Taking on your first employee

GOV.UK's step by step guide starts with checking you can afford to take someone on. The real cost is more than the wage: employer National Insurance at 15% on earnings above £5,000 a year, pension contributions for eligible staff, insurance, and payroll software or a payroll service. Our guide to employer National Insurance explains whether the Employment Allowance can offset part of that.

Pay must be at least the minimum wage for the worker's age.

Home Office guidance explains that employers must check a person's right to work in the UK before employing them. Do this before their first day.

GOV.UK says you need employers' liability insurance as soon as you become an employer, from an authorised insurer, covering at least £5 million. You can be fined £2,500 every day you are not properly insured, and £1,000 if you do not display the certificate where employees can see it. There are exemptions, including where the only person you employ is a family member.

GOV.UK says you must register as an employer before the first payday to get your PAYE reference number, and that you cannot register more than 2 months before you start paying people. The same applies to a limited company paying its only director.

Once registered, you run payroll every payday. Using payroll software, you work out tax and National Insurance and send a Full Payment Submission to HMRC on or before payday. Claims such as statutory pay go on an Employer Payment Summary by the 19th of the following tax month. Statutory Sick Pay for 2026/27 is £123.25 or 80% of the employee's average weekly earnings, whichever is lower. Our payroll page explains when people hand this to someone else.

An employer must give employees and workers a written statement of the main terms when they start. GOV.UK says the principal statement, covering things like pay, hours, holiday and start date, is due on the first day of employment, and the wider written statement, including pension arrangements and disciplinary procedures, within 2 months.

Pensions come next. A worker must be automatically enrolled if they are aged between 22 and State Pension age, earn at least £10,000 a year and usually work in the UK. For 2026/27 the qualifying earnings band runs from £6,240 to £50,270. Check the contribution levels on GOV.UK or with your pension provider.

The Government has accepted a National Living Wage of £13.21 an hour from April 2027, with £11.27 for 18 to 20 year olds and £8.31 for 16 to 17 year olds and apprentices. These are announced rates, so build them into any budget for next year. If you are deciding whether to employ someone through a company, our guide to sole trader or limited company may also help. If you would like an accountant to set up payroll, we read every enquiry and, where we can, put you in touch with a local accountant; how it works explains the process.