Your Payroll Compliance Guidance and Checklist

Payroll often runs smoothly in the background, until it doesn’t. A missed deadline, an unexpected notice, or a small error on a payslip can quickly turn payroll into a source of stress. When that happens, payroll compliance moves from an administrative task to a business-critical priority. 

Payroll compliance is about meeting your legal and reporting responsibilities when paying employees. But with evolving legislation, tight submission deadlines and little room for error, staying compliant can feel complex. 

This guide explains what payroll compliance involves, highlights the key UK requirements, outlines common errors to avoid and shows how Payroll Solutions can help you stay in control with confidence.

Payroll compliance means following all UK laws and HMRC requirements when paying your employees. This includes calculating pay correctly, applying the right deductions, issuing complaint payslips and submitting accurate information to HMRC on time. 

It affects both employers and employees. For employees, compliance ensures they’re paid accurately and transparently. For employers, it protects against penalties, reputational damage and time consuming investigations. For HR and finance leaders, payroll compliance is about reducing risk, maintaining trust and avoiding the operational drain that errors and corrections can cause.

Payroll compliance covers several connected responsibilities. Each one plays a role in keeping payroll accurate, employees informed, and your business aligned with HMRC expectations.

Real Time Information (RTI) is how employers report payroll data to HMRC every time employees are paid. A Full Payment Submission (FPS) must be sent on or before each payday, detailing earnings, tax, National Insurance and deductions to reporting to HMRC. In certain situations, such as claiming statutory payment or reporting no pay in a period, an Employer Payment Summary (EPS) is also required. 

RTI reporting is time-sensitive and closely monitored by HMRC. Missing a submission or reporting incorrect figures can quickly trigger penalties or compliance checks. Staying on top of RTI deadlines is a core part of payroll compliance and one that often causes issues when payroll is rushed or handled manually.

Accurate tax calculation sits as the top priority of compliant payroll. Employers must correctly apply PAYE, Income Tax, employer and employee National Insurance contributions, student loan repayments and statutory payments such as SSP (Statutory Sick Pay) and SMP (Statutory Maternity Pay) where applicable. 

Rates and thresholds change regularly, making it essential to keep payroll systems up to date. Even small errors can lead to underpayments, overpayments or HMRC corrections later. For HR and finance teams, consistency and accuracy here reduce employee queries and compliance risk.

Payslips are a legal requirement and a key part of employee trust. Every payslip must clearly show earnings, deductions, National Insurance, pension contributions and hours worked if pay varies by hours.

Clear, accurate payslips help employees understand how their pay has been calculated, reducing confusion and disputes. When payroll information is transparent, HR and payroll teams spend less time answering questions and more time focusing on strategic priorities.

Workplace pension management is a major payroll responsibility. Employers must assess their workforce, enrol eligible employees, calculate contributions correctly and submit payments on time in line with auto-enrolment rules. 

Payroll plays a central role in making this work. From ongoing assessments to accurate contributions, errors can lead to compliance issues with The Pensions Regulator as well as HMRC. Keeping pension processes aligned with payroll ensures employees receive the benefits they’re entitled to and your business stays compliant. 

Accurate payroll record keeping underpins payroll compliance and gives you confidence if HMRC ever requests information. Employers are required to keep payroll records for at least three years from the end of the tax year they relate to, covering everything from pay calculations to statutory deductions. 

In practical terms, this means securely storing payslips, RTI submissions (FPS and EPS), PAYE and National Insurance calculations, pension records and documentation for starters and leavers. Well-organised records make audits less time-consuming, support faster issue resolution and protect your business if questions arise years or months later.

Payroll compliance doesn’t stop at the final pay run of the year. Year-end brings additional responsibilities, including issuing P60s to employees, completing the final RTI submissions and recording payroll figures with HMRC records. 

Planning ahead is key. Missing deadlines or rushing end-of-year tasks increases the risk of errors that carry into the new year. A structured approach, supported by clear deadlines, helps to ensure a clean transition and sets payroll up for success. 

For a full walkthrough, our year-end payroll guide provides detailed steps and deadlines. 

Use the checklist below as a quick reference guide to keep payroll compliant throughout the year.

