A single late payment of wages is treated in law as an unlawful deduction under the Employment Rights Act 1996, and an employee can bring an employment tribunal claim over it even while still employed [1][4]. Separately, the Full Payment Submission that reports that pay to HMRC must arrive on or before payday, with late filing penalties running from £100 to £400 a month depending on the size of the payroll [5][8].
Paying employees on time is therefore two obligations wearing one label. One duty runs to the worker, who has a contractual and statutory right to be paid the agreed amount on the agreed date. The other runs to HMRC, which requires the pay to be reported in real time on or before the moment it is paid. Missing either has consequences, and they are enforced by different bodies through different routes.
This article separates the two duties, sets out exactly what each one requires, explains what happens when an employer falls short, and gives the practical steps that keep both the worker and HMRC satisfied. It is written for UK employers running their own payroll who want to get paydays right every cycle.
Key takeaways
- Employers must pay wages on the agreed pay day; a missed or late payment is an unlawful deduction under the Employment Rights Act 1996 [1][4].
- The pay interval must be stated in the written statement of employment particulars, given on or before the first day of work [10].
- A Full Payment Submission must reach HMRC on or before the day employees are paid [5].
- Late filing penalties run from £100 to £400 a month by payroll size, with one unpenalised default allowed each tax year [8].
- An employee generally has three months less one day to bring an unlawful deduction claim, and must first notify Acas [1][14].
Two duties, not one
The phrase "paying employees on time" hides two separate legal duties that happen to converge on the same date. An employer that treats them as a single task tends to satisfy one and forget the other. The table below sets them side by side.
| Duty | Owed to | What it requires | Enforced by |
|---|---|---|---|
| Pay on the agreed day | The employee | Correct wages paid on the contractual pay date [[1]](https://www.acas.org.uk/if-your-wages-are-not-paid) | Employment tribunal [[4]](https://www.legislation.gov.uk/ukpga/1996/18/contents) |
| Report on or before payday | HMRC | A Full Payment Submission filed on or before payday [[5]](https://www.gov.uk/guidance/what-payroll-information-to-report-to-hmrc) | HMRC penalties [[8]](https://www.gov.uk/hmrc-internal-manuals/debt-management-and-banking/dmbm519505) |
The two duties are connected in practice, because the same payroll run that pays the worker also generates the report to HMRC [6]. Software that holds the HMRC Recognised badge files the Full Payment Submission automatically as part of the pay run, which is the simplest way to make sure the reporting duty is met at the same moment the worker is paid [5]. Most employers meet both duties through HMRC-recognised payroll software for SMEs rather than trying to co-ordinate them by hand.
The duty to pay employees on the agreed day
An employee's right to be paid on time is one of the most basic in UK employment law. By law, an employer must pay wages on the pay day agreed with the worker, and that pay day should be set out in the written statement of employment particulars provided on or before the first day of employment [4][10].
What counts as paying late
Any failure to pay the full agreed wages on the agreed date is, in law, an unlawful deduction from wages, not merely a delay [1]. This applies to all forms of pay, including basic salary, bonuses, holiday pay and statutory payments, and it applies even where the shortfall is a one-off caused by an administrative slip [1]. A missed payday is treated the same way as an underpayment: the wages were due and were not paid, so the deduction is unlawful [4].
Employers can only make deductions from wages in limited circumstances: where the law requires it, where the contract allows it, or where the worker has agreed in writing beforehand [2][3]. A deduction outside those categories, or a delay in payment, exposes the employer to a claim regardless of the reason behind it [3]. The table below summarises when a deduction is permitted.
| Deduction is allowed when | Deduction is not allowed when |
|---|---|
| Required by law, such as tax and National Insurance [[2]](https://www.acas.org.uk/pay-and-deductions) | It is imposed without a legal or contractual basis [[3]](https://www.acas.org.uk/deductions-from-pay-and-wages) |
| The contract expressly permits it [[2]](https://www.acas.org.uk/pay-and-deductions) | The worker never agreed to it in writing [[3]](https://www.acas.org.uk/deductions-from-pay-and-wages) |
| The worker agreed to it in writing beforehand [[2]](https://www.acas.org.uk/pay-and-deductions) | It follows the work but the contract is silent on liability [[2]](https://www.acas.org.uk/pay-and-deductions) |
The tribunal route when pay is late
When wages are not paid, the worker's remedy is an employment tribunal claim for unlawful deduction from wages or breach of contract [1]. The time limit is short: generally three months less one day from the date the wages should have been paid [1]. Before a claim can proceed, the worker must notify Acas, which offers early conciliation to try to resolve the dispute without a hearing [14].
