How the UK’s Data (Use and Access) Act 2025 Impacts Payroll

Introduction — Why UK Data Laws Matter for Global Employers

Data privacy laws are far-reaching, often impacting operations outside of their countries of origin, and may even clash with those in other jurisdictions. However, it is always the responsibility of a company to understand its compliance needs in relation to data privacy and protection regulations. The UK is no exception to this.

Today, all employers handling employee data for payroll, for example, or collecting information during the hiring process, must be aware of the restrictions that surround how they store and use data. For this reason, it is now required of all companies working with or within the UK market to understand the benefits and challenges of the UK Data (Use and Access) Act 2025.

The Growing Importance of Data Privacy in International Hiring

Data privacy and security laws are a growing concern for employers and businesses the world over. Companies expanding globally today now need to consider the impact of regulations such as the EU’s General Data Protection Regulation (GDPR), the California Consumer Privacy Act (CCPA) and other US state equivalents, and China’s Personal Information Protection Law (PIPL), among others, and depending on the territories or regions involved.

Globally-minded companies, in particular, must understand when and where these laws may overlap with their operations.

The dangers of noncompliance with data security are obvious; in an increasingly digital world, leaks or illegal actions have the ability to cause not just immediate legal challenges but will continue to affect an employer’s brand image for a long time after the fact. Today’s workers are more aware than ever of the need for data security, and companies unable to keep up with ever-evolving legislation may risk being unable to hire top talent.

What’s New in the UK Data (Use and Access) Act 2025?

Brexit left a lot of uncertainty around UK laws, with data security certainly being a priority in terms of the need for clarification and refinement in a post-EU UK legal framework. The UK Data Use and Access Act (DUAA) has thus been designed to clarify the UK’s position on data sharing and usage rights, especially between businesses, government bodies, and approved third parties.

Put basically, it sets clearer rules on who can use and store data, for what purpose, and how, therefore hoping to encourage responsible innovation while maintaining strong data protection.

It’s in the specific ways that the Act will affect the ability of businesses to operate, however, that need to be further investigated in order to inform operational strategy going forward.

9 Major Provisions of the UK Data Act to Affect Businesses:

As a piece of legislation with far-reaching implications, the UK Data Act (2025) has the potential to affect everyone. However, the following 9 points outline the most important elements of the DUAA (2025), with particular focus on its impact on employers, especially in remote hiring and payroll:

1. Enhanced Clarity Around Data Use – Organizations must clearly define and disclose how personal data is used throughout the employment lifecycle, from pre-hiring to offboarding and, potentially, beyond. Privacy notices must now be made available to all employees and include purpose-specific explanations for collecting and processing data (e.g., recruitment, payroll, performance tracking) as it’s collected.
2. Stricter Consent Requirements – Data collection and usage consent must be requested in a way that’s detailed, explicit, and revocable. This is especially true in recruitment and third-party data sharing. As a result, blanket consent collection methods are no longer considered sufficient, meaning it’s the responsibility of businesses to ensure users must opt in for each distinct use of their data.
3. Shorter Response Times for Data Requests – The deadline for businesses responding to Subject Access Requests (SARs) has been reduced from 30 days to 15 business days.
4. Greater Transparency in Automated Decision-Making – Any employers using AI or automation in hiring (e.g., resume screening) must inform those affected in advance. Any use of AI in this manner will also require companies to provide explanations of such decisions and offer manual reviews upon request.
5. New Rules for Cross-Border Data Transfers – The act contains stricter requirements for transferring employee data outside the UK, where companies must now perform Data Transfer Risk Assessments, use UK-approved Standard Contractual Clauses (SCCs), and justify international payroll data flows before transferring personal data.
6. Mandatory Data Auditing – All companies are required to document and audit their data practices regularly. While this was an implicit requirement before the passing of this act, it now applies to both internal systems and services offered by third-party vendors (HR tech, payroll software).
7. Expanded Definition of Data Controllers – Connected to the above, the definition of a “data controller” has been expanded to now include third-party platforms and joint ventures managing recruitment or HR data on a company’s behalf. This will increase shared responsibility concerning data and increase compliance complexity.
8. Stronger Employee Rights – Through this act, employees gain the right to object to processing based on legitimate interest, as well as the right to data portability in structured formats. Finally, employees now have more control over how long data is retained after leaving a company.
9. Revised Penalties and Enforcement – Companies face higher fines for noncompliance, though maximum penalties remain similar to GDPR thresholds (up to £17.5 million or 4% of global turnover). Enhanced scrutiny will also increase powers for the Information Commissioner’s Office (ICO) to conduct investigations and impose penalties.

