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What Is An Employer Reference Number?

What is an employer reference number?
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As an employer, you have a wide range of responsibilities to take care of. Many of these are not merely responsibilities but legal obligations too.

One of these responsibilities is to know about employer reference numbers and what they are used for. You should also know if you need to have an employer reference number yourself, what your number is, and how to obtain it.

Being a business owner means that you’ll probably land up with a large number of different reference numbers, but organisation is key, so be sure to keep track of all your reference numbers in a document that is secure yet easily accessible. In this article, we will have a look at employer reference numbers, what they are, what they are used for, and if you need one as a business owner.

Employer reference number: what is it?

As an employer, you may already have an idea of what an employer reference number is. But to put things simply, an employer reference number is a code made up of letters and numbers. Each employer reference number is unique. These reference numbers (known as ERNs) are used by the UK tax office – Her Majesty’s Revenue and Customs (HMRC) – to identify all employers.

There are many different uses for reference numbers, and times you will need it, which we will discuss later in this article.

What does an employer reference number look like?

When it comes to what employer reference numbers look like, they are always split into two sections, which include:

  • The three-digit tax reference number – This number is a set of three digits that the HMRC uses to identify your business.
  • The rest of the ERN is usually made up of a combination of letters and numbers.

An example as to what an ERN would potentially look like is something like this 123/AB12345.

Do I need to have an employer reference number?

If you are a registered employer in the UK and have employees who earn above the PAYE threshold, you will most definitely need to have an employee reference number.

There are very few exceptions to employers in the UK needing employer reference numbers. But you may not need an ERN if:

  • You are a business owner that does not have employees.
  • If all of your current employees earn below the PAYE tax threshold.
  • If your business was registered somewhere other than England, such as Wales, Scotland, or Northern Ireland.

As soon as you start employing staff, you are obligated to register with the HMRC as an employer. And if you are an employer, you should have an ERN no matter whether or not you are making use of it.

How do I find out what my employer reference number is?

It is very easy to find out what your employer reference number is. When you register with the HMRC as an employer, you will receive a welcome package that will provide you with your ERN, among other things. It may be referred to as an employer Pay As You Earn (PAYE) reference number. If you are looking for it, this reference number will usually appear on all of your tax forms, payslips, P60 and P45 forms.

If you are uncertain as to whether you have an ERN, or you aren’t sure what your number is, you can always call the HMRC to find out. They should be very helpful.

What is a PAYE reference number?

Things can get confusing because an employer reference number is not always referred to as an employer reference number. Across many of their documents, the HMRC calls employer reference numbers by their other name: employer PAYE reference numbers. So “employer PAYE reference numbers” are just the same as “employer reference numbers”.

Keep in mind that an employer reference number is also referred to as ENR as well as an employer PAYE reference. Try not to get confused by the different names. Cluing yourself up on the lingo will definitely make things easier.

How do I know if I’m meant to be part of a PAYE scheme or not?

Because whether your employees meet the PAYE threshold is a contributing factor in whether or not you need an ERN, we thought we should shed some light on the PAYE scheme in the UK.

PAYE is how the HMRC collects its NICS and income tax from employers. If you are an employer and employ employees, you will only be exempt from having to register for PAYE if:

  • Your staff are all paid less than £111 per week;
  • Your staff do not have other jobs;
  • Your staff do not receive any benefits, or
  • Your staff members do not have pensions.

Remember that even if just one of your staff members meets the PAYE requirements, you will need to register for PAYE and fulfil any associated obligations.

What is an employer reference number used for?

Your ERN is used as a reference number on a variety of documents so that the HMRC, as well as other establishments, can identify your business. It is very important that you have your employer reference number on hand for when you do your end-of-year tax returns. If you do not include this number, your PAYE return will be rejected and there may be certain penalties you’ll need to pay.

Your employer reference number may also need to be used on your employees’ payslips and tax credits. If any of your employees want to know your employer tax number, you’ll need to provide them with it. Employees may need this reference number when they are applying for tax credit, student loans, or a P45.