If conciliation fails and the claim succeeds, a tribunal can order the employer to pay the wages owed together with compensation for associated financial loss [12]. For a small employer, the management time and cost of defending such a claim usually dwarfs the value of the late payment itself, which is why reliable paydays are a commercial priority as much as a legal one [12]. Getting the pay interval right in the first place is part of choosing a pay frequency the business can sustain.
The duty to report to HMRC on or before payday
The second duty is owed to HMRC under Real Time Information. Every time an employer pays an employee, it must send a Full Payment Submission reporting the pay and deductions, and that submission must reach HMRC on or before the payday [5]. The filing date for penalty purposes is the date the payment is made [8].
The on-or-before rule and its exceptions
The default is strict: the Full Payment Submission is due on or before the moment the employee is paid, so HMRC's record stays current [5]. A small number of exceptions allow reporting shortly after payday, for example certain payments to casual harvest workers or where a payment cannot reasonably be calculated in advance, but these are narrow and specific [15]. Outside those exceptions, filing after payday counts as late [8].
The practical effect is that payroll has to be finalised before wages leave the account, not afterwards. An employer that pays first and files later, as a matter of routine, is filing late every cycle [5]. This is where automating the submission inside the pay run matters, because the report and the payment are then locked to the same moment, a feature accountants rely on when they run many payrolls from a single multi-client payroll platform.
Using the late reporting reason
When a Full Payment Submission genuinely has to go in after payday, HMRC expects an explanation in the "late reporting reason" field, using a set code [9]. For instance, a correction to an earlier submission is reported with reason code H [9]. Supplying the correct reason code tells HMRC the lateness falls within an accepted exception and helps avoid a penalty that would otherwise apply [9]. Leaving the field blank on a genuinely late submission invites a late filing charge [8].
Late filing penalties
HMRC charges late filing penalties on a monthly basis, and the amount depends on the number of employees in the PAYE scheme [8]. The penalties are calculated per tax month but issued quarterly, and an employer gets one unpenalised default each tax year before charges begin [8]. The table below sets out the monthly amounts.
| Number of employees | Monthly late filing penalty |
|---|---|
| 1 to 9 | £100 [[8]](https://www.gov.uk/hmrc-internal-manuals/debt-management-and-banking/dmbm519505) |
| 10 to 49 | £200 [[8]](https://www.gov.uk/hmrc-internal-manuals/debt-management-and-banking/dmbm519505) |
| 50 to 249 | £300 [[8]](https://www.gov.uk/hmrc-internal-manuals/debt-management-and-banking/dmbm519505) |
| 250 or more | £400 [[8]](https://www.gov.uk/hmrc-internal-manuals/debt-management-and-banking/dmbm519505) |
The single unpenalised default is a limited safety net, and it does not apply to annual PAYE schemes that file only once a year [8]. An employer that files late repeatedly will accumulate charges every month after the first, so the penalties are designed to make habitual lateness costly rather than to punish a single slip [8].
Paying HMRC on time is a separate deadline
Filing the report and paying over the deductions are two different deadlines, and both have to be met. The tax and National Insurance collected through payroll must be paid to HMRC by the 22nd of the following tax month where payment is electronic, or by a quarterly deadline where the average monthly liability is small enough to qualify [7].
Missing the payment deadline triggers a separate late payment regime, distinct from the late filing penalties above, and can attract interest and further charges [7]. An employer can file every Full Payment Submission on time and still fall foul of the rules by paying HMRC late, so the payment date belongs in the payroll calendar alongside the filing date [7]. For occasional or one-off payrolls, a compliant instant payslip and submission keeps both deadlines aligned without a standing payroll process.
