Temporary or agency workers
This guide sets out the PAYE (Pay As You Earn) procedures you must follow if you employ temporary staff or use agency workers.
Taking on temporary or casual workers
In most cases you should follow the same payroll procedures for temporary or casual employees as for your permanent employees - you calculate, record and deduct PAYE tax and National Insurance contributions (NICs) in the same way.
However, there are a number of exceptions. These are explained in the following sections.
Employees who work for less than a week
If you take on an employee for less than a week the PAYE procedures you must follow depend on whether or not the employee gives you a form P45 from a previous employment.
The employee gives you a P45 from a previous employment
If you take on someone for less than a week and they have a P45 from a previous employment, then you should follow the usual rules for taking on an employee. This includes completing a new P45 for the employee at the end of their work with you.
More about PAYE when you take on a new employee
How to complete form P45 when an employee leaves or retires
The employee doesn't have a P45
Normally when you take on an employee without a P45 from a previous employment, you have to complete a form P46. However, if you are taking the employee on for less than one week you don't need to fill in a form P46.
Instead, you should take whichever of the following sets of actions apply in your case. They differ depending on how much you are paying the employee and whether or not the employee has another job.
If you pay the employee less than the NICs lower earnings limit - £90 a week for 2008-09:
- keep a record of their name, address and how much you pay them
- don't deduct PAYE tax or NICs from their pay
- don't update a form P11
- don't complete a form P45 when they leave
If you pay the employee equal to or more than the NICs lower earnings limit and they have another job:
- update a form P11
- calculate and deduct PAYE tax from their earnings using the tax code BR
- calculate and deduct NICs
- complete a form P45 when they leave
If you pay the employee equal to or more than the NICs lower earnings limit and they don't have another job or you don't know whether they have another job:
- update a form P11 for them
- calculate and deduct PAYE tax using the emergency tax code on a week 1 or month 1 basis
- calculate and deduct NICs
- complete a form P45 when they leave
Note that while you don't need to complete a form P46 for these employees when they start working for you, you will have to do so if they continue working for you beyond one week, or if they subsequently work for you again later in the same tax year.
More about PAYE when you take on a new employee
Using the right tax code for a new employee
Check the current PAYE tax and NICs rates, limits and thresholds
Other exceptions
There are two other categories of temporary worker who are treated differently for PAYE tax and NICs purposes than permanent employees. These are students employed during their holidays and harvest casuals employed by farmers.
The two links below will provide you with information about employing students and harvest casuals. The first link is to another of the guides on this site, which deals with student employees. The second is to our publication 'Employer Further Guide to PAYE and NICs' (CWG2) - you'll find information about harvest casuals on page 66.
More about employing students during their holidays
Download our publication 'Employer Further Guide to PAYE and NICs' (CWG2) (PDF 462K)
Taking on a worker supplied by an agency
The payroll procedures you need to follow if you take on a worker who's supplied by an agency depend on whether you pay the worker directly, or they are paid by the agency.
If you pay the worker directly
You must establish whether the worker is employed or self-employed. This depends on the nature of their working relationship with you. You can use our online employment status tool to help with this - there's a link to it below.
Once you have established the worker's employment status, take the relevant following action:
- if the worker is an employee, calculate PAYE tax and NICs in the same way as for any other employee
- If the worker is self-employed, you do not need to worry about calculating PAYE tax and NICs, or deducting it from their earnings
Use our online employment status indicator tool
Guidance on what determines a worker's employment status
If you pay the agency and they pay the worker
In most cases, you will not need to worry about PAYE tax and NICs for agency workers who are paid by the agency, because it is the agency's responsibility.
However, there is an exception if you use an agency that is based abroad and doesn't have a trading address or a representative in the UK. In this situation we will treat you as the worker's employer, and you will have to calculate, record and deduct PAYE tax and NICs in the usual way.
For more information about dealing with PAYE tax and NICs for agency workers, see page 63 of our publication 'Employer Further Guide to PAYE and NICs' (CWG2) - there's a link to it below.
Download our publication 'Employer Further Guide to PAYE and NICs' (CWG2) (PDF 462K)
