Is it ok to pay staff Cash in Hand?

As an accountancy business, we are often asked whether it is acceptable to pay staff cash in hand.’ This question is becoming increasingly relevant as the government cracks down on illegal employment practices and implements stricter penalties for employers who do not comply with the law. Here, our blog will explore the legal implications of paying employees in cash, and why it’s not the best choice.

It might sound good, but it’s illegal!

Paying employees in cash is illegal in the United Kingdom and contravenes the National Minimum Wage Act 1998. When employees are paid cash in hand, there is no record of the payment. So, no taxes or National Insurance contributions are paid on their behalf. This puts the employer at risk of penalties and fines from HM Revenue & Customs (HMRC) for failing to pay the correct amount of tax and National Insurance.

In addition to the legal consequences, paying employees in cash can also impact the employee. Without a record of payment, the employee may not be able to prove their income in the future. This can have serious implications including making it difficult to obtain a loan, mortgage or other financial products. Furthermore, employees paid in cash are not entitled to employment rights such as statutory sick pay, statutory maternity pay, and redundancy pay.

If it’s not ok to pay staff cash in hand, what’s the alternative?

As an alternative, it is recommended that employers pay their employees through the payroll system. This ensures that the correct taxes and National Insurance contributions are paid and the employee’s rights and entitlements are protected. Employers can also take advantage of the many benefits that come with using a payroll system, such as automated calculations and payments, and the ability to easily manage holiday pay and other entitlements.

In brief…

While it may seem easier, it is illegal and could result in serious consequences for both the employer and employee. Employers are strongly advised to use a payroll system to ensure that their employees are paid correctly and their rights are protected.

With the help of an accountant, employers can simplify the payroll process and reduce the risk of errors and penalties. Paying employees legally can help employers build a positive reputation and foster a supportive and fair work environment. It really is the only win-win scenario when it comes to paying staff properly.

If you are concerned about how to pay staff, or would like to find out more about what processes and practices your business should use, please do get in touch. We have experts in the field who can make sure your business accounts and payroll departments are operating efficiently and effectively, and in line with UK rules and regulations. So, when you’re ready, we’re ready!

Call us today on 01243 782 423. Alternatively, you can email us from our contact page and someone will be in touch!

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