Practical steps to never pay or file late
Reliable paydays come from a few disciplines applied every cycle. Setting a fixed pay date in the contract, and matching the payroll calendar to it, removes the ambiguity that causes disputes [10]. Finalising the payroll before the money moves ensures the Full Payment Submission can go on or before payday rather than after it [5].
Automating the submission inside the pay run closes the most common gap, because the report is filed the moment pay is calculated rather than as a separate later task [6]. Building the HMRC payment date into the same calendar as the filing date guards against the separate late payment penalty [7]. For platforms and developers who want these controls inside their own product rather than a separate tool, an HMRC-recognised payroll API files in real time as part of the payment flow. Understanding what payroll involves end to end helps an employer see where each deadline sits.
Common causes of late paydays and how to remove them
Most late paydays are not caused by cash shortages. They are caused by process gaps that push the pay run, or the money, past the deadline. Naming the usual culprits makes them easier to design out of the payroll calendar.
Bank processing times are the most common. A payment instructed on payday itself may not clear until the next working day, so the instruction has to be sent early enough to land in the worker's account on the agreed date [1]. Weekends and bank holidays compress the window further, and a payday that falls on a non-banking day has to be brought forward, not allowed to slip [10]. The table below lists frequent causes and the fix for each.
| Cause of lateness | How to remove it |
|---|---|
| Bank clearing times | Instruct payment early enough to clear on payday [[1]](https://www.acas.org.uk/if-your-wages-are-not-paid) |
| Payday on a weekend or bank holiday | Bring the pay date forward to the last working day [[10]](https://www.gov.uk/employment-contracts-and-conditions/written-statement-of-employment-particulars) |
| Approval bottleneck before the run | Finalise and approve payroll ahead of the money moving [[6]](https://www.gov.uk/running-payroll) |
| Filing treated as a separate later task | Automate the Full Payment Submission inside the pay run [[5]](https://www.gov.uk/guidance/what-payroll-information-to-report-to-hmrc) |
The single most effective control is to finalise payroll a clear day or two before payday, leaving room to instruct the bank and file the submission without a last-minute rush [6]. An employer that runs to the wire every cycle will eventually miss a payday when a bank holiday or an approval delay lands at the wrong moment [7]. Building slack into the calendar is cheaper than defending a tribunal claim or absorbing a filing penalty [8].
Conclusion
Paying employees on time is really about honouring two clocks at once. The first runs to the worker, whose right to be paid the agreed sum on the agreed day is protected by the Employment Rights Act 1996 and enforced through the employment tribunal. The second runs to HMRC, whose Real Time Information rules require the pay to be reported on or before the moment it is made, backed by monthly filing penalties and a separate payment deadline.
An employer that keeps both clocks synchronised, by fixing the pay date, finalising payroll before the money moves, and filing the submission automatically as part of the run, satisfies the worker and the tax authority in a single action. The employers that get into difficulty are almost always those who treat the payday and the report as separate tasks that can drift apart. Keeping them locked together is the whole discipline.
Frequently asked questions
Is it illegal to pay an employee late in the UK?
Paying wages late is unlawful. By law an employer must pay the agreed wages on the agreed pay day, and a missed or delayed payment is treated as an unlawful deduction from wages under the Employment Rights Act 1996 [1][4]. Even a single late payment can support an employment tribunal claim, which the worker can bring while still employed [1].
When does an employer have to report pay to HMRC?
An employer must send a Full Payment Submission to HMRC on or before the day it pays its employees, so HMRC's record reflects the payment in real time [5]. A limited set of exceptions allows reporting shortly afterwards, but outside those the submission is late if it arrives after payday, and a late reporting reason code should be supplied where an exception applies [9].
How much is the penalty for filing payroll late?
Late filing penalties are charged monthly and depend on the size of the PAYE scheme: £100 for 1 to 9 employees, £200 for 10 to 49, £300 for 50 to 249, and £400 for 250 or more [8]. An employer is allowed one unpenalised default each tax year before charges start, although that concession does not apply to annual PAYE schemes [8].
How long does an employee have to claim for unpaid wages?
An employee generally has three months less one day from the date the wages should have been paid to bring an unlawful deduction from wages claim [1]. Before starting a claim, the worker must notify Acas, which offers early conciliation to try to settle the matter without a tribunal hearing [14].
