Is It OK Legally To Pay Your Employees Cash in Hand?

If you are considering paying your employees cash in hand then the good news is it is legal but there are certain rules you must obey before doing so. If you want to find out what those rules are, read on…

There may be times where an employee prefers to be paid cash in had rather than be paid through a more formal process. It might also sometimes be preferable for employers to operate in this way, however, the process can sometimes open up the possibility of exploitation of employees. This is why there are certain laws that apply in any such arrangement where employers are paying their staff free of tax.

The first condition is that employees must have agreed in writing that they are happy to be paid cash in hand and just as importantly they must understand that this is the case.

As well as being able to understand the process, it must also be made clear how much their gross pay will differ from take home pay. Take home pay will be equivalent to what the person would take home under a PAYE arrangement. Gross pay meanwhile will be the total amount of pay including tax due.

Alongside this there will be conditions surround pay and conditions, what are the sickness benefits (if any)? maternity pay? Does pay meet the national minimum and living wage? It may also be necessary to see if employment is offered on a casual basis or a more permanent role.

From a business point of view, you will still need to make the correct calculations on tax plus National Insurance contributions.

If you are unsure about any of the rules surrounding paying your staff cash in hand contact us today.