Setup and onboarding 

• Collect accurate starter information and right-to-work documentation. Why it matters: Errors at the start often lead to ongoing payroll issues.
• Apply correct tax codes and NI categories 
• Set up pension assessment correctly 

Each pay run

• Calculate gross pay, deductions and net pay accurately 
• Submit FPS on or before payday.  Why it matters: Later or incorrect submissions can trigger HMRC penalties 
• Generate compliant payslips 

After Payday 

• Pay HMRC liabilities on time (PAYE, NI, Student loans) 
• Process corrections promptly if errors are identified 
• Respond to employee pay queries quickly 
• Pension duties 
• Assess workforce eligibility each pay period 
• Calculate and submit pension contributions accurately 
• Issue required employee communications 
• Handle leavers accurately, including final pay and P45s. Why it matters: Poor leaver processing often causes compliance gaps. 

Year end 

• Issue P60s by the statutory deadlines 
• Complete  final RTI submissions 
• Coordinate payroll records and archive securely 

Many payroll compliance issues stem from small oversights rather than major failures. Missing RTI deadlines, using outdated tax codes, or maintaining incomplete records can all lead to penalties or time-consuming corrections. 

Pension assessment errors and poorly handled leavers are also common problem areas. Another frequent risk is relying on undocumented payroll processes or a single individual, creating vulnerability during absence or high staff turnover. Clear processes, regular checks, and up-to-date systems significantly reduce these risks.

Payroll compliance becomes more challenging as businesses grow and evolve. Increasing headcount, multiple pay types, frequent starters and leavers and limited internal payroll expertise can all add complexity. 

Sick cover and knowledge gaps can quickly expose compliance risks, especially when deadlines don’t pause for holidays or sickness. For many organisations, this is the point where outsourcing becomes less about convenience and more about reliability, accuracy and peace of mind. 

At Payroll Solution Services, we handle payroll compliance so you can focus on running and growing your business. Our specialists manage consultations, RTI submissions, pension duties and record keeping with precision and care. 

We reduce risk, remove admin burden and provide human support when you need it, keeping your payroll accurate, compliant and stress-free. Whether you’re a small to medium-sized enterprise, a larger organisation, or need CIS payroll, our services scale with your needs and keep you confidently aligned with HMRC requirements. 

Simplify your payroll compliance with Payroll Solution Services. Get in touch today for a free consultation. 

Payroll compliance is about confidence and smoother payroll operations. A clear process, accurate records and timely reporting to reduce issues before they arise. 

Use the checklist as a practical guide, review your processes regularly and seek support when needed. With the right approach,  payroll compliance becomes a dependable part of your business rather than a recurring challenge. 

If you’d like expert support to simplify payroll compliance and reduce risk, get in touch with Payroll Solution Services today and see how we can help.

What does payroll compliance mean in the UK?

Payroll compliance in the UK means meeting HMRC’s legal requirements when paying employees. This includes accurate PAYE and National Insurance deductions, timely RTI submissions, correct statutory payments, workplace pension duties, compliant payslips and reliable record keeping to avoid penalties and issues. 

What payroll records do employers need to keep, and for how long?

UK employers are required to keep payroll records such as payslips. P45s, P60s and hours worked for at least three years after the end of the tax year. Some records, including those for National Minimum Wage and pension auto-enrolment, must be kept for longer. Holding clear, accurate payroll records ensures your business meets HMRC requirements.

What happens if you miss an FPS submission?

Failing to submit a Full Payment Submission on time can result in HMRC penalties, starting with warnings and escalating to fines for repeated delays. While HMRC allows one late submission without penalty each year and offers a short grace period, late FPS filings can still impact employees' tax records. Submitting FPS as soon as possible with the correct reason for late submission helps minimise issues and stay compliant.  

What must be included on a payslip?

A payslip must clearly show the pay period, gross pay, deductions such as tax, National Insurance, pension and net pay. It should also include year-to-date figures so employees can easily see how their take-home pay has been calculated. 

Does payroll handle pension auto-enrolment?

Yes, payroll plays a key role in pension auto-enrolment. It’s responsible for assessing employee eligibility, calculating and deducting contributions, managing opt-ins and outs and submitting data and payments to the pension provider. While employees set up the scheme, payroll handles the ongoing compliance and day-to-day processing. 

How often do payroll rules change?

Payroll rules and legislation are updated regularly, with the most significant changes usually introduced at the start of each new UK tax year on 6 April, alongside smaller updates throughout the year. 

Is payroll compliance different for SMEs vs large businesses?

Payroll compliance requirements are the same for SMEs and large organisations, but the way they’re managed is different. Larger businesses typically have dedicated payroll or HR teams, while SMEs may rely on fewer resources, increasing the risk of errors and compliance issues.