What Happens If I Pay an Employee Late

Introduction

Employees rely on timely wages to meet their financial commitments. When a payment is delayed, even for a few days, it can cause frustration, financial hardship, and damage to trust between you and your team.

Late payments also risk breaching employment contracts, payroll regulations, and tax obligations. While occasional mistakes can happen, repeated or prolonged delays can lead to legal action or reputational harm for the employer.

Is it illegal to pay employees late

There is no specific criminal offence for paying employees late, but it can still have serious legal consequences. Under UK employment law, employees have a contractual right to receive their pay on the agreed date stated in their employment contract.

Failing to do so can be classed as a breach of contract or an unlawful deduction from wages under the Employment Rights Act 1996. Employees who are repeatedly paid late may be entitled to take legal action or resign and claim constructive dismissal if trust in the employment relationship is broken.

The impact of late payments

Late wage payments affect both employees and employers in several ways.

For employees:

Financial hardship due to missed rent, mortgage, or bill payments.

Loss of trust and morale.

Increased stress and reduced motivation at work.

For employers:

Complaints or formal grievances from staff.

Possible claims for breach of contract or unlawful deduction from wages.

Damage to the company’s reputation and relationships with employees.

Administrative complications with HMRC and payroll reporting.

Even a small delay can cause friction, so addressing payroll issues quickly is essential.

HMRC and payroll reporting obligations

When you pay staff through payroll, you must report payments to HMRC using Real Time Information (RTI). This means submitting a Full Payment Submission (FPS) on or before the day employees are paid.

If payment is delayed but you have already submitted an FPS, you must ensure that the report matches the actual payment date. Inaccurate reporting can lead to compliance issues or penalties.

Repeated late payments may also make it harder to reconcile PAYE and National Insurance contributions, increasing the risk of fines or interest charges from HMRC.

Employee rights if wages are paid late

If you pay an employee late, they have several options depending on the severity of the situation.

Informal complaint: Employees usually raise the issue informally first, especially if it is a one-time error. Employers should acknowledge the problem, apologise, and resolve it immediately.

Formal grievance: If the issue happens more than once, the employee can raise a formal complaint through your internal grievance procedure.

Employment tribunal claim: If late payment causes significant financial harm or continues over time, the employee may bring a claim for unlawful deduction from wages. They can claim back any money owed plus compensation for losses.

Constructive dismissal claim: In serious cases where late payment damages the employment relationship, an employee could resign and claim constructive dismissal.

Employers can avoid escalation by resolving payment issues quickly and communicating transparently with staff.

Common reasons for late payment

Payroll delays can happen for several reasons, including:

Administrative errors in processing payroll.

Bank transfer delays or incorrect account details.

Cash flow problems within the business.

Miscommunication about new starters, leavers, or pay changes.

Technical issues with payroll software or RTI submissions.

Regardless of the reason, it is the employer’s responsibility to ensure employees are paid correctly and on time.

What to do if you have paid an employee late

If a payment delay occurs, act quickly to minimise disruption and maintain trust.

Communicate immediately: Inform the employee as soon as possible, explain the cause of the delay, and give a clear date for payment.

Make payment quickly: Process the payment as soon as possible, even if it means issuing a separate transfer outside your usual payroll run.

Reimburse costs: If the delay causes financial loss to the employee, such as bank fees or late payment charges, consider reimbursing them as a goodwill gesture.

Investigate the cause: Review your payroll process to find out what went wrong and take steps to prevent recurrence.

Update HMRC records: If the payment date changes, ensure payroll records and RTI submissions are accurate.

Taking responsibility and communicating clearly will usually prevent the situation from escalating into a formal complaint or legal issue.

Repeated late payments

If employees are regularly paid late, it can indicate deeper financial or organisational problems. Repeated delays create serious risks, including:

Legal action for breach of contract.

Damage to employee retention and morale.

Investigation by HMRC or The Pensions Regulator if payroll or pension contributions are affected.

If cash flow problems are the cause, speak to your accountant about managing payroll more efficiently or adjusting payment schedules. It is better to set a realistic payday than to miss one repeatedly.

Preventing late payments

Employers can avoid most payroll delays by implementing clear processes and planning ahead.

Use reliable payroll software: Automate calculations and submissions to minimise errors.

Set reminders for payment dates: Build payroll deadlines into your calendar to avoid missing cut-off times.

Plan for bank holidays: Adjust your payment schedule so that staff still receive wages on time when paydays fall on non-working days.

Check employee details: Ensure bank information and pay rates are accurate.

Maintain good cash flow: Keep payroll funds separate and prioritise employee payments in your budgeting.

These measures reduce the risk of mistakes and ensure employees are paid promptly every time.

Can late payment affect pensions and deductions

Yes. If you delay paying staff, you may also delay pension contributions, tax deductions, and other payments. This can lead to compliance issues with The Pensions Regulator or HMRC.

Make sure any pension deductions are sent to your pension provider within the required time frame, even if the payroll was delayed.

Conclusion

Paying employees late can damage trust, morale, and your organisation’s reputation, and it may even lead to legal action. While an occasional delay caused by genuine error is understandable, repeated or careless late payments breach employment law and harm staff relationships.

Employers should have robust payroll processes, reliable systems, and good communication in place to ensure staff are paid accurately and on time. When issues arise, acting quickly and taking responsibility protects both your team and your business from further complications.