UK Data Act Key Impacts on Businesses: The Main Points

• Compliant businesses in the UK can now access government-held datasets more easily (e.g., transport, health, energy data).
• This is intended to support product development, market research, or service improvements.
• DUAA creates a framework for “Smart Data Schemes“, making it easier for consumers to share their data with trusted and compliant third parties (like fintech or healthtech firms).
• Businesses handling data under these schemes must follow stricter data governance and security standards.
• Companies are expected to invest in data protection measures, audits, and transparency mechanisms.
• Long-term, this will likely mean an increased compliance workload, especially for SMEs without globally minded data policies.

UK Data (Use and Access) Act vs GDPR: A Comparison

The UK’s new Data Use and Access Act, being primarily aimed at clarification and streamlining in a post-Brexit world, contains many similarities with previous regulations under the GDPR, both in terms of overarching ideals and particular points. However, it seeks to offer a more targeted approach to data security that keeps UK competitiveness in mind, alongside clarifying the sticking points of the GDPR.

On the one hand, while the Act is intended to boost UK business potential, it places new responsibility for data security firmly in company hands, requiring yearly audits of those handling employee data for hiring or payroll purposes, and it sets stricter limits on how employers collect and store personal data, particularly limiting data collected during the hiring process to purpose-driven consent. It also reduces Subject Access Request (SAR) timelines to 15 days, rather than the 30 allowed in the EU, prompting companies to be better equipped to respond rapidly to employee demands for transparency regarding the content and usage of collected data.

Companies operating in the UK will also now have to disclose the use of any automation software as part of the hiring process, a key departure from EU requirements, which will prompt companies to reconsider the tools they use to optimize hiring processes.

Finally, the UK Act increases the speed at which penalties incurred for infraction rise to higher rates, as well as increasing maximum fines to £17.5M or 4% of global turnover for noncompliance.

On the other hand, it streamlines compliance by removing the need for GDPR compliance for those companies operating entirely within the UK, and offers much greater clarity on compliant use of technology as part of recruitment or payroll processes than other equivalent data laws.

GDPR vs UK Data (Use and Access) Act

The Timeline for Implementation and Data Act Enforcement

The Act was passed by the UK government in June 2025, quickly gaining royal assent and passing into law. However, the government has said that the rest of 2025 will remain a transitory period, and enforcement will begin in 2026.

Companies are expected to make clear efforts to begin the transition of any systems or policies affected by this act in 2025, as ignorance of the changes will not be an acceptable excuse once enforcement begins in earnest.

The Impact of the UK Data Access Act on Remote Hiring

Remote hiring has become standard practice for many companies operating across borders, with the UK being no exception. Interestingly, in 2025, there has been a decrease in remote job listings put online, but demand remains high and continues to increase. However, the UK’s Data (Use and Access) Act 2025 introduces new complexities that employers must manage carefully if considering remote hiring options.

Whether hiring remote workers in the UK or processing UK applicant data through global systems for remote work abroad, organizations must expect to face stricter control regarding how information is gathered, where it is stored, and who can access it. The major impact of the 2025 UK Data Accent Act on remote hiring will be a renewed emphasis on responsible data handling, transparency, and consent, particularly in relation to job applicants.

As a result, remote hiring processes may need significant review and updates to ensure full legal alignment. Alternatively, working with already-compliant payroll or employment outsourcing partners can avoid much of the enhanced compliance burden that required changes to internal procedures may bring.

Data Collection and Storage for Remote Job Applicants

Under the new Act, any data collected during remote hiring must be limited to that collected with specific and clearly stated purposes and then stored in accordance with strict jurisdictional rules. In this way, employers can no longer use vague language on consent forms or store data indefinitely “just in case.”

