Paying Employees Salaries

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NOTE: The information contained here is correct as of February 2011 and may be subject to change.

Method of paying Salaries





You can pay cash in hand if earnings are below a certain level, if you earn less than £80 per week

Only cost incurred is travel to and from an ATM and postage to HMRC

You can be paid in cash but you have to make sure you apply deductions such as PAYE & National Insurance


You can use to pay an employee by cheque but also classed as “cash in hand”

There is often a charge for the issuing of a cheque and the cashing of a cheque

You can pay an employee by cheque but if they earn over £80 you must make the appropriate deductions.


Suitable for large transactions and a safer way of paying wages in terms of security and taxation

Banks will often levy a small charge for BACS transaction and there is a time costs , as there is a clearing time for BACS transactions

Make standard deductions such as NI and PAYE, or any appropriate deductions such as student loans.

Minimum Wage Levels: If you are taking on an employee, it is important to remember to keep costs low and due to cash flow restrictions it may result in you only being able to pay minimum wage. There are differing tiers to the minimum wage structure in the UK.

  • £6.50 per hour for those over the age of 21
  • £5.13 per hour for those aged between 18-20
  • £3.79 per hour for those under 18
  • £2.73 for apprenticies aged between 16 and 18

Excluded from the minimum wage

  • Self Employed
  • Volunteers
  • Employees on work experience for less than a year
  • Pre Apprentice government schemes – In Scotland that is Skill Seekers\Get ready for Work

All other employees must be paid minimum wage.  It is ILLEGAL not to pay the minimum wage and failure to do so can result in prosecution, payment of back-dated pay and a costly employment tribunal, with damage to the organisation’s reputation as well as to its balance sheet.