Employers’ Liability Insurance

One of the other very important uses for an employer reference number is when buying employers’ liability insurance. It is a legal requirement for all employers (who have at least one employee) to have employers’ liability insurance in the UK. If you don’t have employers’ liability insurance as an employer, you will be in violation of the law. And if you don’t have an employee reference number, your employer’s liability insurance could be at risk of being cancelled at any time.

If there is ever a time in which you need to make a claim on your employer’s liability insurance, you will need to provide your employer reference number at the very start of the claims process.

Employers’ liability insurance is exceptionally important, especially if you keep in mind the fact that employees can make claims even many years after they have worked for you. These claims could be related to illnesses and injuries. So it is advisable that your employers’ liability is all in order and that your ERN is on hand in the case of a claim.

The employer reference number is always logged in the system so that insurance policies and employer details can be found quickly. They can see when you employed your employees and if you were insured at the time. This way they are able to determine whether or not the claim should be paid.

Why is it important that I know my employer reference number?

As we have already mentioned, it is absolutely vital for you to know your employer reference number when it comes to taking out employers’ liability insurance, and for when you are doing your tax returns.

Because your employees may also need to access this number at some stage, it is very important that you know your employer tax reference number and be sure to include it on any relevant documents. Let’s also not forget that your PAYE return could be rejected if you do not include your ERN.

We suggest keeping all of your reference numbers in both hard copy and digital format for backup. Knowing your ERN is just one of those things that you need to know as an employer, even if you are not currently making use of it.

What about if you’re self-employed?

It does not matter what type of structure your business takes. Suppose you are self-employed but you employ other people. In that case, you will still need to register as an employer, take out employers’ liability insurance, and make use of an employer reference number.

Being an employer is a massive responsibility that you may not have accounted for when you first became self-employed. You may have assumed that you could run your business on your own, but there are many times when self-employed people need to hire employees. And when they do, all of the legal requirements need to be in place.

The difference between limited companies and self-employed people is that limited companies have to register as an employer from the get-go, as the owner or director would be the first employee. Self-employed people work for themselves and are not a direct employee of their company. Therefore, they only need to register as an employer when they start employing additional employees.

How do you register as an employer?

As we have already mentioned, you get your employer reference number in your welcome package when you register with the HMRC as an employer. But how do you go about registering yourself as an employer?

  • Register as soon as you can, preferably when you have decided to start employing people.
  • You will need to register before your employees’ first payday, but not before two months before their first payday. This can make things a little bit confusing.
  • You will need to register at www.gov.uk as an employer. You will find that there are two different sections. One is for LCs with 1 to 9 directors, and the other section is for all other types of employers.
  • Once you have registered, you should receive your welcome package from the HMRC, with your employer reference number.

If you need to pay an employee before receiving your employer reference number from the HMRC, you will need to send a late full payment submission to the HMRC.

Can you have more than one employer reference number?

Yes! You can actually have more than one employer reference number, such as if your business uses different PAYE schemes. This is common for businesses with branches in various locations, but it is most definitely not the rule. If you are operating using more than one ENR, ensure that you know which ENRs are associated with which branches, employees, and insurance schemes. Mistakes made with your ENRs could be costly.

What if I lose my employer reference number?

First things first, you should avoid losing your employer reference number, and all of your other reference numbers for that matter. You will need your ENR for various documents throughout the tax year, and you want to have it on hand should any of your employees need it for tax credit, student loans, etc. As briefly mentioned, storing your reference number information on a digital platform will help you avoid the stress of losing it.

But if you do happen to lose this number, you should be able to access it relatively easily by looking at old PAYE documents or related letters and emails. The reference number should also be on all of your current employees’ P60 and P45 forms.

If you still cannot find it, your last resort would be to call the HMRC and ask for assistance. If there is no record of you having an employee reference number, this could be because you are not registered as an employer. And if you do currently employ staff, or plan to in the near future, you should look at registering as soon as possible.

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