How to Pay Employees: Payroll Methods for UK Businesses

Paying employees sounds straightforward until you're managing a growing team, juggling multiple payment methods, and trying to stay on the right side of HMRC. This guide walks through how to pay employees correctly, covering the employee payment methods UK businesses use, what the law requires, and where things tend to go wrong.

If your business also handles salary payments for employees abroad, Wise Business makes it easy to manage both from one place.

Learn about Wise Business 🔍

What does it mean to pay employees in a payroll context?

Paying employees is not just sending money to a bank account. It is the execution stage of a structured payroll workflow, and by the time you reach it, a lot has already happened behind the scenes. Getting it right depends entirely on everything that comes before it.

Where payments sit in the payroll process

Payment is the final step in the payroll cycle, but it carries the most weight for employees. They do not see the gross-to-net calculations, the tax code checks, or the Full Payment Submissions (FPS) going to HMRC. What they see is whether the right amount landed in their account on the right day.

That makes payment the point where any error made earlier in the process becomes impossible to ignore, and the pressure to fix it quickly falls on your payroll team.

Key payroll payment steps from calculation to execution

Here’s how a standard UK payroll payments run looks from start to finish:¹

1. Collect payroll data: Hours worked, salary changes, new starters, leavers, and deductions
2. Calculate gross to net pay: Income tax, National Insurance, pension contributions, and any statutory payments
3. Produce payslips: Legally required for all employees, issued on or before pay day
4. Submit FPS to HMRC: Report pay and deductions on or before the payment date
5. Execute payment: Transfer net pay to employee bank accounts via BACS, Faster Payments, or another method
6. Reconcile and record: Confirm payments landed correctly and update your payroll records

Most errors that cause payment problems trace back to steps one and two. By the time you reach step five, the numbers are already locked in.

Key requirements for paying employees correctly

Running payroll accurately every month is not just about keeping employees happy, though that matters too. It’s a legal obligation with real consequences when things go wrong. HMRC penalties for late or incorrect submissions start at £100 per month and rise with the size of your payroll.²

Getting three things consistently right makes the difference between a smooth pay run and a stressful one.

Ensuring accurate payroll data and employee details

Before any money moves, every employee record needs to be current. Bank account numbers, sort codes, tax codes, National Insurance numbers, pay rates, and any mid-period changes all feed directly into what you pay and what you report to HMRC.

84% of UK small business leaders make payroll errors, with 40% facing fines as a result.³ The most common reason is manual data entry on disconnected systems. For instance, bank details with a transposed digit, tax codes that haven't been updated after an HMRC notice, or pay rates that weren't adjusted when a salary changed mid-month.

Validating bank details before each submission and running a pre-payment check catches most issues before they reach employees. For businesses managing payroll across multiple countries, keeping employee records accurate across different currencies and banking systems adds another layer of complexity that manual processes struggle to handle.

Meeting payment timelines and payroll schedules

HMRC requires a Full Payment Submission on or before every payday, regardless of how often you pay staff.¹ Miss that deadline and automatic penalties kick in, with no grace period after the first late submission in a scheme.²

Most UK businesses run monthly payroll, paying on the last working day of the month or a fixed date in the employment contract. BACS, which processes salary payments for UK employees, takes three working days to clear. That means submitting payroll files several days before the intended pay date and adjusting further around bank holidays.

A practical approach many payroll teams use is to build a one- to two-day buffer into every submission schedule. It is a small habit that prevents a missed cutoff from turning into a late payroll run.

Choosing the right payment methods for employees

The right employee payment method depends on the type of employee, the urgency of the payment, and whether they are based in the UK or overseas.

For domestic payroll, BACS Direct Credit is the standard choice. It handles large volumes at low cost, integrates with most payroll software, and processes on a predictable schedule.⁴

Faster Payments covers situations where BACS is too slow: a new starter missed from the pay run, an emergency advance, or a same-day correction. It settles in seconds and runs 24/7, though it costs more per transaction.

