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When an employee dies, the employer has to report the death through payroll, calculate and pay any outstanding salary and accrued holiday to the estate, and notify any group life insurance provider so a death in service claim can be started. GOV.UK tells employers not to produce a P45. Payments to someone who has died are usually made to the personal representative or executor of the estate — that is the person holding a grant of probate or letters of administration in England, Wales and Northern Ireland, or a certificate of confirmation in Scotland.
The death of an employee creates both human and administrative challenges. HR teams need to handle the practicalities sensitively and correctly — both out of respect for the employee and their family, and to comply with legal obligations around payroll, HMRC, and employment contracts. This guide sets out what the rules actually require of a UK employer, and where the choice is the employer's own. It is not legal advice.
The first priority on learning of an employee's death is to prevent any further salary payments being processed. This means notifying the payroll team immediately so that the deceased is removed from the next payroll run. Any payments made after the date of death will need to be recovered from the estate, which creates administrative complexity that is best avoided.
Before notifying the wider workforce, ensure that the line manager and senior HR have been informed, and that the approach to communicating with colleagues has been agreed. This matters for several reasons: it ensures the communication is sensitive and accurate, it allows any workplace-based employee assistance or support to be prepared, and it means colleagues do not learn of the death through informal channels or social media before any formal communication.
If the death was sudden or the employee was known to be unwell, the employer should also consider whether any colleagues may be particularly affected and may need additional support. Many employers have Employee Assistance Programmes (EAPs) that provide bereavement counselling — make sure staff are reminded of this resource.
Cancel or suspend access to the employee's work systems, email account, and any physical access (key fobs, access cards) promptly — ideally the same day. An active email account in a deceased person's name can cause confusion and, in some cases, presents a fraud risk.
The estate of the deceased employee is entitled to all pay that was due and unpaid at the date of death. This has two main components:
Outstanding salary: calculate the salary due for the period from the last pay date to the date of death, on a pro-rata daily basis. For example, if the employee was paid on the last working day of each month and died on the 15th, the estate is entitled to approximately half a month's salary.
Accrued but untaken annual leave: regulation 14 of the Working Time Regulations 1998 applies where a worker's employment terminates during the leave year and they have taken less of their statutory leave than the proportion of the leave year that has expired. In that case the employer must make a payment in lieu. The statutory entitlement is 5.6 weeks a year, and it is the accrued and untaken part of it for the current leave year that is paid out — not the whole year's allowance. Regulation 14(3) lets a "relevant agreement" provide how the sum is calculated; otherwise the regulations set the formula. The Working Time Regulations 1998 extend to England, Wales and Scotland; Northern Ireland has its own working time regulations.
Any other outstanding payments — unpaid expenses, unpaid overtime, bonuses that have been earned but not yet paid — should also be included in the final settlement.
Important:
GOV.UK says payments to a person who has died are usually made to the personal representative or executor of that person's estate — not to family members in their own right. Some employers will release a small final payment against a death certificate and an indemnity rather than wait for a grant, but that is the employer's own risk decision. It is not a statutory small-payments regime: the £5,000 limit in the Administration of Estates (Small Payments) Act 1965 applies to particular statutory payments, not to private-sector payroll generally.
This is the point employers most often get wrong. When an employee dies, GOV.UK's instruction is not to issue a P45 at all. What you do instead, in your next Full Payment Submission, is:
If a payment has to be made after you have already reported the death on an FPS, GOV.UK says to deduct PAYE using code 0T on a week 1 or month 1 basis, tick "Yes" in the payment after leaving indicator, and give "H — correction to an earlier submission" as the late reporting reason. If the death was not reported in the right FPS, HMRC directs employers to follow the ordinary guidance for when an employee leaves.
If there is a tax refund due, or an outstanding liability at the date of death, HMRC settles that with the personal representative as part of the estate's tax affairs rather than with the family directly.
Keep the payroll records. The personal representative or HMRC may need them for the estate's tax affairs.
Many employers provide a death in service benefit as part of their employee benefits package, usually a lump sum expressed as a multiple of salary and arranged through a group life assurance policy with an insurer. No official source publishes what the typical multiple is, so check the actual scheme rules rather than relying on a rule of thumb.
Notify the group life insurance provider as soon as possible after the employee's death. Most providers have a specific bereavement claims team. The claim process typically involves:
The nomination of beneficiary form is a document (separate from a will) that the employee completes to say who they would like to receive the death in service benefit. It is worth being precise about what it does, because this is widely misstated. The nomination is an expression of wish: it does not bind the trustees, and it is not what keeps the benefit out of the estate.
What keeps the benefit out of the estate for inheritance tax is the opposite — the fact that the trustees, not the member, decide who gets it. HMRC's inheritance tax manual puts it this way: lump sum death benefits are in most cases paid at the discretion of the scheme trustees or provider, even where a nomination expressing a wish has been made, and are then not part of the estate. Where the member does have control over who receives the benefit — where they can make a binding nomination — HMRC treats it as forming part of the estate under section 5(2) of the Inheritance Tax Act 1984.
So a missing nomination form does not create an inheritance tax problem; it just leaves the trustees without a steer, which can slow the payment and may not land where the employee would have wanted. Check the HR records for one either way.
A separate change is coming: HMRC's technical note on inheritance tax and pensions confirms that from 6 April 2027 most unused pension funds and pension death benefits are brought within the value of the estate for inheritance tax. Death in service benefits from registered pension schemes are specifically excluded from that charge by the new section 150A(6)(d) of the Inheritance Tax Act 1984.
The executor of the deceased employee's estate will need to provide the employer with authority to release the final payment. Employers should be prepared to share the following with the estate:
The final payment should typically be made at the next regular payroll run after receiving authority from the executor. Do not make the final payment in cash or to individuals without written authority from the executor — this exposes the employer to the risk of paying the wrong person and being required to pay again.
Also remember to notify the workplace pension provider (if the employee was enrolled in a pension scheme) — pension death benefits are separate from the death in service benefit and will be managed by the pension trustees according to their scheme rules.
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