A Simple Guide to ERN and PAYE Numbers for Start-Ups

You’ve finally gotten around to registering your startup and making your first hire — congratulations.

One of the things involved in becoming an employer is keeping up with different details, numbers, and information you need to know. One such number is an Employer Reference Number (ERN).

This guide will show you all you need to know about ERN, like what it’s used for, what it looks like, and other questions you might have.

Let’s begin.

What is an Employer Reference Number (ERN)?

An Employer Reference Number (ERN) is a unique combination of numbers and letters that His Majesty Revenue and Customs (HMRC) and other institutions use to recognise your startup.

HMRC assigns this number to you once you hire your first employee — therefore becoming an employer. For HMRC to assign you an ERN, you need to be running your company under the Pay As You Earn payroll system.

An Employer Reference Number is also known as an employer PAYE reference number, as it appears on HMRC’s website when you want to register as an employer. So whenever you see ERN or employer PAYE reference number, you can rest assured knowing they mean the same thing.

What format is an Employer Reference Number?

A typical ERN consists of numbers and letters split into two parts.

The first part of an ERN is a 3-digit code representing HMRC’s office number. This number varies depending on where your business is located within the UK.

The second part of an ERN starts with 1-2 alphabets followed by 1-6 digits. This part of the ERN is unique to each business.

The “/” symbol separates both sides of an ERN.

So, here’s what a sample format for an ERN would look like — 123/A12345 or 123/YZ12345.

Why do you need an Employer Reference Number?

It’s not enough to only know what an Employer Reference Number is supposed to look like. You must also understand why you need one and what you can use it for.

Here are some of the most common situations or reasons why you need an Employer Reference Number:

For your annual PAYE return

Since you’re using the PAYE payroll system, you’re expected to complete and submit an end-of-the-year PAYE tax return. The PAYE return informs HMRC of how much tax and National Insurance contributions employees have paid on their salaries and how much you paid them for the year.

If you make your PAYE return without an ERN or an incorrect one, HMRC will reject it. Also, it might lead to delays with documentation and cost you money in the form of fines.

When employees request it

Another instance where your ERN would come in handy is when employees request it. For example, your employees could require you to provide your ERN if they want to apply for student loans, tax credits, or something else.

When buying employer insurance

Employers are required under the Employers’ Liability (Compulsory Insurance) Act 1969 to take out insurance against their liability of personal injury to their employees.

You’ll need an ERN to buy employers’ liability insurance.

Without an ERN, it would be impossible for the Employers’ Liability Tracing Office (ELTO) to update its database with your insurers over time. 

Having an updated record with ELTO is crucial because it’d make it easier to identify companies where a current or past employee worked whenever they have an insurance claim against you.

ELTO makes it easier for employees to access their employers’ liability insurance data for free.

Where to find your Employer Reference Number (ERN)

Soon after making your first hire and becoming an employer, HMRC will send you a welcome pack. Included in the welcome package is your Employer Reference Number (ERN). 

Aside from the welcome pack, you can find your ERN on different tax forms like P11Ds, P45s, P60s, and payslips.

Can a business have more than one ERN?

While uncommon, a business can have more than one ERN. 

You can be assigned a unique ERN for each scheme if you manage different PAYE schemes across multiple locations.

You should manage and keep these different ERNs safe to use the correct one as required.

What to do if you’ve lost your ERN

You don’t need to panic if you ever lose your ERN. While the ERN is an important number, it’s pretty easy to retrieve if you ever lose it.

One of the first places to check is the welcome pack where you originally received your ERN.

You can also find your ERN in the emails you sent or received from HMRC. 

Still, another place to check is any old P45, P60, or payslips around you. 

If you can’t find your ERN in all these places, it might mean you’ve not registered as an employer. To register, get in touch with HMRC without delay.

In what cases are you exempt from having an ERN?

Remember when we mentioned that HMRC only assigns ERNs to businesses running a PAYE payroll system? So you wouldn't have an ERN if you’re not running a PAYE payroll system.

Here are some of the conditions that might cause you not to use the PAYE system and therefore be exempted from having an ERN:

• If your employees earn less than the Lower Earning Limit — currently at £123.

• If your employees work as unpaid volunteers.

• If you pay your employee through an agency or as self-employed sub-contractors.

• If your business is based or registered outside England, Northern Ireland, or other areas without a tax presence in the United Kingdoms, like the Channel Islands or the Isle of Man.

• If you don’t have any employees.

Never lose your ERN with PayFit

If you operate using the PAYE payroll scheme, your ERN is a crucial number you must always have handy.

With payroll software like PayFit, you wouldn’t need to worry about keeping your ERN safe, as our tool helps you store and automatically populate your tax forms whenever you want to submit them to HMRC.

Book a free demo today to learn more about how to manage your payroll process as a startup with PayFit.