Payroll number: What it is and how to use it for your business

Published Thursday 18 December 2025

Table of contents

• How to locate and use payroll numbers
• PAYE reference numbers versus payroll numbers
• Why payroll numbers matter for your business
• Managing payroll numbers
• Avoiding common payroll number pitfalls
• Enhancing payroll processes with Xero
• FAQs on payroll numbers

Key takeaways

• Implement a consistent payroll numbering system using standardized formats like department codes plus sequential numbers to prevent processing errors and maintain organized employee records.
• Assign new payroll numbers to returning employees rather than reusing previous ones, since each employment period requires a unique identifier for accurate record-keeping and HMRC compliance.
• Utilize payroll numbers to link employee records such as benefits, bonuses, and expenses, making it easier to manage pay information and ensure the right person receives the correct wages.
• Recognize that payroll numbers differ from PAYE reference numbers in that they are employer-created internal tools for record management, while PAYE numbers are HMRC-issued for tax compliance purposes.

How to locate and use payroll numbers

Finding your payroll number is straightforward through these common locations:

• Payslips: Look for a unique code or number (often labelled "Payroll ID" or "Employee Number")
• HR department: Contact your human resources team directly
• Employee portals: Check your company's online system or app
• Employment contracts: Review your original hiring documentation

As an employer, you can use employee payroll numbers to make sure you're paying the right person the right wages.

PAYE reference numbers versus payroll numbers

Pay As You Earn (PAYE) reference numbers and payroll numbers serve different purposes in your payroll system, though both appear on payslips.

Key differences:

• Purpose:PAYE numbers handle tax and National Insurance; payroll numbers manage employment records
• Source: HMRC provides PAYE references; employers create payroll numbers
• Requirement: PAYE numbers are mandatory for tax compliance; payroll numbers are optional business tools
• Scope: PAYE numbers follow employees across jobs; payroll numbers are employer-specific

Why payroll numbers matter for your business

Payroll numbers aren't mandatory but become essential as your team grows. Without them, employees with similar names risk receiving incorrect payslips containing sensitive data like salaries and National Insurance numbers.

Large teams benefit most from payroll numbers because manual tracking becomes error-prone and time-consuming.

Using payroll numbers also simplifies your records and helps you meet legal and tax requirements from His Majesty’s Revenue and Customs (HMRC). This makes your payroll more accurate and organised.

Managing payroll numbers

You can link payroll records such as benefits, bonuses and expenses to each payroll number to keep employee pay information organised.

Generating and assigning payroll numbers

Generating payroll numbers helps you clearly identify each employee across your organisation. You can create them manually or automate the process with payroll software.

Best practices for payroll number creation:

• Keep them unique: Never duplicate numbers across employees
• Use consistent formats: Combine letters and numbers systematically
• Add department prefixes: Differentiate teams (e.g., MAR-012345 for marketing)
• Maintain sequential order: Use logical numbering systems for easy tracking

If an employee leaves and rejoins the company, you'll need to assign them a new payroll number. This is because a payroll number applies to the specific employment, not the employee. An employee will have different payroll numbers for different jobs and periods of employment.

Avoiding common payroll number pitfalls

Avoiding payroll number mistakes prevents processing errors and ensures smooth payment operations.

Common pitfalls to avoid:

• Inconsistent formatting: Use standardized patterns like department code plus sequential numbers (e.g., ACC-00123).
• Reusing numbers: Assign new numbers to returning employees, even if they held the role previously.
• Missing HMRC updates: Report payroll number changes during employment to prevent duplicate records, as issues with multiple payroll IDs can lead to situations where cases need manual correction by HMRC.
• Poor documentation: Maintain clear records linking payroll numbers to employee details.

Enhancing payroll processes with Xero

automates payroll number management, reducing manual errors and saving administrative time.

Xero payroll software simplifies:

• Number assignment: Automatic generation of unique payroll identifiers
• Payslip integration: Seamless inclusion of payroll numbers on employee documents
• Record maintenance: Centralized storage of employment data and payroll histories
• HMRC compliance: Automated submission of accurate payroll reports and updates

Try Xero for free today.

FAQs on payroll numbers

Common questions about payroll numbers and how UK businesses use them.

Is a payroll number the same as a National Insurance number?

No, payroll numbers and National Insurance numbers serve different purposes. Your National Insurance number is government-issued and stays with you throughout your career, while payroll numbers are employer-specific identifiers used only for internal payroll processing.

What is a bank payroll number?

A bank payroll number is a code some banks use to process bulk payroll payments from employers. This differs from employee payroll numbers and helps banks organise multiple salary payments from the same company.

Can I reuse payroll numbers for returning employees?

No, assign new payroll numbers to employees who return to your company. Each employment period requires a unique identifier to maintain accurate records and prevent confusion in your payroll system.

Do I need payroll numbers if I only have a few employees?

Payroll numbers are not required for small teams but become more useful as you grow. His Majesty’s Revenue and Customs (HMRC) even offers free Basic Pay As You Earn (PAYE) Tools software for businesses with fewer than ten employees. They prevent errors and simplify record-keeping, making future expansion easier to manage.