If you've taken on your first employee, you'll have come across the term Employer Reference Number. It sounds more complicated than it is.

This guide explains what an ERN is, why you need one and what happens if you don't have it when you need it.

What is an Employer Reference Number?

An Employer Reference Number, or ERN, is a unique code that HMRC gives you when you register as an employer. You'll also see it called a PAYE reference number.

It identifies your business in the tax system. HMRC uses it to connect your payroll records to the right employer account.

Your ERN has two parts. First a three-digit number that identifies your HMRC tax office. Then a reference that's unique to your business. They're separated by a forward slash. For example: 123/AB45678.

Do you need an ERN?

Not every business needs one. You only need an ERN if you employ staff.

That means you need to register if you:

• Pay an employee £123 or more per week (the 2024/25 lower earnings limit)
• Employ anyone who has another job or receives a pension
• Provide employee benefits like a company car or health insurance

If you're a sole trader with no employees, you don't need an ERN. If you use only self-employed contractors, you don't need one either. But the moment you hire your first employee, registration is a legal requirement.

How to get an Employer Reference Number

You register as an employer through HMRC. Once your registration is processed, HMRC sends your ERN by post. This usually takes up to five working days, though it can take a little longer at busy times.

To register, you'll need:

• Your business name and address
• Your National Insurance number (sole traders) or your company registration number (limited companies)
• The date you first paid or expect to pay an employee

You can register on the HMRC website. Search for 'register as an employer' on GOV.UK.

You need to register before your first payday, or within four weeks of taking on a new employee. Don't leave it until the last minute. Processing can take a few days, and you'll need the ERN to run payroll.

Where to find your ERN

Once you have one, your ERN appears in a few places.

• Your PAYE payment reference from HMRC
• P60 and P45 forms for your employees
• Letters from HMRC about your payroll
• Your payroll software, if you use any

If you've lost it, check any correspondence from HMRC. Alternatively, call the HMRC employer helpline and they'll be able to help.

What your ERN is used for

Your ERN comes up in more situations than you might expect.

Running payroll

You include your ERN when you submit payroll information to HMRC. It makes sure tax and National Insurance records are linked to the right employer.

Employee documents

It appears on P45s and P60s, which employees need when they leave or at the end of the tax year.

Business insurance

Employers' liability insurance is a legal requirement once you have employees. Most insurers ask for your ERN when you take out a policy.

Finance applications

Some lenders ask for your ERN when you apply for business finance. It helps confirm you're a registered employer and gives them a clearer picture of your business.

Auto-enrolment

If you're setting up a workplace pension for your employees, your pension provider will ask for your ERN.

What happens if you don't register

Not registering as an employer when you should is not something HMRC overlooks. If you're late registering, you can face penalties and interest on unpaid tax.

It can also cause problems for your employees. Without the right PAYE records, they could end up on the wrong tax code, which means paying the wrong amount of tax.

If you're not sure whether you need to register, it's better to check sooner rather than later.

ERN vs other business numbers

It's easy to mix up the different numbers a business can have. Here's what each one is.

• ERN (Employer Reference Number): your PAYE reference, used for payroll and employee tax records
• UTR (Unique Taxpayer Reference): a 10-digit number used for self-assessment and corporation tax
• VAT registration number: only relevant if you're VAT registered
• Company registration number: issued by Companies House when a limited company is formed

Each one does a different job. Your ERN is specifically for your role as an employer.