This guide sets out the PAYE procedures you must follow if you employ temporary staff or use agency workers.
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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.
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.
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 using the information on the P45 and then completing a new P45 for the employee at the end of their work with you.
When an employee leaves or retires - including completing 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 (LEL) - £102 a week for 2011-12:
If you pay the employee equal to or more than the NICs LEL and they have another job:
If you pay the employee equal to or more than the NICs LEL and they don't have another job or you don't know whether they have another job:
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.
Rates and thresholds for employers
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.
You'll find more information on employing students during their holidays in the guide 'Student employees' - there's a link to this below.
The HM Revenue & Customs (HMRC) publication CWG2, 'Employer Further Guide to PAYE and NICs', contains more information about harvest casuals on pages 75 and 76. There's a link to that publication at the end of this guide.
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.
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 HMRC's 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:
Use HMRC's online employment status indicator tool
Guidance on what determines a worker's employment status
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 72 of HMRC's publication CWG2, 'Employer Further Guide to PAYE and NICs' - there's a link to it in the section below.
Download CWG2, 'Employer Further Guide to PAYE and NICs' (PDF 530KB)
