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How to hire and pay employees in United Kingdom
Slasify
Nov 17, 2025
| Key Takeaways |
|---|
| 1. Payroll operates monthly with a minimum wage of GBP 11.44/hour, with updated National Living Wage rates applying by age group. |
| 2. Personal income tax ranges from 19% to 48% depending on region and tax band, with no local employment taxes. |
| 3. National Insurance Contributions apply to both employees and employers, with NIC rates determined by earnings and category letter. |
| 4. Standard working hours average 48 hours per week over a 17-week period, with mandated rest breaks and optional opt-outs for additional hours. |
| 5. Annual leave entitlement is 5.6 weeks, with rules for carryover depending on circumstances such as sickness, maternity, or family leave. |
| 6. Termination requires a fair and lawful reason, with statutory notice periods based on tenure and redundancy entitlements for eligible employees. |
Discover the global hiring and employment landscape in United Kingdom – as a country with a strong reputation in manufacturing and one that is commerce-friendly across multiple sectors, coupled with the access to highly skilled local talents it offers, the UK is recognized as a prime destination for business expansion, investment, and trade.
Personal Income Tax
How much income tax an individual pay will depend on their income above their Personal Allowance and their income falling within each tax band. The following rates apply for those with a standard Personal Allowance of GBP 12,570.
| PAYE Tax Rate | Annual earnings the rate applies to (above the PAYE threshold) | Tax Rate (%) |
|---|---|---|
| England, Northern Ireland and Wales | ||
| Basic tax rate | Up to 37,700 | 20 |
| Higher tax rate | 37,701–125,140 | 40 |
| Additional tax rate | Over 125,140 | 45 |
| Scotland | ||
| Starter tax rate | Up to 2,827 | 19 |
| Basic tax rate | 2,828–14,921 | 20 |
| Intermediate tax rate | 14,922–31,092 | 21 |
| Higher tax rate | 31,093–62,430 | 42 |
| Advanced tax rate | 62,431–125,140 | 45 |
| Top tax rate | Over 125,140 | 48 |
Personal Allowance may be bigger if the person claims Marriage Allowance or Blind Person's Allowance and may be smaller if their income is over GBP 100,000.
Local Tax
There are no local taxes on employment income in the United Kingdom.
Statutory Contributions
Employers use an employee's National Insurance category letter when they run payroll to work out how much they both need to contribute.
| Category Letter | Employee Group |
|---|---|
| A | All employees apart from those in groups B, C, H, J, M, V and Z in this table |
| B | Married women and widows entitled to pay reduced National Insurance |
| C | Employees over the State Pension Age |
| H | Apprentices under 25 |
| J | Employees who can defer National Insurance because they’re already paying it in another job |
| M | Employees under 21 |
| V | Employees who are working in their first job since leaving the armed forces (veterans) |
| Z | Employees under 21 who can defer National Insurance because they’re already paying it in another job |
| Categories for employees who work in freeports | |
| F | All employees who work in freeports, apart from those in groups I, L, and S in this table |
| I | Married women and widows who work in freeports and are entitled to pay reduced National Insurance |
| L | Employees who work in freeports and can defer National Insurance because they’re already paying it in another job |
| S | Employees who work in freeports and are over the State Pension Age |
Employees who are at least 16 years old and are earning GBP 242 or more per week from one job shall pay Class 1 National Insurance Contributions (NIC) until they reach the State Pension age.
| Weekly Income (GBP) | Class 1 NIC Rate | Note |
|---|---|---|
| 242–967 | 8% | A reduced NIC rate of 1.85% may apply to eligible married women or widows under Category B and I. |
| Over 967 | 2% |
Employers are also generally required to pay Class 1 NIC at 15% of the portion of their employees' earnings over a certain threshold.
Employer Contributions
| Contribution Rates | Note | |
|---|---|---|
| National Insurance Contributions (NIC) | 15% | No contribution is paid on the portion of weekly income that is less than GBP 96. |
| Workplace Pension Scheme | 3% | Actual pension contribution rates may vary according to the chosen type of pension scheme. |
It is important to note that NIC rate may vary according to the employee's category letter and income, as follows:
| Category Letter | GBP 96–125 per week (GBP 417–542 per month) | GBP 125.01–481 per week (GBP 542.01–2,083 per month) | GBP 481.01–967 per week (GBP 2,083.01–4,189 per month) | Over GBP 967 per week (GBP 4,189 per month) |
|---|---|---|---|---|
| A | 15% | 15% | 15% | 15% |
| B | 15% | 15% | 15% | 15% |
| C | 15% | 15% | 15% | 15% |
| F | 0% | 0% | 15% | 15% |
| H | 0% | 0% | 0% | 15% |
| I | 0% | 0% | 15% | 15% |
| J | 15% | 15% | 15% | 15% |
| L | 0% | 0% | 15% | 15% |
| M | 0% | 0% | 0% | 15% |
| S | 0% | 0% | 15% | 15% |
| V | 0% | 0% | 0% | 15% |
| Z | 0% | 0% | 0% | 15% |
Employee Contributions
| Contribution Rates | Notes | |
|---|---|---|
| National Insurance contributions (NIC) | 8% | No contribution is paid on the portion of weekly income that is GBP 242 or less. |
| Workplace Pension Scheme | 5% | Actual pension contribution rates may vary according to the chosen type of pension scheme. |
It is important to note that NIC rate may vary according to the employee's category letter and income, as follows:
| Category Letter | GBP 125–242 per week (GBP 542–1,048 per month) | GBP 242.01–967 per week (GBP 1,048.01–4,189 per month) | Over GBP 967 per week (GBP 4,189 per month) |
|---|---|---|---|
| A | 0% | 8% | 2% |
| B | 0% | 1.85% | 2% |
| C | - | - | - |
| F | 0% | 8% | 2% |
| H | 0% | 8% | 2% |
| I | 0% | 1.85% | 2% |
| J | 0% | 2% | 2% |
| L | 0% | 2% | 2% |
| M | 0% | 8% | 2% |
| S | - | - | - |
| V | 0% | 8% | 2% |
| Z | 0% | 2% | 2% |
Payment of Wages
The maximum cycle for payment of wages is a month, but employers are free to decide on the intervals—that is weekly, monthly or other specified intervals.
Minimum Wage
Employees who are 21 years old and over are entitled to the National Living Wage (NLW), while those who are at least of [school leaving age](https://www.gov.uk/know-when-you-can-leave-school) are entitled to the National Minimum Wage (NMW).
The NLW and NMW in the UK vary by age and, effective from April 1, 2025, the amounts are set as follows:
| Age | NLW/NMW |
|---|---|
| Under 18 | GBP 7.55 per hour |
| 18–20 years old | GBP 10.00 per hour |
| 21 years old and over | GBP 12.21 per hour |
Statutory Bonus
There are no statutory bonuses in the United Kingdom.
Termination
In order to dismiss an employee, the employer must have a valid reason with regards to their capability or conduct, redundancy or something that prevents them from legally being able to do their job. There could be other fair reasons too—these are commonly referred to as 'other substantial reasons.'
Even if the employer has a justified reason for dismissing an employee, the dismissal is only fair if the employer acts reasonably during the dismissal and disciplinary process.
Note: An employment relationship can also be terminated by the employee's long-term ill health or resignation.
Notice Period
Employees with at least a month of service shall give their employers at least a week's notice when resigning, while those who are being dismissed shall be given the following statutory minimum notice or payment in lieu:
| Length of service | Notice period |
|---|---|
| 1 month–2 years | 1 week |
| 2 years and above | 1 week for each year of service, up to a maximum of 12 weeks |
Employers may dismiss their employees instantly without notice or any pay in lieu on the grounds of gross misconduct, e.g. theft, fraud, violence, etc. That being said, employers are still expected to conduct the proper procedure when dismissing their employees due to misconduct since tribunals may still rule a summary dismissal as 'procedurally unfair.'
Severance Pay
There are no statutory severance pay requirement in the United Kingdom, though eligible employees who have been made redundant may be entitled to receive compensation in the form of redundancy pay.
Probationary Period
There is no statutory probation period in the United Kingdom, though they usually do not exceed a period of 6 months.
Work Time Rules
Standard Working Hours
An employee's standard working hours is determined in their respective work agreement, provided that the total working hours does not exceed an average of 48 hours per week, calculated over a reference period of 17 weeks.
Break Period
Employees have the right to an uninterrupted 20-minute break during their working day if they work more than 6 hours a day. This break generally does not have to be paid, but it will depend on the employment contract.
Overtime
Overtime refers to any work performed beyond the employee's normal working hours as fixed by their employment contracts, provided that the employee's total working hours does not exceed an average of 48 hours per week. Overtime arrangements must be included in the employment contract, and employees are free to opt out of the 48-hour work week directive to work more hours.
Employers are not required to pay any overtime premium for overtime work, though the employee's average pay for the total hours worked must not fall below the National Minimum Wage.
Weekly Rest Days
Employees are entitled to at least 11 hours of rest between each working day. Moreover, they are also entitled to either an uninterrupted 24 hours without any work per week or an uninterrupted 48 hours without any work per fortnight.
There are generally no rules against having employees work Sundays, but this must be agreed upon in writing between the employer and employee.
Holiday and Leave Entitlements
Public Holidays
Public holidays do not have to be given as paid leave, though employers can choose to include them as part of a employee's statutory annual leave. The public holidays in the United Kingdom for 2025 are as follows:
| Holiday | Date | Which country does this apply in? |
|---|---|---|
| New Year's Day | January 1 | England, Wales, Scotland, Northern Ireland |
| 2nd January | January 2 | Scotland |
| St. Patrick's Day | March 17 | Northern Ireland |
| Good Friday | April 18 | England, Wales, Scotland, Northern Ireland |
| Easter Monday | April 21 | England, Wales, Northern Ireland |
| Early May Bank Holiday | May 5 | England, Wales, Scotland, Northern Ireland |
| Spring Bank Holiday | May 26 | England, Wales, Scotland, Northern Ireland |
| Battle of the Boyne (Orangemen's Day) | July 14 | Northern Ireland |
| Summer Bank Holiday | August 4 | Scotland |
| Summer Bank Holiday | August 25 | England, Wales, Northern Ireland |
| St. Andrew's Day (substitute day) | December 1 | Scotland |
| Christmas Day | December 25 | England, Wales, Scotland, Northern Ireland |
| Boxing Day | December 26 | England, Wales, Scotland, Northern Ireland |
Annual Leave
Generally, employees are entitled to 5.6 weeks' paid annual leave, calculated according to the number of days they work in a week. It is important to keep in mind, however, that annual leave is capped at 20 days regardless of how many days an employee work in each week.
For example, an employee working a 5-day workweek will be entitled to 28 days of paid leave per year.
To decide on an employee's annual leave entitlement, the employer can implement either a 'leave year' or an 'accrual' system. Furthermore, annual leave days that have not been taken by the end of each relevant period can be carried over to the following period as per the employment contract.
| Circumstances preventing the employee from using annual leave | Annual leave carryover |
|---|---|
| The employee is on maternity or other family related leave | Up to 28 days of the unused leave can be carried over to the following period |
| The employee is off sick | Up to 20 days of unused leave days can be carried over to the following period, provided they are taken within 18 months of the end of the leave year in which the leave was accrued |
In all other cases, employees who are entitled to the full 28 days of leave can carry over a maximum of 8 days of unused leave.
Sick Leave
Statutory Sick Pay (SSP) is given to eligible employees who have been sick after a 3-day waiting period for up to 28 weeks. This waiting period is not applied if the employee has received SSP within the last 8 weeks that already included the 3-day waiting period.
SSP is set at GBP 118.75 per week, payable for up to 28 weeks. The actual SSP amount an employee is entitled to can be worked out with the SSP calculator.
Employers can refuse an employee's SSP request if they do not qualify by sending them form SSP1 within 7 days of the employee going off sick. Furthermore, employers are also obligated to produce this form when their employee's SSP is ending by the following deadlines:
| SSP ending unexpectedly while employee is still sick | Within 7 days of their ending |
|---|---|
| SSP is expected to end before the sickness | On or before the beginning of the 23rd week |
Maternity Leave
Employees who have meet all the relevant qualifying conditions and have given the appropriate advance notice may be entitled to up to 52 weeks of maternity leave and 39 weeks of maternity pay.
Maternity leave can be taken 11 weeks before the expected week of childbirth at the earliest and shall start the day immediately after childbirth if they are born early.
Statutory Maternity Pay (SMP) is paid at 90% of the employee's average weekly earnings, which shall be capped at GBP 187.18 per week after the first 6 weeks of payment. Employers are encouraged to use this Maternity, Adoption and Paternity calculator to work out their employee's maternity entitlements.
Employers can refuse an employee's SMP request if they do not qualify by sending them form SMP1 within 7 days of making their decision.
Note: A portion of the SMP can be reclaimed from the HM Revenue and Customs. More information on the reclamation of statutory pay can be accessed here.
Paternity Leave
Employees who have meet all the relevant qualifying conditions and have given the appropriate advance notice may be entitled to 2 consecutive or non-consecutive weeks of paternity leave with Statutory Paternity Pay (SPP).
