HR and payroll for technology in the United Kingdom
Reviewed by Mellow Editorial Team, HR & payroll content team
Running HR and payroll in the UK technology sector involves the same statutory obligations as any other industry, plus a distinct set of practical pressures: fierce competition for skilled workers, widespread use of contractors, equity-based pay, and rapid headcount changes. Getting the fundamentals right from day one matters more than ever as employment law continues to evolve.
Statutory payroll obligations every tech employer must meet
Whatever the size of your engineering or product team, the core payroll mechanics are non-negotiable.
Income tax is deducted under PAYE. Employees receive a personal allowance of £12,570 before any tax is due. Earnings above that are taxed at 20% (basic rate), 40% (higher rate) and 45% (additional rate) at the relevant thresholds.
National Insurance runs alongside income tax. Employees contribute at 8% on earnings within the main band, then 2% above the upper earnings limit. Employers pay 13.8% (Class 1, category A letters) on earnings above the secondary threshold — a cost that scales quickly when salaries are high, as they tend to be in technology.
Real Time Information (RTI) requires you to submit a Full Payment Submission (FPS) to HMRC on or before each payday, without exception. Late submissions attract penalties and can disrupt Universal Credit payments for employees. End-of-year obligations include a P60 for every employee still on payroll by 5 April, due by 31 May, and a P11D for any taxable benefits in kind, due by 6 July.
Auto-enrolment requires employer pension contributions of at least 3% of qualifying earnings, with employees contributing a minimum of 5%. In a competitive market for engineers, many tech businesses offer enhanced contributions as a differentiator — but the statutory floor applies to all.
Employment Rights Act 2025: what has changed and what has not
The Employment Rights Act 2025 received Royal Assent in December 2025, and several changes are already in force or coming soon.
From April 2026, Statutory Sick Pay applies from day one — there are no longer waiting days for eligible employees. This is a genuine day-one right and should be reflected in your sickness absence policies immediately.
The right to request flexible working is also a day-one right. Technology workers frequently expect hybrid or remote arrangements, so in practice many employers already accommodate this, but employees can now make a formal request from the first day of employment.
Paternity leave and unpaid parental leave are day-one rights under the Act.
What the Act does not do is create a day-one right against unfair dismissal. That story circulated widely during the legislation's passage but did not make it to Royal Assent. The qualifying period for unfair dismissal protection remains two years for dismissals taking place now. It will reduce to six months for dismissals on or after 1 January 2027. There is also no statutory probation period — probation exists only where you include it in the contract of employment. Employers should plan now for the January 2027 change: a six-month qualifying period means performance and conduct issues need to be addressed and documented much earlier in employment.
Guaranteed-hours and fire-and-rehire reforms are expected to take effect in 2027 and are particularly relevant for tech firms using variable-hours or project-based staff.
Contractors, IR35 and off-payroll workers
Technology businesses rely heavily on contractors, and IR35 (the off-payroll working rules) remain a central compliance risk. Since April 2021, medium and large private-sector clients have been responsible for determining the employment status of contractors working through personal service companies. If HMRC determines that a contractor falls inside IR35, the employer becomes liable for income tax and National Insurance that should have been deducted.
Reasonable status determinations, documented thoroughly through Status Determination Statements, are essential. Many tech businesses have responded by moving contractors onto payroll or using umbrella companies, each of which has its own cost and compliance implications.
Holiday pay and working time in a sector that rarely switches off
Statutory annual leave stands at 5.6 weeks — 28 days inclusive of bank holidays for a five-day week. For technology workers on annualised salaries this is relatively straightforward to administer, but complications arise with on-call arrangements, overtime, and workers who are genuinely hybrid between employed and self-employed status.
Policies on out-of-hours contact, on-call payments and compensatory rest should be clearly documented, particularly in DevOps, infrastructure, and support roles where incidents can occur at any time.
Benefits, equity and salary sacrifice
Share options and equity awards are common in UK technology companies, particularly in growth-stage businesses. Enterprise Management Incentive (EMI) schemes offer significant tax advantages and are widely used to attract and retain engineers. Taxable benefit rules and P11D reporting apply to benefits such as private medical insurance, company cars and loans.
Salary sacrifice arrangements — commonly used for pension contributions, cycle-to-work schemes and electric vehicles — reduce gross salary for both income tax and National Insurance purposes, saving both employer and employee money. They must be structured correctly to be effective and should be reflected accurately in payroll.
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