If you employ even a single member of staff, getting payslips right is not optional — it is a legal obligation. Yet payslip errors are surprisingly common among small businesses and sole traders who have recently taken on their first employees. A missing deduction line here, an absent hours figure there, and suddenly you are exposed to an Employment Tribunal claim you never saw coming. Understanding exactly what the law requires is the first step to protecting your business and treating your staff fairly.
Who Is Entitled to a Payslip?
Since 6 April 2019, the right to a written payslip extends beyond employees to all workers. This change, introduced under the Employment Rights Act 1996 (as amended by the Employment Rights (Miscellaneous Amendments) Regulations 2019), means that casual workers, agency workers, and zero-hours contract staff must all receive a payslip. The only group still excluded is the genuinely self-employed — contractors operating through their own limited companies or as sole traders invoicing for services.
In practical terms, if someone is on your payroll and you are running PAYE, they are almost certainly entitled to a payslip. When in doubt, issue one. The cost of producing an extra payslip is negligible; the cost of an Employment Tribunal is not. Payslips must be provided on or before the employee's pay date — handing them out a week late does not satisfy the legal requirement.
The Mandatory Information Every Payslip Must Show
The Employment Rights Act 1996 sets out the minimum information that must appear on every payslip. These are not suggestions — they are statutory requirements:
- Gross pay: The total amount earned before any deductions. This includes basic salary, overtime, bonuses, and commission.
- Net pay: The amount the employee actually receives after all deductions have been applied.
- Variable deductions itemised separately: Any deduction that changes from one pay period to the next must be listed individually, with a description and the amount. Income Tax and National Insurance are the most common examples.
- Fixed deductions (either itemised or shown as an aggregate): Deductions that remain constant — such as a fixed voluntary pension contribution or a season ticket loan repayment — can be shown as a single combined figure, provided the employer has previously given the employee a written statement detailing each fixed deduction. In practice, itemising everything avoids confusion.
- Hours worked (where pay varies by hours): Since April 2019, if an employee's pay varies according to the hours they work — for example, a part-time shop assistant on an hourly rate — the payslip must state the number of hours that pay relates to. This can be shown as a single total or broken down by different rates (e.g., standard hours and overtime hours).
Note what is not legally required but is strongly advisable: employer name, employee name, employee number, National Insurance number, tax code, the pay period, and payment method. Including these details costs nothing and significantly reduces the number of queries your payroll department — or you, if you handle it yourself — will receive.
Common Mistakes Small Businesses Make
Even well-intentioned employers regularly fall foul of payslip rules. Here are the most frequent errors seen in small UK businesses:
- Lumping deductions together: Combining Income Tax and National Insurance into a single "deductions" figure is not permitted. Each variable deduction must be shown separately with a clear description.
- Omitting hours on variable-pay payslips: Many small employers are still unaware of the 2019 amendment requiring hours to be shown when pay varies. If you pay someone an hourly wage, the hours must be on the payslip.
- Issuing payslips late: Payslips handed out after the pay date are technically non-compliant, even if every other detail is correct.
- Not providing payslips to workers: Some businesses give payslips to salaried staff but forget casual workers. Post-2019, this is unlawful.
- Using informal formats: A handwritten note or a rough spreadsheet print-out is not inherently illegal, but it creates a significant audit risk and is far more likely to contain errors.
A straightforward solution is to use dedicated payroll software that generates payslips automatically from the pay run data. BizHub365, for example, produces fully compliant payslips as part of its built-in PAYE payroll module — including the hours-worked field where applicable — and handles Real Time Information (RTI) submissions to HMRC directly, so your Full Payment Submission (FPS) and payslip are generated in one workflow.
Digital Payslips: Are They Legal?
Yes — digital payslips are perfectly legal in the UK, provided the employee can access and save them. There is no requirement to issue a physical paper payslip. Many employers now distribute payslips via a secure employee portal, by encrypted email, or through a payroll app. The key conditions are that the payslip must be accessible to the employee before or on pay day, and — critically — they must be able to print or save it. Simply displaying a payslip on screen without any download or print option may not meet the "written payslip" standard under the Employment Rights Act.
If any of your workforce lacks regular computer access — some construction site workers or agricultural employees, for example — consider whether digital delivery alone is adequate, or whether a paper backup is prudent. It is also worth checking your employment contracts: if you have historically committed to paper payslips, you may need to consult employees before switching to a purely digital format.
What Happens If You Get It Wrong?
Employees and workers who have not received a compliant payslip can bring a claim to an Employment Tribunal under Section 11 of the Employment Rights Act 1996. The Tribunal can make a declaration confirming the employee's entitlement and, where unnotified deductions have been made during the thirteen weeks preceding the claim, it can order repayment of those deductions to the employee — regardless of whether the deductions themselves were lawful.
Beyond the financial exposure, there is a reputational dimension. An Employment Tribunal claim, even one that is successfully defended, consumes management time and legal costs that no small business can easily absorb. HMRC also takes an interest in payroll record-keeping during compliance checks: disorganised or incomplete payslip records are a red flag that can trigger a deeper investigation into your PAYE arrangements.
The practical upshot is straightforward. Run a compliant payroll, issue payslips on time, and keep records for at least three years (HMRC recommends this as a minimum, though six years is safer from an employment law perspective).
Conclusion
Payslip compliance is one of those areas of employment law where the rules are clear, the consequences of getting it wrong are real, and — with the right systems in place — full compliance is genuinely straightforward. Make sure every variable deduction is itemised, include hours worked where pay varies, issue payslips on or before pay day, and extend that entitlement to all workers, not just permanent employees.
If you are managing payroll manually or wrestling with ageing software, it is worth exploring a modern solution. BizHub365 handles the full PAYE workflow — from calculating Income Tax and National Insurance through to generating compliant payslips and submitting your FPS to HMRC via RTI — all from one place. Fewer spreadsheets, fewer errors, and a much smaller chance of an unwanted letter from an Employment Tribunal. Visit bizhub365.co.uk to find out more.