Taking On Your First Employee: What Do You Need to Do?

Short answer: before your first employee starts, check they have the right to work in the UK, take out employers' liability insurance and register with HMRC as an employer before the first payday. Then run payroll through software, give them a written statement on their first day and set up a workplace pension if they qualify.

What do I need to sort out before they start?

Three things should be in place before their first day: a right to work check, employers' liability insurance and an agreed rate of pay.

• Right to work: GOV.UK says you must check that a job applicant is allowed to work for you in the UK before you employ them. You could face a civil penalty if you employ an illegal worker without having carried out a correct check.

• Employers' liability insurance: you need this as soon as you become an employer, covering you for at least £5 million from an authorised insurer. You can be fined £2,500 for every day you are not properly insured, and you could be fined £1,000 if you don't display the certificate where staff can see it. There are limited exemptions, for example for some family members, so check GOV.UK's list before relying on one.

• