Payroll compliance is one of those areas where the gap between ‘probably fine’ and ‘definitely fine’ matters more than most business owners realise. The rules are detailed, they change regularly, and the consequences of getting them wrong – financially and reputationally – have increased significantly with the launch of the Fair Work Agency in April 2026.
This checklist is designed to give you a structured way of reviewing your current payroll position. It is not a substitute for professional advice, and it is not exhaustive – but it covers the areas where errors are most common and where the risk of enforcement attention is highest.
Work through it honestly. If anything surfaces a question you cannot readily answer, that is useful information in itself.
How to Use This Checklist
Go through each item and consider whether you can confirm it is in place. If you are confident it is – tick it and move on. If you are unsure, or if you know it needs attention, note it down. The goal is not a perfect score on first reading; it is an honest picture of where things stand.
Some items will depend on your specific circumstances – the type of workers you employ, whether you offer benefits or salary sacrifice arrangements, and how your business is structured. Where an item does not apply, set it aside. Where it does apply and you cannot confirm it, treat it as a priority.
| National Minimum and Living Wage | |
| ☐ | All workers are paid at or above the correct NMW/NLW rate for their age bracket |
| ☐ | Rates have been updated following the April 2025 uplift (NLW £12.21/hour for workers aged 21+) |
| ☐ | Effective hourly rate has been checked for salaried workers, accounting for all hours actually worked |
| ☐ | Salary sacrifice arrangements do not reduce net pay below the minimum wage threshold |
| ☐ | Unpaid working time – travel between sites, mandatory training, pre-shift preparation – is included in hours for NMW purposes |
| Statutory Sick Pay | |
| ☐ | SSP is being paid from day one of absence (the three-day waiting period was removed from April 2026) |
| ☐ | Qualifying earnings threshold is being applied correctly |
| ☐ | SSP records are being maintained for each episode of absence |
| Statutory Family Leave Pay | |
| ☐ | Statutory Maternity, Paternity, Adoption, and Shared Parental Pay rates are current |
| ☐ | Qualifying periods and earnings thresholds are being applied correctly for each type of leave |
| ☐ | Enhanced contractual pay arrangements (if applicable) are being applied consistently |
| Holiday Pay | |
| ☐ | Holiday pay is calculated on the basis of normal remuneration, not basic pay only, for workers with variable pay |
| ☐ | Workers on irregular hours or zero-hours contracts are having holiday entitlement calculated correctly under the 52-week average pay reference period |
| ☐ | Holiday pay records – leave taken, pay received, any payment in lieu on termination – are being kept and retained for six years (required from April 2026) |
| ☐ | Part-year workers’ holiday entitlement is being calculated in line with current legislation |
| PAYE and National Insurance | |
| ☐ | All employees are on the correct tax code, including new starters and those returning from leave |
| ☐ | Emergency tax codes are reviewed and corrected promptly where applied |
| ☐ | National Insurance category letters are correct for each employee, including those with multiple jobs or above state pension age |
| ☐ | In-year changes – salary increases, bonuses, benefit changes – are being processed in the correct pay period |
| Student Loans | |
| ☐ | Student loan deductions are being applied where a Start Notice (SL1) has been received from HMRC |
| ☐ | The correct plan type (Plan 1, Plan 2, Plan 4, or Postgraduate Loan) is being applied for each employee |
| ☐ | Deductions stop promptly when a Stop Notice (SL2) is received |
| Auto-Enrolment Pensions | |
| ☐ | All eligible workers are being assessed correctly at each pay period |
| ☐ | Minimum contribution rates are being met: 5% employee, 3% employer (or an alternative qualifying scheme) |
| ☐ | New joiners are being enrolled within the required timeframe |
| ☐ | Opt-out requests are being processed correctly and refunds made within the required window |
| ☐ | Re-enrolment duties have been carried out at the three-year anniversary date |
| Benefits in Kind and Salary Sacrifice | |
| ☐ | All taxable benefits are being reported correctly – either via payroll or P11D |
| ☐ | P11D(b) Class 1A NI return is submitted by 6 July following the tax year end |
| ☐ | Salary sacrifice arrangements are documented with a variation to contract and applied correctly in payroll |
| ☐ | Benefits that do not qualify for salary sacrifice (such as cash) are not being processed as if they do |
| Record-Keeping and RTI | |
| ☐ | Full Payment Submission (FPS) is submitted to HMRC on or before each pay date |
| ☐ | Employer Payment Summary (EPS) is submitted where applicable each month |
| ☐ | Payroll records are retained for a minimum of three years after the end of the tax year they relate to |
| ☐ | Payslips are provided to all workers on or before each pay date |
| ☐ | Leavers are processed correctly and P45s issued promptly |
| Fair Work Agency Readiness | |
| ☐ | Records are organised and retrievable in the event of an inspection – contracts, payslips, timesheets, holiday records |
| ☐ | There is a clear process for workers to raise payroll queries, and those queries are resolved promptly |
| ☐ | Any historical payroll discrepancies have been identified and addressed before they become enforcement issues |
What to Do If You’ve Spotted Gaps
Finding items on this checklist that you cannot confidently tick is not unusual – payroll legislation is genuinely complex, and most growing businesses have at least one area that has not kept pace with either the rules or the business itself.
The important thing is what happens next. Gaps that are identified and addressed proactively are a very different matter from gaps discovered during an inspection. The Fair Work Agency can investigate historical payroll going back up to six years, and a business that has already identified and corrected an issue is in a considerably stronger position than one that has not.
If you have found areas of concern, the right next step depends on the nature and scale of the issue. Some things can be corrected straightforwardly in the next payroll run. Others – historical underpayments, incorrect NI categorisation, benefits that have not been reported – may need a more careful approach, particularly where they have a HMRC reporting dimension.
In either case, it is worth speaking to someone who knows payroll well before making corrections, to make sure the remedy does not create a further issue.
A Note on the Fair Work Agency
The Fair Work Agency launched on 7 April 2026, bringing together HMRC’s National Minimum Wage enforcement team, the Employment Agency Standards Inspectorate, and the Gangmasters and Labour Abuse Authority into a single enforcement body with significantly expanded powers.
The FWA can enter business premises without prior notice, inspect payroll records, and bring tribunal claims on behalf of workers – including workers who have chosen not to pursue a claim themselves. Penalties for underpayment can reach 200% of the amount owed, capped at £20,000 per worker.
The checklist above includes a specific section on FWA readiness for this reason. Being compliant is the goal; being able to demonstrate compliance quickly and clearly if asked is the practical requirement.
At Atria, we manage payroll for a range of businesses and we are well placed to review your current position, identify any areas of concern, and help you put them right. If this checklist has raised questions you’d like to talk through, get in touch with the team – it’s a straightforward conversation and often a reassuring one.
This checklist is for informational purposes and reflects payroll legislation and guidance in force as at June 2026, including NLW rates effective from April 2025 and FWA powers effective from April 2026. It does not constitute legal or financial advice. For guidance specific to your circumstances, please speak to a qualified professional.