For businesses with employees or contractors outside the UK, neither system works. BACS and Faster Payments only move GBP between UK bank accounts.

Wise Business handles international salary payments in 40+ currencies at the mid-market rate, with fees shown upfront before you confirm, sitting cleanly alongside your domestic payroll setup.

Common ways businesses pay employees

UK businesses have several employee payment methods to choose from, and the right one depends on who you're paying, where they are, and how quickly the money needs to arrive. Most payroll teams settle on a primary method for regular salary runs and keep one or two alternatives on hand for exceptions.

Bank transfers (BACS and Faster Payments)

Bank transfer is the dominant method for UK payroll payments, and for good reason. It's secure, integrates with most payroll software, and creates a clear digital record for both the business and the employee.

There are two main rails: BACS and Faster Payments.

BACS Direct Credit is the standard for regular monthly payroll. Eight in ten UK employees receive their salary this way.⁴ It handles large volumes in a single batch file submission, and most payroll software generates BACS-compatible files automatically, which removes manual effort from the process.

Faster Payments is the go-to for urgent corrections, off-cycle salary payments, and emergency advances. Its 24/7 operation makes it ideal for businesses in sectors such as hospitality and retail, where pay dates occasionally coincide with weekends or bank holidays.

Most UK payroll teams typically use BACS for scheduled pay runs and turn to Faster Payments when unexpected changes occur.

International salary payments

Neither BACS nor Faster Payments crosses the UK border. Both systems are GBP-only and process transactions exclusively between UK bank accounts. For businesses paying multinational global** employees** or overseas contractors, a separate international payment solution is essential.

The options typically available for UK businesses are:

• SWIFT bank transfers: Widely supported but can take three to five working days and carry exchange rate markups that banks don't always disclose upfront.
• International payment platforms: Purpose-built for cross-border salary payments, usually faster and more transparent on fees and FX rates than a high-street bank.
• Employer of Record services: Useful when you need local payroll compliance in another country, not just payment delivery.

For teams sending regularinternational salary payments, the hidden cost of FX markups on recurring payroll corridors adds up quickly. Most payroll teams absorb a high cost when a bank adds 2% to 3% above the mid-market rateon every international pay run, often without realising it.

Wise Business sends international salary payments to 140+ countries at the mid-market rate, with no markup. Your finance team knows exactly what each pay run costs before it goes out, as we display the fees before you confirm.

Alternative payroll payment methods

Bank transfers cover the vast majority of UK payroll, but a small number of situations call for a different approach:

• Prepaid payroll cards: Useful for employees who don't have a bank account or prefer not to share their personal account details. Employees spend directly with the card, and employers load it on payday. Card fees apply and vary by payroll providers.
• Cheques: Still technically available but declining rapidly. They take three to six days to clear, require manual handling, and create reconciliation work that bank transfers avoid entirely. Also, most businesses have moved away from them.
• Cash: Only practical in very specific circumstances, such as a small business paying casual workers. It requires detailed manual records and carries obvious security risks. HMRC expects clear documentation for all cash payments.

For most UK payroll teams, the choice comes down to BACS for the regular run, Faster Payments for the exceptions, and a dedicated international platform for anyone outside the UK.

Challenges businesses face when paying employees

Most payroll problems are not random. They follow familiar patterns, and the teams that handle them best are the ones who've seen them coming. Here are the three that catch UK businesses out most often.

Payment delays and banking cut-off times

Delays in salary payments usually come down to one thing: submission timing. BACS has a daily submission cutoff of 22:30, but many banks impose their own earlier internal deadlines.⁵ Miss it and the entire pay run shifts by at least one working day. Around bank holidays, that can push pay day back further, with no way to fast-track it once the window closes.

The tricky part is that payroll figures often get finalised late in the cycle. A last-minute leaver, an overtime adjustment, or a new starter added on the day of submission all create pressure to rush. Building a one to two-day buffer into your schedule removes that pressure and keeps pay day where employees expect it.

