Construction payroll software must handle CIS subcontractor deductions and monthly CIS300 returns to HMRC, CIJC Working Rule Agreement pay rates and allowances, multiple pay frequencies (weekly for operatives, monthly for staff), and PAYE Real Time Information submissions. Platforms most commonly used by UK contractors include Moorepay, Zellis, Cintra, COINS Payroll, RedSky, and Sage 50 Payroll with a CIS module. Auto-enrolment pension obligations, holiday pay under the Working Time Regulations, and HMRC's IR35 off-payroll working rules for contractors are the three compliance areas most likely to create liability for construction employers who use a payroll system without construction-specific configuration.
Last reviewed May 2026
Construction payroll is more complex than payroll in most other sectors. A mid-sized UK contractor may simultaneously run PAYE payroll for directly employed operatives (on weekly pay, CIJC rates, and industry allowances), PAYE payroll for salaried staff (on monthly pay, different terms and conditions), and CIS deduction processing for self-employed subcontractors - each requiring different tax treatment, different pay elements, and different HMRC reporting obligations. Add auto-enrolment pension management, IR35 assessments for personal service company contractors, and the holiday pay calculation complexity introduced by the 2023 legislative changes for irregular-hours workers, and it becomes clear why generic payroll software frequently fails construction employers. This guide covers what UK construction payroll software must handle, which platforms appear most frequently on shortlists, and the compliance requirements that most commonly create liability.
CIS: The Core Construction Payroll Requirement
The Construction Industry Scheme is the single most important differentiator between construction payroll and general payroll. Under CIS, contractors must verify each subcontractor with HMRC before making the first payment, deduct the applicable tax rate (20% for verified subcontractors with gross payment status; 30% for unverified subcontractors; 0% for gross payment status holders) from the labour element of each payment, and submit a monthly CIS300 return to HMRC by the 19th of the month following the month of payment.
Payroll software that handles CIS must be able to: verify subcontractor UTR numbers with HMRC via the CIS online service; calculate the deductible amount by separating labour from materials in each payment (since the deduction applies only to the labour element); generate CIS payment and deduction statements for each subcontractor (which they use to reclaim deductions via their Self Assessment or Corporation Tax return); and produce the monthly CIS300 return in the correct format for HMRC submission. Payroll software that cannot do any of these natively requires workarounds - typically a combination of manual calculation and separate accountancy software - that create error risk and audit exposure.
HMRC's CIS compliance checks have intensified in recent years, with particular focus on false self-employment - arrangements where workers are treated as self-employed subcontractors for CIS purposes but whose working arrangements indicate an employment relationship. The HMRC Employment Status Indicator tool provides guidance on the employment status tests, but the underlying assessment requires a review of the actual working arrangements. Payroll software cannot resolve genuine employment status questions, but it should flag when a subcontractor's payment pattern (same hours, same rate, same contractor, every week) resembles an employment relationship and prompt a formal status review.
CIJC Working Rule Agreement: Pay Elements the Software Must Handle
Many UK construction employers apply the Construction Industry Joint Council (CIJC) Working Rule Agreement, which sets minimum pay rates, allowances, and conditions for the industry. The CIJC WRA covers: craft, skilled, and general operative pay rates (updated annually); daily fare and travel allowances (DAFTA), which are paid tax-free up to HMRC approved limits; subsistence allowances for workers staying away from home; and overtime and shift premium rates.
DAFTA (Daily Fare and Travel Allowance) is a particularly important payroll element. Under CIJC WRA Rule 5, workers are entitled to a fare and travel allowance when the distance from their home to the site exceeds certain thresholds. The allowance is tax and NIC-free up to the HMRC approved mileage allowance limits; above those limits, the excess is taxable. Payroll software used by CIJC employers must calculate DAFTA entitlements from the site distance data entered, apply the correct tax treatment, and report the taxable element correctly through RTI. Generic payroll software that treats all allowances as taxable, or that cannot calculate distance-based allowances at all, will either overcharge workers' tax (creating dissatisfaction and potential claims) or undercharge (creating HMRC liability).
