Quick Summary
- Check the person's right to work in the UK before they start.
- Register as an employer with HMRC before the first payday.
- Run payroll and report to HMRC on or before each payday (RTI).
- Employer National Insurance is 15% above £5,000 a year, but the Employment Allowance can cut it by up to £10,500.
- You need employers' liability insurance and a workplace pension.
Taking on your first member of staff is a big step for any small business. There are legal duties to get right from day one — but once payroll is set up, most of it runs automatically. Here's your checklist.
Before they start
- Decide the pay. It must be at least the National Minimum Wage or National Living Wage for their age.
- Check their right to work in the UK and keep a copy of the check. Fines for employing someone without the right to work are severe.
- Get employers' liability insurance, which is compulsory as soon as you employ someone, with cover of at least £5 million.
- Prepare a written statement of employment particulars, which must be given by the first day of work.
Register as an employer with HMRC
Register online up to 2 months before you first pay anyone. HMRC sends your employer PAYE reference and Accounts Office reference — allow up to 5 working days, and longer at busy times. Even a limited company paying only its director a salary above the lower earnings limit needs to register.
Set up payroll
Each payday, you must:
- Calculate tax, National Insurance, student loan and pension deductions
- Give the employee a payslip
- Send a Full Payment Submission (FPS) to HMRC on or before payday — this is Real Time Information (RTI)
- Pay HMRC by the 22nd of the following month (electronically)
You can use payroll software or outsource payroll to an accountant.
Employer costs in 2026/27
- Employer National Insurance: 15% on earnings above £5,000 a year per employee.
- Employment Allowance: reduces your employer National Insurance bill by up to £10,500 a year. It isn't available to limited companies where the only employee is a director.
- Pension contributions: at least 3% of qualifying earnings for eligible staff.
Example
A café hires one employee on £22,000 a year. Employer National Insurance is 15% × (£22,000 − £5,000) = £2,550 — fully covered by the Employment Allowance, so the business pays £0 employer National Insurance.
Workplace pension
Your auto-enrolment duties start on the first employee's start date. You must assess them, enrol them if eligible, and complete a declaration of compliance with The Pensions Regulator within 5 months. See our auto-enrolment guide.
Ongoing employer duties
- Statutory payments: sick pay, maternity, paternity and shared parental pay
- Holiday pay — at least 5.6 weeks a year for full-time staff, pro rata for part-time
- Starters and leavers: process P45s and new starter checklists
- Payroll records kept for 3 years after the end of the tax year
- Tips must be passed on in full under a written policy
Employee or contractor?
If you control when, where and how someone works, and they can't send a substitute, they're probably an employee — even if you call them self-employed. Getting this wrong can lead to backdated tax and National Insurance bills.
Frequently Asked Questions
What do I need to do before hiring my first employee?
Check their right to work, get employers' liability insurance, register as an employer with HMRC, set up payroll and prepare a written statement of employment terms.
How much does it cost to employ someone in the UK?
As well as wages, employers pay 15% National Insurance on earnings above £5,000 a year and at least 3% pension contributions. The Employment Allowance can cut the National Insurance bill by up to £10,500 a year.
How long does it take to register as an employer?
HMRC usually issues your employer PAYE reference within about 5 working days, but it can take longer, so register well before the first payday.
Can my limited company claim the Employment Allowance?
Yes, unless the director is the only employee paid above the secondary threshold. Taking on a non-director employee usually makes you eligible.
Do I need a workplace pension for one employee?
Yes. Auto-enrolment duties start with your first employee. You must assess them and enrol them if they're eligible.
Taking On Your First Employee?
We'll register you as an employer, set up payroll and pensions, and run every payday for you.
Sardar Muhammad, AAT
Sardar is the founder of LimeTree Accounting Solutions, an AAT-accredited practice in Govanhill, Glasgow. He works with sole traders, tradespeople, landlords and small limited companies across Glasgow and Clydebank.
This guide is general information based on UK and Scottish tax rules as at 13 October 2026. It is not personal advice. Rates and thresholds change, so speak to us about your own situation.