Salaries and wages for your staff

A salary is the annual amount of money that an employer must pay an employee at agreed intervals in exchange for their work. The term "wage" is often used to describe the same thing, but usually refers to the hourly pay of employees and can apply to less permanent members of staff.

Either way, it’s crucially important for you to understand the requirements surrounding such agreements in the UK. From the formalities to the legalities and everything in between. It’s your way of keeping your business in check as far as the law is concerned and your workforce motivated as far as your employees are concerned.

No matter what kind of industry you’re in, the benefits of risk-free payroll management can be felt across your entire business.

Let’s dive into everything you need to know about salaries and wages in the UK so you can make sure you’re paying your people fairly, accurately and on time every time.

What are employers’ responsibilities for salaries and wages?

For startups and market leaders alike, every type of employer has a set of responsibilities to follow when it comes to fair and transparent pay management. If you neglect them, you run the risk of falling foul of the law and ultimately sacrificing any hope of running a successful business.

It simply isn’t worth playing fast and loose with the rules around people’s pay—it’s not even legal (why would it be?), so it’s helpful to work to a framework that covers all the bases.

You are responsible for providing:

National Minimum Wage (NMW) or National Living Wage (NLW)

You must meet the rate thresholds for anyone on your payroll in the UK. If they’re of school-leaving age, or an apprentice under 19, or over 19 and in their first year of apprenticeship, the NMW applies and, if they’re 21 or over, it’s the NLW.

Equal pay for equal work

You are required by law to pay men and women the same amount for doing the same work, similar work or work of equal value. This is where it’s helpful to have a completely transparent and consistent equal pay policy with accurate job descriptions, so everyone knows where you stand as an employer and where they stand as a valued employee.

Pension contributions

 As an employer, you must automatically enrol your eligible employees into a workplace pension scheme and make the necessary contributions to it within each pay cycle.

Pay slips

All employees are legally entitled to receive an itemised pay slip from their employers, detailing their pay (gross and net) and any deductions within each pay cycle, such as National Insurance (NI), tax, pension contributions and student loan repayments (you must use HMRC’s Pay As You Earn (PAYE) system to deduct these contributions accurately from relevant employees’ pay).

Statutory rights

In the UK your employees have statutory rights to certain types of paid leave, of which you must account for within their salaries and wages. For all eligible employees this includes:

• Statutory sick pay (SSP)

• Statutory maternity, paternity and adoption pay

• Statutory Parental Bereavement Pay

• Holiday pay

You are also responsible for meeting regulations around working hours, including breaks and leave, and maintaining accurate records of hours worked and payments owed and made during each period of employment.

This information should not only be easily accessible for every employee, but it should also be available to auditors should the time come to run a fine-tooth comb through the business.

What’s more, there are requirements around salary sacrifice schemes for employers, too, so tmake sure you are calculating tax and NI deductions correctly and not reducing employee pay to a level below the NMW or NLW.

What are the salary and wage regulations in the UK?

So, on those NMW and NLW rates, the government tends to update the amounts workers are legally entitled to as payment for their hours worked every April (at the end of the financial year)—you can find out more on the government’s website. The reason the UK government does this, is to try to maintain a fair wage for people to live off in the UK, particularly those who rely on short-term agency work or zero-hour contracts.

They differ according to the employee’s age and are currently classified as follows:

When it comes to full-time employees, there is no legal upper limit to the agreed salary as it depends on your industry, but the amount paid must not fall below the national minimum pro rata. The pay must account for the number of hours specified in the employment contract and the details therein need to be agreed and confirmed by both parties before the employment can legally begin.

An employee’s total pay can include the base salary plus any relevant bonuses, commissions and benefits that come with the job—again, these must be outlined clearly in the agreement so there’s no room for confusion down the line.

Paying employees for overtime isn’t a legal requirement in the UK, but it’s not uncommon for employers to outline the definition of overtime in an employment contract and specify the amount to be paid for any accrued.

You must be careful that if your employee is working more hours but not getting overtime pay, that their hourly rate doesn’t fall below the minimum wage.

In terms of equal pay, the law covers everyone from part- and full-time employees to temporary workers and apprentices. You must abide by the Equality Act 2010 and the EHRC’s Statutory Code of Practice on equal pay to ensure they’re not stepping out of line on salaries and wages in the UK.

The impact of non-compliance with salary and wage regulations can be really rather destructive to your business, ranging from losing staff and damaging your reputation to tackling HMRC investigations and employment tribunals. You don’t need us to tell you that that’s not good for business, so, frankly, it pays to pay.

If you ever find yourself in need of some advice on the salary regulations front, why not get help from employment law experts to keep you on top of all HR issues related to payrolls, employment law, insurance and more.

Which factors can affect salary structures in the UK?

What you pay your staff in the UK can be affected by a range of factors, from your industry benchmarks and geographical location to your prospective worker’s level of experience. It’s important to get a good grasp of how these factors affect the offer you put on the table so you can remain both competitive in your market and attractive as an employer, but also savvy in the way you balance your books.

Make sure you do your research to dig out your industry benchmarks for salary ranges before you throw any old numbers out there—the last thing you want to do is under or over-cook it and appear out of touch.

Why not try the BrightHR Salary Calculator to start benchmarking your offers and compensating your staff properly.

Best practices for managing salaries and wages

You can get off on the good foot with your future employees by following best practices for establishing their salary structures and pay scales. Indeed, these also apply to existing staff, so be sure to use this list as a reference for any pay-related movements in your business:

Check the industry standards

In the same way as you’d monitor your competitors’ marketing and advertising activities every month, you should also keep track of what others are offering on the salary front so you can remain competitive.

Maintain transparent communication

One of the most important habits to get into is keeping a clear line of communication between management and staff, including topics like progression paths and bonuses.

Conduct regular salary reviews

Employees need to know they are working toward something and will be rewarded for their hard work, so making sure you review their salary or wages on the regular is a pretty crucial aspect of your relationship with them.

Monitor gender parity in pay

Don’t neglect your position as a responsible employer by letting equal pay fall by the wayside—carry out regular checks of what you’re paying your staff for doing their jobs and act accordingly and promptly if there’s a disparity.

Consider performance-based benefits

Attracting great talent is one thing, but retaining it is another, so it’s good practice to look at the long-term benefits for staff if they’re loyal to you—give them a reason to stay and work hard to be a part of your (mutual) success.

Get help with BrightHR Payroll services and support

If you’re ready to level up on your payroll management, you can start streamlining it today with our payroll software.

Request a free demo and rest your head comfortably in the knowledge that your business is fully compliant with the UK’s laws on salaries and wages.