Workforce Payments Guide United Kingdom

Papaya offers Virtual IBAN accounts (or “wallets”) to hold your funds segregated and safeguarded until payments are ready to be processed. Opening and managing corporate bank accounts can often be complex and time-consuming, requiring extensive checks and due diligence.

Papaya’s Virtual IBAN solution, built on the trusted infrastructure of JPMorgan, streamlines this process-making it faster, easier, and more cost-effective while ensuring your funds are secured.

Delivery Timeline

Supported payment types

Salary payments, authorities payments, contractor payments.

3rd Party Payments

Contractor Payments

Papaya Global supports payments to contractors in the United Kingdom. The payout currency may vary based on the receiver bank account setup when receiving foreign currencies. It is advised for contractors to reach out to their bank to confirm how foreign currencies are handled

Bank Requirements

IBAN

KYC

The KYC (Know Your Customer) process in the United Kingdom involves verifying the customer’s identity through various documents.

The Financial Conduct Authority (FCA) oversees the KYC process ensuring that firms conduct business in compliance with KYC and Anti-Money Laundering (AML) laws. The FCA also encourages the digitization of KYC, known as Digital Identity Verification.

The process falls under the UK’s AML and Countering Financing of Terrorism (CFT) model, with the Money Laundering Regulations of 2007 and 2017 playing a significant role. This legislation adopts a risk-based approach with additional controls and expanded Customer Due Diligence (CDD) requirements. Businesses in the regulated sector must have policies and procedures in place to comply with these regulations. The FCA mandates every financial institute to hire a Money Laundering Reporting Officer (MLRO) to focus on AML activities and detect any suspicious activities.

The UK’s National Crime Agency (NCA) is responsible for identifying and tracking major criminals, as well as organizing training sessions for AML compliance personnel.

Finally private sector businesses are required to develop in-house identity verification mechanisms to verify their customers and monitor their transactions under the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017). In case of company changes, the updated PSC Information must be reported to the UK’s registry and company house.

The General Data Protection Regulation (GDPR) is also applicable to protect customer data collected during the KYC procedures.

Payroll payment Frequency

Monthly

Banking Regulations

Banking laws that impact cross-border workforce payments are primarily governed by the EU’s Funds Transfer Regulation (FTR), which has been adapted to a UK-only context after Brexit.

This regulation, also known as the “travel rule”, requires specific information about the payer and payee to accompany electronic payments to help combat money laundering, terrorist financing, and breaches of financial sanctions. The UK version of the FTR requires additional information for transfers outside the UK and Gibraltar. After 31 March 2022, transfers from the UK to the EEA exceeding EUR 1,000 must carry certain specific information, and the Financial Conduct Authority expects firms to have effective risk-based procedures in place for receiving transfers of funds lacking this information.

International Banks

Local banks in the United Kingdom

Payment Methods

The B2C payment tools available in the United Kingdom include debit cards, credit cards, contactless payments, PayPal, Apple Pay, Google Pay, digital wallets, bank transfers through the Faster Payment Network, and Buy Now, Pay Later (BNPL) services like Klarna.

Other payment tools available include: Zettle, Revolut, Worldpay, Square, SumUp, Stripe, Mollie, Opayo, Checkout.com, 2Checkout, Amazon Pay, Paysafe, and Clearpay.

These payment gateways support various payment methods and offer different pricing models.

Cryptocurrency

Income Tax and National Insurance: Under UK law, paying employees in crypto would be considered ‘income’ and would therefore be taxed at source the same way regular salaries are. Tax and National Insurance would be deducted, then employees would receive the net amount in crypto.

PAYE Reporting: Like ‘normal’ cash salary payments, payments to employees in the form of ‘readily convertible assets’ are also subject to Pay-As-You-Earn (PAYE) withholding. Under PAYE, the employer needs to report the cash equivalent of the income on their UK payroll, and deduct PAYE income tax and Class 1 employer and employee National Insurance Contributions (NICs).

Payment Submission: The employer usually must send details to HMRC every time they pay an employee, on or before the time of the payment. The information is submitted electronically using a Full Payment Submission (FPS) which is generated by the employer’s payroll software or payroll provider.

Payment to HMRC: Payroll taxes are payable to HMRC by the same date (or the 22nd if the payment to HMRC is made electronically). Because the income is not paid in cash, but PAYE and NIC payments must be paid to HMRC, the employer has two options: Pay employees the crypto equivalent of the net amount after PAYE and employee NI deduction, or Pay PAYE to HMRC on behalf of the employee.

Crypto Wallets: Some companies, like Mode Global, have announced partnerships to pilot a Bitcoin payroll product for Brits, allowing employers to pay British employees directly into their Mode crypto wallet.

Given the possible differences in treatment and differing view on the treatment of some crypto assets for some individuals, it is important any business thinking of paying their employees in crypto assets takes specialist advice beforehand