Preparing to hire your first employee? It's a significant milestone for any growing business. To help you navigate the process with confidence, we've put together a practical checklist outlining some of the key steps and responsibilities you'll need to consider before bringing someone on board.
Understand the legal basics first
Before anything else, make sure you:
You'll also need to comply with:
- National Minimum Wage/National Living Wage laws.
- Health and safety rules for the profession.
- Pension auto-enrolment responsibilities (more on this below).
Register as an employer with HMRC
You must register with HMRC as an employer even if you're only taking on one person. This applies even if they're a family member or working part-time.
- When? At least 5 working days before your first payday.
- How? Online at gov.uk/register-employer.
- HMRC will send you a PAYE reference number, which you'll need for payroll and reporting.
Running payroll and understanding your tax responsibilities
As soon as you take on staff, you'll need to run payroll and stay compliant with a range of tax and reporting obligations. This is often where first-time employers underestimate the admin involved, which is why having an accountant in place from the start can save you a lot of hassle.
Setting up payroll
You'll need to set up a payroll system using suitable software. We recommend (and use) BrightPay, and can either support you with the setup or take care of the entire payroll process on your behalf.
If you're managing payroll yourself, each pay period you'll need to:
- Calculate pay including any statutory payments (e.g. sick pay, holiday pay).
- Deduct the right amount of Income Tax and National Insurance.
- Produce payslips for the employee.
- Submit a Full Payment Submission (FPS) to HMRC on or before the payday.
PAYE and National Insurance
Payroll software handles most of this automatically, but you still need to understand what's being reported:
- Income Tax is deducted via PAYE, based on the employee's tax code (provided by HMRC).
- National Insurance has two parts:
- Employee's NIC: deducted from their gross pay.
- Employer's NIC: an additional cost you cover as the employer.
For 2025/26, employer NICs apply on earnings above £12,570 per year (approx. £1047.80/ month), charged at 13.8%.
Employment Allowance
If eligible, you can claim up to £10,000 off your employer NIC bill through the Employment Allowance.
- Applies if your total employers' Class 1 NICs were under £100,000 in the previous tax year.
- This is claimed through your payroll software.
Statutory payments
You're also responsible for providing Statutory pay and leave, Many of these can be reclaimed through your payroll submissions, though the rules vary depending on the payment type.
Workplace pensions
You must assess your employee for auto-enrolment into a workplace pension scheme.
If they meet criteria (age 22 to State Pension Age and earn over £10,000/year), you must:
- Enrol them into a scheme.
- Contribute a minimum of 3% of qualifying earnings.
- Deduct at least 5% from the employee's pay.
You'll also need to make a declaration of compliance with The Pensions Regulator.
Keep records and stay compliant
Keep the following for at least 6 years:
- Payroll records
- Tax and NICs calculations
- Payments to HMRC
- Employee leave and sickness
- Any pension contributions
HMRC can audit you at any time.
How we can help
Taking on your first employee is exciting but comes with a fair amount of extra workload. We can help with:
- Employer registration
- Payroll setup and processing
- HMRC submissions
- Pensions setup and ongoing compliance
- Advice on grants and allowances (e.g. Employment Allowance or Apprenticeship support)
Need help getting started?
Get in touch and we'll guide you through each step, stress-free and fully compliant.