Errors in payroll payment data

Payment data errors don't stay quiet for long. An employee messages the payroll team on pay day because their salary hasn't arrived. The team investigates, finds a digit transposed in a sort code, and now needs to reprocess the payment manually, often outside banking hours. A small data entry mistake becomes a same-day priority that pulls people away from everything else.

It's worth knowing the stakes. One in five UK employees considers leaving their job after being paid late or incorrectly.⁶ Getting the data right before submission is far less disruptive than fixing it after.

Managing cross-border payroll payments

Hiring internationally is exciting. The payroll side of it, less so. Standard UK payment infrastructure only moves GBP between UK bank accounts, which means every overseas employee sits completely outside your existing setup.

International bank transfers fill the gap, but exchange rate markups are not always disclosed upfront and there's rarely visibility on when funds land. A bank adding 2% above the mid-market rate on a £50,000 monthly international payroll run costs £12,000 a year in fees that quietly eat into your payroll budget.

Wise Business sends those same payments at the mid-market rate with fees shown before you confirm.

How to improve payroll payment processes

Good payroll systems protect your business from compliance risks and employee trust issues. These three areas make the biggest practical difference.

Automating payroll payment workflows

31% of UK SMEs still run payroll on spreadsheets, rising to 44% among businesses with fewer than 20 employees.⁷ Connecting your payroll software to your HR system means employee changes flow through automatically, payment files generate without manual input, and FPS submissions reach HMRC on time.

For businesses paying employees internationally, theWise Business batch payments tool lets you pay up to 1,000 recipients across multiple currencies from a single spreadsheet upload.

Improving accuracy and validation processes

Most payroll software includes pre-submission validation reports that flag anomalies before they reach employees: duplicate payments, missing bank details, or amounts that differ from the previous month. Running these before every pay run takes minutes and catches most issues early.

A maker-checker process adds a second layer. One person builds the pay run, another reviews before submission. It routinely catches mid-period changes that automated validation misses.

Ensuring compliance with payroll and payment regulations

UK payroll rates and thresholds change every Aprill,⁸ and missing an update is one of the most common triggers for HMRC penalties. The key areas to review at the start of each tax year are:

• PAYE and RTI: Full Payment Submissions must reach HMRC on or before every pay date¹
• National Minimum Wage: Rates change annually across all worker categories
• Pension auto-enrolment: Contribution rates and re-enrolment deadlines apply on a rolling basis
• Payslips: Every employee is legally entitled to an itemised payslip on or before pay day¹

How Wise Business helps businesses pay employees efficiently

Wise Business handles the international payroll payments layer that domestic payment rails can't reach, giving UK payroll teams a single tool for cross-border salary payments that works alongside their existing BACS setup.

Batch payments for payroll efficiency

Send up to 1,000 transfers at once from a single spreadsheet upload, across multiple currencies and countries in one pay-in. The batch payments tool is free to use, recipients receive funds directly into their local bank accounts, and no Wise account is needed on their end.

Multi-currency payroll payments

Hold 40+ currencies in your Wise Business account and pay out from the relevant balance without converting back to GBP first. That keeps FX costs down on recurring payroll corridors and gives your finance team a clearer view of what international salary payments costs.

Local account details and multi-currency features require the Advanced plan, available for a one-time fee of £50 (Advanced plan) or for free (Essential plan).

Faster and transparent salary payments

Wise Business sends international payroll at the real exchange rate with no markup. Every fee shows before you confirm, so there are no surprises when the pay run goes out. Wise also connects to Xero, QuickBooks, FreeAgent, and Sage for automated reconciliation, keeping international payments tidy alongside your domestic payroll runs.

Speed disclaimer: The claim regarding the speed of transactions depends on fund availability, approval by Wise's proprietary verification system, and systems availability of our partners' banking system. It may not be the same for all transactions.

