HMRC has announced that it will not move forward with its plan requiring employers to report detailed employee working hours via Real Time Information (RTI). The draft regulations have been officially withdrawn and will not be enforced.
This outcome benefits employers, particularly given the ongoing management of significant regulatory changes such as Making Tax Digital, the shift to real-time payrolling of benefits, and the escalating costs of National Insurance. The requirement for detailed hours reporting, alongside these modifications, would have introduced further administrative and operational difficulties, especially for small and medium-sized enterprises. The cancellation of this proposal reduces a considerable reporting burden and allows payroll teams to concentrate on compliance activities that are both essential and appropriate.
What Was Originally Proposed
Under the original proposal, employers would have been required to submit precise working hours for each employee on every pay run, replacing the current banding system. This would have meant:
- Reporting actual hours worked for hourly-paid staff
- Reporting contractual hours for salaried employees
- Providing detailed explanations for certain non-standard payments
In practice, this would have created substantial operational challenges. Many payroll systems are not configured to capture or transfer hours data in the format HMRC envisages. Time and attendance systems often do not integrate smoothly with payroll software, which would have required new processes, manual data entry, and additional software costs.
For many employers, especially those paying fixed salaries or employees above the National Minimum Wage, the extra reporting would have offered minimal practical benefit but would have considerably increased administrative tasks.
Research by the Chartered Institute of Payroll Professionals revealed the extent of the problem, with over 65% of payroll professionals stating they would need to gather entirely new data to comply, and nearly 40% expecting a substantial rise in administrative workload.
The Current System Remains Unchanged
There are no modifications to the existing reporting framework under Real Time Information (RTI). Employers are obliged to continue selecting one of the designated “normal hours worked” categories when submitting a Full Payment Submission (FPS) to HMRC:
- Band A: Less than 16 hours per week
- Band B: 16 to 24 hours per week
- Band C: 24 to 30 hours per week
- Band D: 30 hours or more per week
- Band E: Other (including zero-hours contracts, irregular working patterns, or pensioners)
This categorisation requirement has been in effect since the introduction of RTI in 2013 and was established to facilitate the administration of Universal Credit. It affords HMRC a broad overview of working patterns without necessitating the submission of exact hours data.
Crucially, this stance remains unaltered. Employers are not mandated to modify payroll procedures, update software systems, or implement additional training as a consequence of the withdrawn proposal. Current reporting practices should remain unchanged.
Why the Proposal Was Withdrawn
Feedback from payroll professionals, software providers, and business groups consistently underscored that the proposal would impose a disproportionate compliance burden. Notable concerns included:
- Significant administrative effort
- System incompatibility and integration issues
- Additional costs for smaller enterprises
- Limited relevance for numerous salaried positions
- Minimal benefits relative to the required efforts
After consulting and considering industry representations, HMRC acknowledged that the costs and complexities outweighed the advantages and decided not to proceed with the proposal. This outcome exemplifies a pragmatic response to authentic operational concerns within the payroll sector.
What Employers Must Still Do
Although the proposed RTI reporting requirement has been withdrawn, employers must continue to maintain appropriate working hours records to meet existing statutory obligations. In particular, accurate records remain necessary for:
National Minimum Wage compliance – maintaining sufficient records for workers paid at or near statutory minimum rates.
Working Time Regulations – demonstrating compliance with limits such as the 48-hour average working week and rest requirements.
Holiday pay calculations – particularly for workers with variable hours or irregular earnings.
Employment tribunal or dispute proceedings – where documented working hours may form important evidence.
The key distinction is that these records are retained for regulatory and employment law compliance, rather than submitted to HMRC via RTI. Employers should therefore continue their existing record-keeping practices to ensure compliance, but without the additional reporting burden that had been proposed.
Other Changes Still Proceeding
While the detailed RTI hours reporting proposal has been withdrawn, other significant payroll reforms remain on the legislative timetable.
From April 2027, employers will be required to payroll most Benefits in Kind in real time through PAYE. This will affect items such as company cars, private medical insurance and beneficial loans. Organisations will need to ensure their payroll systems and internal processes can handle real-time benefit reporting and associated tax deductions.
In addition, from April 2026, strengthened PAYE accountability measures within labour supply chains are expected to take effect. These provisions are designed to address non-compliance in agency and umbrella company arrangements and may introduce joint and several liability for unpaid tax in certain circumstances. Businesses engaging temporary workers or contractors through intermediaries should therefore review their contractual arrangements and compliance procedures carefully.
The overall compliance landscape remains active. Although one proposed requirement has been removed, employers should continue planning for the reforms that are proceeding.
How The Infinity Group Can Help
Keeping up with changes from HM Revenue & Customs can be time-consuming. We monitor developments for you and explain clearly what applies to your business — and what does not. If a proposal is withdrawn or updated, you will know straight away.
We review your payroll processes to identify risks before they become costly problems. This includes checking working hours records, National Minimum Wage compliance and benefits handling. With mandatory payrolling of Benefits in Kind arriving in April 2027, we help you prepare in a structured and manageable way.
If payroll system changes are needed, we guide you towards practical solutions that suit how your business operates — without unnecessary complexity.
For straightforward advice and reliable support, contact The Infinity Group. We help you stay compliant with what truly matters.