Paying staff – the basic legal requirements

Jan 21, 2019 | Good Management

If you’re taking on your first employee, or even if you already employ a few staff, it’s a good idea to make sure you understand your legal obligations with regards to paying the people who work for you.

Below you’ll find a list of the basics you need to remember when deciding what salary or hourly rate to pay your staff and how to administer payment.

This list is about normal pay for doing the job, and doesn’t include added legal obligations you have like sick pay, maternity pay, holiday pay, redundancy pay and pension contributions.

In respect of pay only, your employees have the following rights:

  • Itemised pay statements, provided on or before the date they are paid
  • Not to be subjected to unauthorised deductions from pay or demands for payment
  • Equal pay and benefits if doing the same, similar, equivalent or equal value work to that done by someone of the opposite sex
  • Not to be discriminated against on grounds of any of the protected characteristics under the Equality Act – sex, gender reassignment, pregnancy or maternity, being married or a civil partner, race, colour, nationality, national or ethnic origins, disability, age, sexual orientation, or religion or belief
  • To be paid at least the applicable National Living Wage or National Minimum Wage appropriate to their age group as set by the government from time to time
  • To be paid according the to terms of their contract of employment
  • (For part time or fixed term employees) not to be treated less favourably than comparable full timers or permanent staff

Make sure the contract of employment you are using with staff is clear on pay rates and covers potential issues such as overtime, commission, bonuses and other payments staff may be owing or may think they are owed.

When deciding how much to pay someone, either as a new recruit or during a pay review, make sure you check what you are paying other people for the same or similar work to ensure there are no less favourable treatment, discrimination or equal pay concerns.

Make sure you keep on top of increases to National Minimum and National Living Wage rates to avoid slipping behind and ending up with backpay to cover or even a fine.

Of course setting the right rates of pay, deciding how to reward good performance or long service, motivating staff while remaining cost effective and streamlined are all issues that require proper consideration, and as you grow, you may want to consider a more formal salary structure and a salary review mechanism. But getting the basic legal fundamentals right is an essential building block for a reward system that works well in your business.


If you want some advice about how and what to pay staff in your small business, do get in touch.