Hiring your first employee

Section 01

Before you advertise

1. 01

   Define the role clearly

   Write a job description that specifies the duties, required skills, hours, location, and salary range. A clear job description reduces the risk of hiring the wrong person and forms the basis of the employment contract.

2. 02

   Decide on employment status

   Are you hiring an employee, a worker, or engaging a self-employed contractor? The distinction matters for tax, rights, and your obligations. If you want someone to work regular hours under your direction, they are almost certainly an employee. See our IR35 guide if you are considering a contractor.

3. 03

   Check you can afford it

   The true cost of an employee is their gross salary plus Employer's National Insurance (13.8% on earnings above £5,000 from April 2025), pension contributions (minimum 3% of qualifying earnings), and any benefits. Use the Employer NI calculator to estimate the full cost.

Section 02

Before the first day — legal requirements

1. 01

   Carry out a Right to Work check

   You must check that every employee has the legal right to work in the UK before they start work. For British and Irish citizens, this means checking a passport or birth certificate plus National Insurance number. For non-UK nationals, check their visa or settled status via the Home Office online service. Keep a copy of the documents checked.

2. 02

   Register as an employer with HMRC

   Register at gov.uk/register-employer before your first payday. You will receive a PAYE reference number and an Accounts Office reference number. You need these to set up payroll software and make payments to HMRC.

3. 03

   Provide a written statement of employment particulars

   From April 2020, all employees must receive their written statement on or before day one. This is a legal requirement. It must include pay, hours, holiday entitlement, notice periods, job title, and place of work. Use our free employment contract template as a starting point.

4. 04

   Set up payroll software

   You must report payroll to HMRC in real time (RTI) on or before each payday. Use HMRC-recognised payroll software — FreeAgent, Xero, QuickBooks, and Sage all support RTI. HMRC also offers a free Basic PAYE Tools for businesses with fewer than 10 employees.

5. 05

   Get Employer's Liability insurance

   Employer's Liability insurance is a legal requirement for almost all businesses with employees. You must have at least £5 million of cover and display your certificate. Premiums typically start from £60–£150 per year for a single employee.

6. 06

   Carry out a health and safety risk assessment

   Employers with 5 or more employees must have a written health and safety policy. Even with fewer employees, you must carry out a risk assessment and take reasonable steps to protect your staff. The HSE provides free guidance and templates at hse.gov.uk.

Section 03

Within 6 weeks of the start date — pension auto-enrolment

• Eligible employees: aged 22–66, earning over £10,000 per year (£833/month).
• Non-eligible employees: aged 16–21 or 67+, or earning £6,240–£10,000 — they can opt in but you are not required to enrol them automatically.
• Minimum contributions: employer must contribute at least 3% of qualifying earnings; employee contributes at least 5% (total 8%).
• Choose a pension provider: NEST (National Employment Savings Trust) is the government-backed default and accepts all employers. Other providers include The People's Pension and Smart Pension.
• Send a declaration of compliance to The Pensions Regulator within 5 months of your staging date.

Section 04

Ongoing obligations

• Run payroll on or before each payday and submit RTI reports to HMRC.
• Pay PAYE and National Insurance to HMRC by the 19th of each month (22nd if paying electronically).
• Issue payslips on or before each payday (a legal requirement).
• Keep records of working hours, holiday taken, and sick leave.
• Review pay annually — ensure rates remain above the NMW/NLW after each April increase.
• Re-enrol any employees who opted out of the pension every 3 years.
• Provide a P60 to each employee by 31 May each year.