Benefits of Being an Employee on PAYE
Your National Insurance Contributions entitle you to certain state benefits.
Protection Against Unfair Dismissal
If you started work before 6th April 2012 and have been in continuous employment (i.e. working for the same employer) for at least one year you are automatically protected against unfair dismissal. Employees who started work on or after 6th April 2012, gain protection against unfair dismissal after two years of continuous employment.
Statutory Sick Pay (SSP)
As an employee you are entitled to SSP if you are sick for three days or more.
- Normally the three waiting days do not include non-working days (weekends or days not normally worked).
- Working days lost prior to SSP commencing are paid at your employer's discretion.
- SSP can be paid instead of or as part of the normal rate of pay. For the current SSP rate, please refer to the rates and thresholds page. You are entitled to 28 weeks SSP.
- Your employer may be able to reclaim some of the costs from the state.
Statutory Maternity Pay (SMP)
If you are pregnant and have been working for the same employer for at least nine months prior to the baby's due date your employer is obliged to administer SMP on your behalf.
- For the first 6 weeks of the maternity pay period you are entitled to 90% of your gross wage.
- For the subsequent 33 weeks you are entitled to the current rate of SMP or 90% of your gross wage, whichever is lower. For the SMP rate, please refer to our rates and thresholds page.
- If you choose to resume your employment following your maternity leave you are fully entitled to do so, with the same terms and conditions as before.
- In most cases your employer can reclaim all costs of operating and paying SMP from HMRC.
Statutory Adoption Pay (SAP)
If you are adopting a child you have a right to 39 weeks Statutory Adoption Pay (SAP), providing you have been in continuous employment (working for the same employer) for at least 26 weeks by the date the adoption is approved. Adoption pay is paid at the current statutory rate, or 90% of your average weekly earnings, whichever is the lowest. Information on the current rate is available on our rates and thresholds page.
Ordinary Statutory Paternity Pay (OSPP)
Those who are eligible can choose to take either one week or two consecutive weeks' paid paternity leave (not odd days). In order to qualify you must have been in continuous employment (with the same employer) for at least 26 weeks (six months). Please refer to our rates and thresholds page for the current rate.
Additional Statutory Paternity Pay (ASPP)
If the mother chooses to return to work early, ASPP can apply. From April 2011 ASPP allows partners who are eligible to take up to 26 weeks leave, of which 13 can be paid to care for their new baby. Leave can be taken any time from 20 weeks after the child is born, but it must have finished by the child's first birthday. Please refer to our rates and thresholds page for the current rate.
Redundancy Pay
You are entitled to redundancy pay if you have been in continuous employment for a minimum of two years, providing you are not on a fixed-term contract.
The amount you are entitled to is dependent on your age and the length of time you have worked with your existing employer. For information on the latest statutory redundancy pay rates, please refer to the rates and thresholds page.
Your employer is free to pay you more at their own discretion, however they cannot reclaim any part of the costs from the state.
State Pension Contributions
By paying NIC you also qualify for State Pension contributions. The State Pension is divided into two parts:
- The Basic State Pension
- The State Second Pension
For more information you can either speak to an Independent Financial Advisor or contact the Pensions Helpline on 0845 3000 168.
Holiday Pay
Up until recently all full-time employees in the UK were entitled by law to 4 weeks paid leave every year. New holiday legislation has now been introduced and as of April 2009 all employers are required to give 8 bank holidays as paid leave in addition to the 4 weeks. That means that all full-time employees will now be entitled to 5.6 weeks holiday per year.
If you work on a part-time basis and you want to know how many days you are entitled to, simply multiply the number of days you work each week with 5.6. The total should be rounded up to the nearest 1/2 day.
BEWARE: You Could Lose Out If Your Employer Cuts Corners!
If your employer does not register for PAYE or if they register but only declare part of your salary in order to save themselves money it will directly affect your full entitlement to the above and other state benefits. Also, remember that you will need evidence of declared income in the form of payslips to get a personal loan, mortgage or provide a financial reference to a landlord.
It is never in your interest to agree to any illegal tax-saving arrangement with your employer!