Important Information on the Payroll Records You Should Keep for Your Employees

As an employer, you have certain duties towards your employees. You have to make sure that your employees are comfortable, for example, by providing them with an environment that is well-ventilated, with the proper equipment (and machinery, if they make use of it) as well. But apart from this, perhaps your most important duty is to make sure that your employees are given their salary – not just the proper amount that they are due, but at the right time as well.

In regards to your payroll, whether you are managing it yourself or are outsourcing your payroll and relying on the service of an outsourced payroll specialist provider such as, you also need to keep certain important records about your employees that are related to their payroll. So what are these records, and how important are they? Here’s what you should know:


The records you should keep 

  • Your employees’ salaries plus deductions

You should keep a record of all your employees’ salaries in your payroll management software. And if you have employees on a part-time basis, even if they receive not more than £112 per week, details of their pay should be recorded and kept as well. You should also keep a record of statutory pay for your employees, including sick pay, maternity or paternity pay, shared parental pay, or adoption pay.

Whatever deductions you make from your employees’ salaries should also be recorded and stored. This includes taxes and National Insurance deductions and other types of deductions such as repayments for student loans, contributions for pension, and payments for child maintenance.

  • Records of reports and payments made to HMRC

All the records of the reports (Full Payment Submission) you are required to send to HMRC should be kept as well. The FPS should include all the payments you make to your employees as well as any deductions you have made. Keep in mind that the FPS reports should be submitted either on the date of your employees’ pay or salary day, or before.

Aside from the reports, you also have to keep records of whatever you send to HMRC every month – and this includes payments for National Insurance and tax. You have to also make sure that you pay whatever you owe to HMRC on or before the 22nd of each month (unless you are paying them by post, which would be the 19th) or you may be fined. However, if you pay your employees not more than £1,500 per month, you can also arrange to pay HMRC every quarter.

  • Notices of tax codes

If any of your employee or staff tax codes change, you should receive a notice (via email) from HMRC. Tax codes usually change if there are any changes to their income which is tax free (their Personal Allowance), or if they begin (or stop) getting a benefit which is taxable, such as a company vehicle. Once you have received the email from HMRC, you have to access PAYE Online and update your staff’s payroll data or records as soon as you can, before their next salary date.

Other records you should keep include taxable benefits or expenses such as travel expenses and Payroll Giving programme or scheme payments (where your employees can choose to donate to any charitable organisation or charity straight from their salary before the deduction of tax).

It is important to keep all these records for at least three years, as HMRC may decide to do a check of your records to see if you are paying the proper amount of tax. If HMRC does not find these records or your records are incomplete, you may have to pay a penalty of as much as £3,000.