Specifically, this means that personal information (including everything from CVs to identity documentation) must be collected with informed consent. Once collected, it must be stored securely on protected systems and then deleted when no longer necessary.

For international employers using centralized applicant tracking systems or global CRMs, even those not hiring in the UK itself, this might mean assessing whether UK applicant data is being inadvertently processed or transferred outside approved jurisdictions.

Employer Liability for Remote Hiring Compliance

Remote hiring increases an employer’s exposure to compliance issues under UK data privacy laws, as employers are now held directly accountable for any misuse, overreach, or unlawful transfer of candidate data, even when that data is processed by third parties or AI-driven platforms.

Failure to comply can quickly result in fines or reputational damage, as the 2025 Act places the onus on employers to document compliance procedures and demonstrate that all remote hiring practices meet the law’s transparency and consent standards.

Verifying Right-to-Work and Background Checks Under New Rules

As integral parts of a properly done hiring process, right-to-work verification, background screening, and criminal record checks are all steps that involve sensitive data. Now, these steps face tighter controls under the 2025 law as employers must ensure that such checks are conducted transparently and in a manner that respects individual privacy rights. This will include providing applicants with clear explanations of why data is needed, who will see it, and how long it will be stored. This information should be shared proactively and as part of the standard data collection process.

For businesses that rely on third-party screening services, it’s now critical to confirm that vendors are fully compliant with the UK’s updated requirements, especially when checks involve cross-border data flows.

However, it should be noted that the new Data Access Act also makes it quicker and easier for employers to work with UK government agencies that typically provide information during these particular background checks, provided such checks are conducted in accordance with the privacy requirements already described.

How the 2025 UK Data Law Affects Payroll and HR Providers in Particular

The 2025 legislation introduces a number of necessary operational changes for those processing payroll and HR functions, including third-party or overseas service providers. While these changes are generally helpful in terms of streamlining and security they require, making the changes can be tricky, particularly for those handling UK-based employee data as part of a broader global workforce.

The new act requires updated consent checks when collecting payroll data and increased documentation expectations. For companies providing or using payroll and HR software, these additional requirements mean that those responsible for collecting and processing UK payroll data must reassess how employee data is managed, including how it’s shared across platforms as needed.

These changes will likely have wide-reaching effects on how employee salaries are processed and how international teams stay compliant with data privacy laws.

New Payroll Data Processing Standards

The UK Act places a renewed emphasis on transparency and employee control when it comes to payroll-related data processing, meaning employers must now ensure that employees understand exactly what personal and financial data is collected, how it will be used, and how long it will be stored.

Whether you are managing payroll yourself or outsourcing these functions to a professional HR support service, this will require revisiting pay slip generation, bank detail collection, and tax documentation processes, with any out-of-date or inadequate processes needing extra attention. In the case of those outsourcing payroll to third parties, liability updates will now still require you to be informed and responsible for the correct collection, storage, and usage of such data.

Payroll managers must also demonstrate compliance through regularly updated audit logs, consent tracking, and up-to-date privacy consent documentation.

Third-Party HR Tech and Software Compliance

As an increasingly popular option when facing the heightened complexities of data privacy and processing requirements today, many companies now rely on third-party HR platforms and SaaS tools to manage onboarding, employee records, and benefits. This is a particularly effective option for companies working in or expanding to multiple markets, as the expertise that third-party service providers can offer in unfamiliar markets is a great way to avoid compliance errors stemming from a lack of local knowledge.

However, due to the awareness of this practice and the dilution of responsibility it can entail when used improperly or when working with unqualified partners, the new UK law requires these tools or providers to meet stricter compliance standards, not just in terms of data security, but also data transparency and purpose limitation.

Employers are now responsible for ensuring that any vendor storing or accessing UK employee data has updated its practices to reflect the 2025 rules. This may involve taking steps such as contractual reviews, vendor audits, and requiring certifications of compliance, especially for tools that involve automated decision-making or cloud-based storage outside of the UK.