Paternity leave cannot start before childbirth and must be taken within the first year of childbirth. That being said, the start and end dates are bound to be different if taken for those who adopt.
SPP is paid at 90% of the employee's average weekly earnings or GBP 187.18 per week, whichever is less. Employers are encouraged to use this Maternity, Adoption and Paternity calculator to work out their employee's paternity entitlements.
Employers can refuse an employee's SPP request if they do not qualify by sending them form SPP1 within 28 days of their pay request, with a copy being retained for record keeping.
Note: A portion of the SPP can be reclaimed from the HM Revenue and Customs. More information on the reclamation of statutory pay can be accessed here.
Parental Leave
Employees may be entitled to unpaid parental leave and Shared Parental Leave (SPL), which includes Shared Parental Pay (ShPP).
Unpaid Parental Leave
Employees who have met all the relevant qualifying conditions and have given the appropriate advance notice may be entitled to 18 weeks of unpaid parental leave for each child, which can be taken up to their 18th birthday.
The limit on how much parental leave each parent can take annually is 4 weeks for each child unless the employer agrees otherwise. This leave must also be taken as whole weeks rather than individual days, unless the employer agrees otherwise or the child is disabled.
Employers cannot delay or postpone the taking of this leave without a significant reason, and must explain this reason in writing with 7 days of their employee's original request.
Shared Parental Leave and Shared Parental Pay
In the event that an employee or their partner end their maternity or adoption entitlements early, they may be entitled to start taking their Shared Parental Leave (SPL), provided that they have met the relevant qualifying conditions.
The duration of SPL and amount of ShPP shall be determined by what is left over from their maternity or adoption leave and pay. SPL and ShPP must be taken between the baby's birth and their first birthday (or within a year of adoption).
SPL can be taken in up to 3 separate blocks of leave, which can be shared with their eligible partners. They can then choose how much of the SPL each of them will take. However, if only one parent is qualified for SPL and ShPP, they cannot share the leave, but they can still use SPL to book their leave in separate blocks.
Employees on SPL may work up to 20 days without bringing it to an end under a SPLIT days arrangement in addition to any keeping-in-touch days already available to them through agreements with the employer.
ShPP is paid at 90% of the employee’s average weekly earnings or GBP 187.18 per week, whichever is less.
Note: A portion of the ShPP can be reclaimed from the HM Revenue and Customs. More information on the reclamation of statutory pay can be accessed here.
Other Leave
| Leave Type | Paid/Unpaid | Duration | Note |
|---|---|---|---|
| Adoption Leave | Paid | up to 52 weeks |
This can be taken by employees who adopt a child or have a child through a surrogacy arrangement, provided that they have met all the qualifying conditions and gave the appropriate advance notice. Statutory Adoption Pay (SAP) for is paid at 90% of the employee's average weekly earnings, which shall be capped at GBP 187.18 after the first 6 weeks of payment. A portion of SAP paid can be reclaimed from the HM Revenue and Customs. |
| Antenatal Care (Male) | Unpaid | 6.5 hours per appointment | For fathers or the partners of pregnant women to go to 2 antenatal appointments. |
| Antenatal Care (Female) | Paid | - | Can be taken by employees who have declared pregnancy to their employers for medical appointments and other antenatal care. |
| Neonatal Care Leave | Both | Up to 12 weeks |
For parents of babies who are admitted into neonatal care within 28 days of birth for a continuous period of 7 days or longer. This leave must be taken within 68 weeks of the baby's birth. The right to claim pay for this leave arises if the employee has at least 26 weeks of continuous service with their employer and they meet the minimum earnings threshold. |
| Statutory Parental Bereavement Leave | Paid | 2 weeks per child |
Employees who have met the qualifying conditions may take this leave if they or their partner either had a child under 18 years old who died or had a stillbirth after a 24-week pregnancy. This leave can be taken from the date of the death or stillbirth and must end within 56 weeks of that date. Statutory Parental Bereavement Leave Pay is paid at 90% of the employee's average weekly earnings or GBP 187.18 per week, whichever is less. A portion of this pay can be reclaimed from the HM Revenue and Customs. |
| Time-Off for Family and Dependents | Unpaid | - | Can be taken to deal with an emergency involving a dependent. |
| Time-Off for Public Duties | Unpaid | - | Eligible employees can get time off work for certain public duties, including jury service and magistrate duties, among others. |
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