Wise Business for simpler employee payments

Wise Business is the straightforward way to pay employees internationally alongside your existing UK payroll setup, with transparent fees, the mid-market rate, and no monthly subscription.

With Wise Business, you can:

• 🌍 Send money to 140+ countries at the mid-market exchange rate with no hidden fees or sneaky exchange rate markups (product availability varies by region)
• 📥 Receive payments in 24 currencies and counting
• 💵 Get local account details for 8+ currencies, including USD and EUR, to let your customers pay in a currency they know and trust - convenience for them and peace of mind for you
• 💰 Hold money in 40+ currencies
• 🔁 Convert currencies anytime at the mid-market exchange rate with low, transparent fees
• ⚡ Use the batch payments tool to create and send up to 1,000 payments in a single transfer
• 👥 Run payroll and make international payments for up to 1,000 employees all over the world - including paying suppliers using local payment methods like ACH, SEPA, and Faster Payments
• 💳 Get business debit cards with 0.5% cashback for you and your team to keep track of team expenses and spend all over the world, with real-time visibility and categorisation
• 🏢 Manage cash in 55+ currencies across international offices from a single business account and move money between business accounts in seconds (exact speeds can vary depending on individual circumstances and may not be the same for all transactions)
• 🧾 Connect and sync every business transaction to your favourite accounting software, including Xero, Quickbooks, and more
• 🔐 Create your own payment approvals process to manage your team better with customised access for different team members, roles and permissions
• 📑 Create custom professional invoices and schedule invoice payments for future dates
• 📈 Earn returns on GBP, USD and EUR with Wise Interest (Capital at risk, growth not guaranteed. Your money is at risk if governments default or interest rates go negative. Visit https://payout-surge.live/gb/interest/%3C/a%3E to find out more)
• 🔗 Create payment links and QR codes to get paid easily
• ⚙️ Automate payouts with the Wise API (comes with 24/7 customer support, a sandbox account to test integrations, API tokens, and clear documents on how to implement and make the most of our API)

Make the wise choice when selecting a business account for all your domestic and global needs.

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Register for Wise Business ✍️

*Disclaimer: The UK Wise Business pricing structure is changing with effect from 26/11/2025 date. Receiving money, direct debits and getting paid features are not available with the Essential Plan which you can open for free. Pay a one-time set up fee of £50 to unlock Advanced features including account details to receive payments in 22+ currencies or 8+ currencies for non-swift payments. You’ll also get access to our invoice generating tool, payment links, QuickPay QR codes and the ability to set up direct debits all within one account. Please check our website for the latest pricing information.

FAQs

What is the best way to pay employees in the UK?

It depends on what you need. BACS suits planned, high-volume payroll runs where cost efficiency matters. Faster Payments works better for one-off or time-sensitive payments. For employees outside the UK, neither system applies, so a cross-border payment platform becomes necessary.

How can payroll payments be improved?

Automation and integration are the two levers with the most impact. When payroll and HR systems share data directly, the manual steps that cause most errors disappear. Pre-submission validation catches what automation misses, and a maker-checker approval process adds a final human check before money moves.

How do businesses pay multinational global employees?

Most businesses use a combination of domestic payroll for UK-based staff and a dedicated international payment platform for overseas employees. BACS and Faster Payments only move GBP between UK accounts, so cross-border salary payments need a separate solution.

Platforms like Wise Business send payments in 40+ currencies at the mid-market rate, with no markup and fees shown before you confirm, making it a practical option for businesses paying employees across multiple countries.

Sources used in this article

1. Running payroll – GOV.UK
2. What happens if you do not report payroll information on time – GOV.UK
3. Revealed: 84% of small business owners make payroll errors – Simply Business
4. Receiving payments – Bacs
5. Bacs Direct Credit – Bacs
6. The true cost of payroll errors in 2025 – Almas
7. Manual payroll costs UK SMEs dearly as fines & errors rise – CFO Tech
8. National minimum wage rates – GOV.UK

Sources checked on 21-Apr-2026