These challenges can be particularly acute for providers handling cross-border payroll for remote UK workers or expatriates, where multiple legal standards may apply to a single transaction. As a result, it’s more important than ever for businesses to be aware of the partners they work with and the way that services are provided.

Compliance Tips for UK Data Privacy – What International Employers Should Do Now in the Wake of the 2025 UK Data Use and Access Act

The Data (Use and Access) Act 2025 (DUAA) introduces new expectations around how employee and candidate data is collected, stored, shared, and kept, and as enforcement of the law ramps up, employers will need to show that they’re proactively revising their internal processes, vendor relationships, and workforce training to ensure full alignment.

While the law can introduce complexity, especially for those managing distributed or remote teams, there are clear and actionable steps employers can take now to remain ahead of the curve.

1.     How to Update Your Data Handling Policies and Contracts and Avoid Noncompliance

The first step toward compliance is a thorough review of how your organization handles data across the entire employment lifecycle. This may mean that existing privacy policies, employee handbooks, and contracts (particularly those concerning data consent and retention) may all need to be reviewed and updated to reflect the specific and limited data use requirements now outlined in the Act.

Businesses must be able to clearly outline for current and potential future employees why data is collected, how long it will be kept, and who it may be shared with, both internally and externally.

Contracts with third-party vendors, especially those providing recruitment or payroll services, must also be reviewed to ensure that responsibility is understood and accounted for under the UK’s updated definition of data controllers.

2.     Train HR Teams and Third-Party Providers

Regulatory compliance requires the teamwork and integration of multiple departments, not just HR and hiring teams. To meet the obligations of the UK DUAA, all staff responsible for data handling must be trained to properly respond to subject access requests (SARs), properly manage consent, and understand correct data storage, among other compliance requirements.

However, equally important yet potentially far more complex is the role of third-party providers or systems in the UK such as applicant tracking systems (ATS), payroll processors, and recruitment agencies, all of whom must also understand and adhere to the new standards. Without the ability to control how these third parties operate, it is up to responsible companies to carefully vet and monitor the actions of partner organizations to ensure they are also keeping up with relevant data privacy requirements.

Ongoing training and clearly defined accountability structures are therefore essential to reduce risk and maintain compliance.

3.     Implement Stronger Access Controls and Audit Trails

The DUAA reaffirms that transparency and traceability are core pillars of the UK’s approach to data protection, meaning employers dealing with UK personnel or data must adopt systems that not only protect data but also document every instance of access or use. This may include introducing multi-factor authentication and should always include detailed access logs capable of identifying who accessed employee or applicant data, when, and for what purpose.

By creating tighter access control systems and robust audit trails, businesses will be better positioned to demonstrate compliance, respond to regulatory inquiries, and build trust with their employees and partners.

Final Thoughts: Staying Compliant and Competitive in the UK Market

While the 2025 Data Use and Access Act’s primary purpose may be to simplify the complexities of post-Brexit Britain’s relationship with existing legal systems such as that described in the GDPR, it also serves as a reminder that compliance with Data Privacy and Security regulations is no longer a preference or unique selling point, but a basic requirement for international businesses.

At the same time, this act and others like it are continually clarifying requirements, offering UK-focused businesses a way to stay competitive in the local market. For those companies with operations that work across borders, this change may signal that it’s time to change or review current practices, but a continuous and evolving approach to data security can only be beneficial for long-term operations.

The Strategic Role of Data Privacy in Global Hiring

The 2025 UK Data Use and Access Act demonstrates the key role that personal information now plays in not only consumer practices but also internal systems.

Essentially, while the rules are getting clearer, compliant data handling requires consistently more and more time and energy to ensure. To safely and successfully enter the global hiring market today, businesses must be able to guarantee that their hiring practices reflect both best practices and legal requirements, whether that’s in the UK or elsewhere, and this compliance comes at a price.

Whether the cost comes in terms of hiring extra administrative staff or the added time it will take existing staff to manage new and evolving regulatory operations, in-house management of global hiring and employment is increasingly resource intensive. That’s why picking the right compliance assurance strategy can be a decisive factor in managing streamlined and effective global operations.