Subsistence allowances for workers staying away from home (typically on projects requiring overnight accommodation) are treated similarly: tax-free up to HMRC approved limits, taxable above. HMRC's Employment Income Manual sets out the approved rates for subsistence; payroll software should apply these rates and flag payments above the approved limit for correct tax treatment.
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Platforms Used for UK Construction Payroll
Moorepay is one of the most widely used payroll platforms in UK construction, particularly for contractors with 50-500 employees and subcontractors. Its CIS module handles verification, deduction calculation, payment statements, and CIS300 returns. Its CIJC rate library is updated annually. It processes both weekly and monthly payroll frequencies and integrates with several HR and time and attendance platforms used in the construction sector.
RedSky is a construction-specific payroll and HR platform with strong CIS functionality and CIJC WRA support. It is designed specifically for the construction sector and handles the combination of directly employed PAYE workers, CIS subcontractors, and salaried staff within a single payroll run. Its labour costing module allocates payroll costs to project cost codes, which is essential for construction firms that need accurate project-level cost reporting.
COINS Payroll is the payroll module within the COINS construction ERP. Its primary advantage is integration with COINS's project management, commercial management, and subcontract management modules - payroll data flows directly into project cost reports without manual re-entry. It is most appropriate for contractors already using COINS as their primary business system.
Cintra is a UK payroll and HR platform with CIS capability and support for complex pay structures including multiple pay frequencies and allowance types. It is used across several industries but has specific experience in construction payroll. Its managed payroll service option (bureau payroll) suits contractors who want to outsource payroll processing entirely rather than running software in-house.
Sage 50 Payroll with the CIS add-on module is widely used by smaller construction contractors, particularly those already using Sage 50 Accounts. The CIS module adds subcontractor verification, deduction calculation, and CIS300 return production to the standard Sage 50 Payroll functionality. Its CIJC allowance handling requires manual configuration rather than a pre-built rate library, which adds setup complexity for first-time users.
| Platform | CIS native | CIJC rate library | Labour cost coding | Best for |
|---|---|---|---|---|
| Moorepay | Yes | Yes | Yes | 50-500 employees |
| RedSky | Yes | Yes | Yes | Construction-only payroll |
| COINS Payroll | Yes | Yes | Yes (ERP integrated) | COINS ERP users |
| Cintra | Yes | Configurable | Yes | Bureau payroll option |
| Sage 50 Payroll + CIS | Via add-on | Manual config | Limited | Smaller contractors, Sage users |
IR35 Off-Payroll Working Rules in Construction
The off-payroll working rules (commonly called IR35, though the current regime is technically the Chapter 10 ITEPA 2003 rules as reformed from April 2021) apply to medium and large construction businesses that engage workers through personal service companies (PSCs). Under these rules, the client (the construction contractor engaging the PSC) must determine whether the worker, if engaged directly, would be an employee. If the determination is "inside IR35", the client or the fee-payer (often a labour agency) must deduct income tax and NIC from payments to the PSC as if they were employment income.
Construction businesses that engage specialist contractors (structural engineers, project managers, quantity surveyors) through PSCs must have a formal employment status determination process and produce a Status Determination Statement (SDS) for each engagement. Payroll software that supports IR35 compliance should include an SDS template or integration with an employment status assessment tool, and should handle the PAYE deduction mechanics for inside-IR35 payments correctly. The HMRC Check Employment Status for Tax (CEST) tool is the primary HMRC-endorsed assessment tool, though its outputs are not legally definitive and professional advice is recommended for borderline cases.
The Construction Industry Training Board (CITB) levy applies to construction employers with a wage bill (including labour-only subcontractor payments) above £120,000 per year. Payroll software should be capable of producing the CITB levy return data - the total value of payments to PAYE employees and labour-only subcontractors in the levy year - accurately and without manual extraction from payroll records. The CITB levy guidance sets out which payments are included and excluded from the levy calculation.
