HR and payroll for marketing agencies in the United Kingdom
Reviewed by Mellow Editorial Team, HR & payroll content team
Marketing agencies face a distinctive mix of employment arrangements — permanent staff, freelancers, project contractors and overseas talent — that makes getting HR and payroll right more complex than in many other sectors. This guide covers the practical obligations every UK marketing agency needs to understand.
Workforce structure and employment status
Most marketing agencies operate with a blend of employees, workers and self-employed contractors. Each status carries different legal and payroll consequences.
Employees receive the full range of statutory rights: paid annual leave (5.6 weeks, or 28 days including bank holidays for a five-day week), auto-enrolment pension contributions, Statutory Sick Pay, and family leave entitlements. Workers — for example, regular freelancers engaged on an ongoing basis — are entitled to holiday pay and the National Minimum Wage but not to the same pension or SSP protections as employees.
Genuinely self-employed contractors sit outside these obligations, but agencies must take care. HMRC's IR35 rules (the off-payroll working rules) apply where an agency engages a contractor through a personal service company. If the contractor's working arrangements would make them an employee were it not for the intermediary, the agency — as the end client — is responsible for deducting income tax and National Insurance before paying the contractor's company. Getting this wrong attracts significant back-tax liability, and HMRC actively scrutinises creative and digital sectors.
Payroll fundamentals and reporting obligations
For employees and workers on payroll, agencies must operate PAYE under Real Time Information. This means submitting a Full Payment Submission to HMRC on or before each payday — there is no grace period. Late FPS submissions attract automatic penalties.
Income tax is deducted using each employee's tax code. The personal allowance for 2026/27 remains £12,570. Earnings above that are taxed at 20% (basic rate), 40% (higher rate) and 45% (additional rate). Employer Class 1 National Insurance runs at 13.8% on earnings above the secondary threshold (category A employees), while employees pay 8% up to the upper earnings limit and 2% above it.
Year-end obligations include issuing every employee a P60 by 31 May and filing P11Ds for benefits in kind — agency team perks such as private medical insurance, gym memberships or client entertainment allowances — by 6 July.
Auto-enrolment and pension duties
Marketing agencies, like all UK employers, must auto-enrol eligible employees into a qualifying pension scheme. The minimum contributions on qualifying earnings are 3% from the employer and 5% from the employee. Agencies that use a mix of employment models sometimes overlook their obligations for part-time account executives, junior creatives or studio staff — but eligibility is determined by age (22 to state pension age) and earnings (above the earnings trigger), not by job title or contract type.
Project-based billing cycles can make payroll timing irregular at smaller agencies. It is worth ensuring your payroll software flags auto-enrolment thresholds consistently, especially if you bring in temporary staff around campaign peaks.
Employment Rights Act 2025: what changes for agencies
The Employment Rights Act 2025 received Royal Assent in December 2025 and introduces several changes relevant to agency employers.
The genuine day-one rights now in force are the right to request flexible working, day-one entitlement to Statutory Sick Pay (no waiting days, taking effect from April 2026), and day-one access to paternity and unpaid parental leave. These apply from the first day of employment regardless of probationary status.
It is important to be precise about what the Act does not do. There is no day-one right against unfair dismissal. The qualifying period for unfair dismissal remains two years under the current rules, reducing to six months for dismissals on or after 1 January 2027. Probationary periods are contractual, not statutory — agencies can still use them to manage performance expectations, but they do not extend the qualifying period for SSP or family leave.
For agencies planning their people processes ahead of 2027, the practical implication is that once the six-month qualifying period takes effect, managing underperformance will need documented processes from an early stage. Guaranteed-hours and fire-and-rehire reforms are also scheduled for 2027 and will affect agencies that rely on rolling short-term contracts.
Sector-specific considerations
Creative and digital agencies frequently deal with a few HR scenarios that other sectors encounter less often.
Hybrid and remote working is the norm across most agency functions. Following the ERA 2025 changes, employees can request flexible working from day one. Agencies should have a written procedure for handling these requests within the statutory timeframe.
International talent is common, particularly in digital marketing, paid media and data roles. Employing someone outside the UK — or paying a UK-based employee who is a non-settled worker — introduces right-to-work checks, potential shadow payroll obligations and employer immigration compliance duties. These sit alongside standard PAYE.
Contractor-heavy project teams remain a feature of campaign work. Agencies should conduct status determinations before each engagement begins, document the reasoning and issue a Status Determination Statement where IR35 applies.
Getting the employment and payroll framework right is not incidental to running a marketing agency — it directly affects your ability to attract the talent and use the workforce models that make campaign delivery possible.
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