The Employment Relationship: Pay & Benefits

There are national minimum wage rules in the UK.  The rate of pay that applies will depend on the worker’s age and status.  In particular there are different pay rates for apprentices, under 18s, employees aged 18 to 20, employees aged 21 to 24 and employees aged 25 and over. These are reviewed by the Government each year.

Employers are required to account to the tax authorities for income tax and national insurance contributions through the Pay As You Earn (PAYE) scheme.  It is common for employers to engage a payroll provider to assist with setting up a PAYE reference number and administering the scheme.

From 1 February 2018 all UK employers are now required to “auto-enrol” their employees in a government compliant pension plan and to make minimum contributions into that plan, provided that the individual qualifies as an “eligible jobholder” under the relevant legislation.  Minimum contributions are based on an employee’s ‘qualifying earnings’.

The minimum contribution requirements are being phased in over a six-year transitional period that ends on 5 April 2019:

  • For the period between 6 April 2018 to 5 April 2019: 2% employer minimum contribution + 3% staff contribution = 5% total minimum contribution
  • From 6 April 2019 onwards: 3% employer minimum contribution + 5% staff contribution = 8% total minimum contribution.

Although there is no obligation to do so, many employers provide some non-cash benefits such as private medical insurance, life assurance and childcare vouchers.