Hiring your first employee is the moment a business becomes an employer — and the UK treats that as a legal status, not a metaphor. Before the new starter arrives, several registrations and documents must exist; after they arrive, a set of duties runs continuously. Get the skeleton right and the recurring admin is light.
Before they start
- Register as an employer with HMRC to get your PAYE reference — do it weeks ahead; the scheme must exist before the first payday.
- Check the right to work in the UK — see the actual documents or use the online checking service; keep the evidence.
- Prepare the written statement of employment particulars: pay, hours, place of work, holiday, notice — legally due on or before day one.
- Set up payroll — software or a bureau — for PAYE, National Insurance and real-time-information filings.
- Buy employers’ liability insurance: a legal requirement covering injury or illness at work, minimum £5 million of cover.
The pension obligation
If your employee earns above the earnings trigger and meets the age criteria, you must automatically enrol them into a workplace pension and contribute at least 3 per cent of qualifying earnings, with total minimum contributions of 8 per cent. The Pensions Regulator oversees compliance and writes to new employers — the letter is not optional admin. The trigger figures change; confirm the current thresholds at the time you hire.
The ongoing duties
- Pay at least the National Minimum Wage or National Living Wage for their age — the rates rise every April.
- Pay PAYE and National Insurance to HMRC on the schedule your payroll produces.
- Statutory sick pay, holiday entitlement (5.6 weeks), rest breaks and working-time limits apply to employees.
- Keep payroll and right-to-work records — HMRC and the Home Office can both ask.
The full employer checklist, current wage rates and auto-enrolment thresholds are on the gov.uk employing pages. Figures quoted are correct at the time of writing.
The cost nobody budgets
Salary is only part of what a hire costs. Add employer National Insurance on top of the gross wage, the auto-enrolment contribution, the insurance, the equipment and the payroll admin — and the all-in cost of a first employee runs meaningfully above the advertised salary. Budget at the true cost, not the headline number; the hires that go wrong are usually the ones priced optimistically.
It is also worth deciding the payroll route before the offer letter: software is cheap, a bureau is cheaper still in attention, and doing PAYE by hand is a false economy the first time a filing date collides with a busy week.
Finally, write the offer letter and the contract before the interview process concludes, not after — the hire who accepts on Thursday should start against paperwork you already had ready, not paperwork improvised over the weekend. The scramble to produce documents after the fact is how small employers miss the day-one requirements entirely.
Do I need to auto-enrol a part-time employee?
Only if they meet the criteria — age band and earnings above the trigger. Below it they can opt in, and you may still need to contribute. Check the current thresholds when you hire; they are reviewed annually.
Can I use a contractor instead of employing?
You can engage genuinely self-employed people — but if the working relationship looks like employment (set hours, your tools, your direction, personal service), HMRC and employment tribunals treat it as employment regardless of the label, with the tax and rights that implies.
Is employers’ liability insurance really compulsory for one employee?
Yes — it is a legal requirement the moment you employ anyone, with a minimum of £5 million of cover, enforced by a daily fine for non-compliance. Family businesses are largely exempt only for employing close family.
