What are payroll numbers? A guide for UK employers

This comprehensive free guide is designed to help UK businesses learn about the payroll number. 

Employee payroll numbers must not be confused with Real Time Information (RTI) numbers or references, which are unique identifiers used by HMRC to keep track of employee tax records. A payroll number, also known as a payroll ID or payroll reference number, is used by UK employers to keep track of each of their employees. This is crucial for effective, end-to-end management of your payroll process.

Payroll numbers  are a unique set of numbers and letters that employers can assign to each individual working at a company. While they are not a legal requirement in the UK, they can help protect employees’ personal data, and reduce the risk of errors within the payroll process. Indeed, correctly managing this data is a key part of your financial responsibilities as an employer.

Here, in this article for UK businesses, we will explain how payroll numbers can help contribute to business data security, how they are created and formatted, and things management needs to be aware of.

What is a payroll number? 

A payroll number (also referred to as a payroll ID, which you can view on a PayFit payslip) is one of the unique identifiers used by employers in the UK to identify their employees from a payroll perspective.

Usually made up of a combination of numbers and letters, they serve as an added layer of protection to help make sure you pay your people securely and on time. The primary use of such identifiers is to help an employer more efficiently keep track of payments and deductions made to and from an employee. Often this number is the same as the RTI number, which helps align employees’ records with those HMRC has on file for their tax records (more on this later). Ensuring these match is therefore a helpful tip to avoid issues.

What’s new for payroll numbers in 2025-2026? 

Several important updates have been introduced for payroll numbering systems that all businesses should be aware of. Managing these changes is crucial for ensuring compliance: 

• New RTI reporting requirements mandate more detailed payroll ID formats for ensuring accurate tracking of employee details and tax information.

• There are now enhanced data protection requirements for how you store and transmit any personal information associated with a payroll number.

• Modern payroll software now has integration requirements with HMRC’s digital tax platform to streamline the process.

• There are specific formatting requirements for multi-contract employees and secondary employment situations.

• New Real Time Information (RTI) requirements affect how a payroll number is used in practice. For example, there are now additional payroll ID validation checks within HMRC’s systems to prevent common errors.

• Multi-site employers must now include location codes in the payroll number they make for each employee record.

• An employee’s working hours now need to be reported alongside their payroll number, and it is therefore important that you can view this information in your payroll software, as it is crucial for correct salary calculations.

• Businesses need to consider different formatting for temporary and agency workers, plus there are new requirements for correcting payroll number errors in RTI submissions.

How do you create a payroll number?

A payroll number can either be created and assigned manually by your internal management team, or it can be generated by your payroll software. If you choose the manual approach, a helpful tip is to use a consistent format when creating the number for each employee. Some software will automatically assign a consistently formatted unique payroll reference number. However, this is something you should confirm with your prospective provider when you decide to invest in a payroll management software process.

HMRC’s latest guidance recommends that an employer should use a combination of letters and numbers (a minimum of 6 characters), include department or location identifiers where relevant, and avoid the use of sensitive personal details like birth dates or national insurance (NI) numbers.

An employer should maintain consistent formatting across all payroll systems for easy-to-view records. For larger organisations, it is advised to include check digits to help with error detection, ensuring the payroll process is as smooth as possible.

What’s the difference between payroll numbers, RTI numbers and PAYE reference numbers? 

The concepts of payroll number, PAYE number and RTI number are closely related, but there are crucial differences that are important for UK employers:

• RTI and Payroll Number: An RTI number is a unique identifier that HMRC uses to keep track of employee tax records. This number can usually be found in the Full Payment Submission (FPS). Like a payroll number, it is usually created and assigned manually by those responsible for the company payroll process. It is recommended, for consistency and ease of managing records, to use the same RTI and payroll number for each employee.

• PAYE Reference Number: A PAYE Reference Number (also called the Employer Reference Number, or ERN) is different, as it’s assigned to businesses with employees automatically by HMRC. This unique identifier consists of 3 digits representing the HMRC office dealing with your company, followed by several letters or numbers. The PAYE reference number is usually 10 digits in total, but there can be exceptions.

What can payroll numbers also be known as? 

You may hear them referred to as payroll IDs (our preference) or payroll reference numbers. As discussed above, the concepts are slightly different from both RTI and PAYE reference numbers.

What are some common payroll number issues to avoid? 

Incorrect or late identification of these payroll numbers can be difficult to amend and cause major payroll issues, such as incorrect salaries and confusing payslips. Therefore, an important tip is to make sure the correct numbers are set up from the get-go.

Particular attention should be paid to when an employee leaves and is later re-employed by the business. In this specific employment case, a new, unique payroll number must be assigned to them. This is because a payroll number is issued on a per-employment basis, rather than being based on a singular person. This is therefore a crucial step, ensuring your financial records are accurate.

If, for whatever reason, you wish to update an employee’s payroll ID during their employment, you should report this change immediately to HMRC. Failure to do so on time might result in a duplicate record being created, which means HMRC will incorrectly demand submissions and tax payments for the original, now-defunct reference as well, creating significant financial issues for the employer.

How do payroll numbers help with data protection and GDPR? 

Crucial employee details can be linked to a payroll number, for example, the employee’s name, contact details, job title, salary, and other related personal information. By linking such sensitive data to a simple payroll ID, you can limit how much confidential information needs to be shared and stored across various different databases (particularly important for a multinational business). This therefore limits the amount of personal information that could be compromised in a data breach. 

Recent security requirements demand heightened encryption standards for transmitting payroll data, plus a requirement that the payroll number is masked in non-essential comms.

A key tip is to check your software’s standards. For example, PayFit is an ISO27001 certified payroll software, meaning we conform to the highest standards of data protection and security for your business. Two-factor authentication (2FA) is another important feature, ensuring that only approved admins can view the entire company’s payroll data, whereas each employee only has access to view their own personal information, like their latest payslip and other important files.

You can learn more about how we enshrine security and protection at every step of your payroll process by booking in a demo call with one of our product specialists.

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