Auto-Enrolment and Holiday Pay in a Construction Workforce
Auto-enrolment pension obligations apply to all UK construction employers from their duties start date. The Pensions Regulator requires that eligible workers (aged 22-66, earning above the £10,000 annual trigger) are automatically enrolled into a qualifying pension scheme. Construction operatives on weekly pay require the assessment to be conducted on a weekly basis - weekly earnings must be compared to the weekly pay period trigger (approximately £192 per week in the 2025-26 tax year). Payroll software that assesses eligibility only on an annual earnings basis will either over-enrol or under-enrol workers with variable weekly hours.
Holiday pay for construction operatives with variable hours has been a persistent compliance issue since the Supreme Court's decision in Brazel v Harpur Trust and the subsequent legislative clarification. The correct method for workers with irregular hours (including zero-hours construction operatives and casual workers) is to calculate holiday pay based on average weekly earnings over the preceding 52 weeks in which pay was earned. Construction payroll software should implement the 52-week average method by default for variable-hours workers, not the 12.07% accrual method that was widely used before the post-Brazel legislative changes. Payroll software that still defaults to 12.07% for variable-hours workers is producing non-compliant holiday pay calculations for this worker category.
FAQ
What happens if a contractor fails to deduct CIS from a subcontractor payment?
If a contractor fails to make the correct CIS deduction, HMRC can recover the unpaid amount from the contractor - not from the subcontractor who received the payment. HMRC can also charge interest and penalties on late or incorrect CIS deductions. Contractors who discover they have failed to deduct correctly should notify HMRC and make a voluntary disclosure before the error is identified in a compliance check, as voluntary disclosure typically results in lower penalties.
Can a construction operative be both a PAYE employee and a CIS subcontractor?
Not for the same work. A worker is either an employee (PAYE) or self-employed (CIS) for any given engagement, based on the actual nature of the working relationship. HMRC's employment status tests apply regardless of what the contract says. Treating a worker who has the characteristics of an employee as a CIS subcontractor creates liability for underpaid income tax, NIC, and potential penalties under the false self-employment rules.
What is the CIJC WRA and does it apply to all UK construction employers?
The CIJC Working Rule Agreement is a collective agreement negotiated between employer associations (including Build UK) and trade unions (Unite and GMB) setting minimum pay rates, allowances, and conditions for construction workers in England, Wales, and Scotland. It does not apply automatically to all construction employers - it applies where the employer is a member of a participating employer association, or where the WRA is incorporated into individual employment contracts. Many UK contractors apply CIJC rates voluntarily as the industry standard, even where not strictly required.
How does the CITB levy affect a contractor's payroll software requirements?
The CITB levy is calculated on the employer's total payroll costs for PAYE employees and labour-only subcontractor payments. Payroll software must be able to produce a total of these payments for the levy year (6 April to 5 April) in the format required for the CITB levy return. Labour-only subcontractor payments (CIS deductions applied) are included; payments to subcontractors who supply both labour and materials are excluded. The payroll system must therefore distinguish between labour-only and supply-and-fix subcontractor payments for levy calculation purposes.
Do weekly-paid construction operatives have the same auto-enrolment rights as monthly-paid staff?
Yes. Auto-enrolment rights apply to all eligible workers regardless of pay frequency. For weekly-paid workers, the employer must assess eligibility on a weekly basis, comparing weekly earnings to the weekly pay period earnings trigger. The assessment must be conducted every pay period - it is not sufficient to assess weekly-paid workers once per year on an annualised basis, as this will miss workers whose earnings fluctuate across the earnings trigger threshold.
How We Verified
This article draws on HMRC guidance on the Construction Industry Scheme, CIS300 returns, and off-payroll working rules; CITB guidance on the levy; The Pensions Regulator guidance on auto-enrolment; and CIJC Working Rule Agreement published rate schedules. Holiday pay methodology was checked against GOV.UK guidance following the 2023 legislative changes. Platform capability descriptions are based on publicly available information as of May 2026. No vendor paid for inclusion in this article.
