (unless an exception applies)." Include everyone you pay, "even if they get less than £96 a week." New employers get a first-run grace: "HMRC will not charge a penalty if ... you're a new employer and you sent your first FPS within 30 days of paying an employee."

The first payment carries the same withholdings as every pay thereafter (next stage): PAYE on the code, Class 1 NI, the auto-enrolment contribution, any student-loan repayment, and any statutory pay due — all shown on an itemised payslip the worker must receive on or before payday.

Income tax comes off on the code HMRC supplies. For 2026-27 the England & Northern Ireland / Wales ("rUK") table is 20% / 40% / 45% on a £12,570 Personal Allowance; Scotland (an "S" prefix code) runs six bands up to a 48% top rate. The code — not the payslip address — tells payroll which table to apply. See PAYE, NI & auto-enrolment for the full band tables.

For 2026-27 the employee (primary, category A) pays 8% between the Primary Threshold (£242/week, £12,570/year) and the Upper Earnings Limit (£967/week, £50,270/year), then 2% above. The employer pays secondary Class 1 at 15% on earnings above the Secondary Threshold (£96/week, £5,000/year), with no upper limit.

For an enrolled worker, contributions total a minimum of 8% of qualifying earnings — The Pensions Regulator: "This is set at 8% ... You, the employer, must pay at least 3% of this." The qualifying-earnings band for 2026-27 is £6,240–£50,270, so the contribution is on the slice of pay within that band. On the standard split the worker makes up the balance (5%, including basic-rate tax relief).

Where an employee is a borrower, deductions run through payroll: "Employees repay 9% of the amount they earn over the threshold for Plan 1, 2, 4 and 5," and a postgraduate loan is "6% of the amount they earn over the threshold." The 2026-27 annual thresholds are Plan 1 £26,900, Plan 2 £29,385, Plan 4 £33,795, Plan 5 £25,000 and Postgraduate £21,000. Until a start notice (SL1) arrives, HMRC says to "use Plan 5 in your payroll software"; a postgraduate loan can run at the same time as a plan-type loan.

When an eligible employee is off sick, Statutory Sick Pay is "£123.25 a week ... or 80% of your normal weekly earnings — whichever is lower," for up to 28 weeks. From 6 April 2026 two long-standing limits are removed: SSP is payable "from the first day of sickness absence" (no waiting days) and the Lower Earnings Limit is removed so "all employees regardless of their weekly earnings" qualify. Statutory maternity, paternity, adoption and related payments (£194.32 or 90% of AWE, whichever is lower, for the flat-rate weeks) run through payroll too — see Leave & statutory pay.

"Almost all people classed as workers are legally entitled to 5.6 weeks' paid holiday a year," capped at 28 days. For irregular-hours and part-year workers (leave years from 1 April 2024), entitlement accrues at "12.07% of actual hours worked in a pay period," and rolled-up holiday pay — "12.07% of a worker's total pay" — is lawful again for those workers if "clearly marked as a separate item on each payslip."

The worker has a statutory right (ERA 1996 s.8) to "a written itemised pay statement" at or before payday, showing gross pay, deductions and their purposes, and net pay — and, where pay varies by time worked, the hours. GOV.UK: "Payslips must be provided on or before payday." The same day, the FPS reporting the pay and deductions goes to HMRC "on or before their payday." See Payslips & records and Statutory lodgement (RTI).

The employer pays its PAYE bill (tax, NI, student loan) "by ... the 22nd of the next tax month if you pay monthly" (the 19th if paying by post). Deducted pension contributions must reach the scheme "by the 22nd (19th if you pay by cheque) day of the next month." Small employers paying less than £1,500 a month may be able to pay HMRC quarterly instead.

Codes change as circumstances do. "HM Revenue and Customs (HMRC) will tell them which code to use," and when a code needs to change HMRC will "tell you and your employer the new tax code within 15 working days." Because ordinary codes are cumulative, the next payday reconciles the year to date automatically once the new code is applied.

An enrolled worker can opt out: "There is a one-month timeframe in which staff can opt out of the scheme," and on opt-out the employer must "stop taking money out of their pay and arrange a full refund of what has been paid to date ... within one month of their request." Staff can also opt in (including during a postponement window). Roughly every three years the employer must re-enrol eligible staff who had left the scheme and complete a re-declaration of compliance — see PAYE, NI & auto-enrolment.

Loan deductions switch on and off on HMRC notices: a start notice (SL1, or PGL1 for a postgraduate loan) begins deductions and a stop notice (SL2 / PGL2) ends them. Until a start notice is received for a known borrower, the employer uses "Plan 5 in your payroll software."

When an employee leaves you report it to HMRC on the FPS — GOV.UK warns not to report too early because "you'll need to send a corrected FPS to update HMRC if information changes, for example an employee leaves or changes tax code." The employee is given a P45, the statutory leaver document that carries their pay and tax to date (and which their next employer uses to set the code). The employer PAYE reference appears on the P45 as on the FPS.

The final payment runs the usual deduction stack, plus any pay owed on leaving. Because statutory holiday accrues as the worker works (5.6 weeks a year; 12.07% of hours for irregular-hours and part-year workers), any accrued but untaken statutory holiday is settled in the final pay. It is reported on the final FPS for that employee like any other payment.

The duty outlasts the employee. HMRC: "keep them for 3 years from the end of the tax year they relate to," and if you do not, "HMRC may estimate what you have to pay and charge you a penalty of up to £3,000." The statutory basis (Income Tax (PAYE) Regulations 2003, reg 97) requires an employer to "keep and preserve for not less than three years after the end of the tax year to which they relate all PAYE records." Details in Payslips & records.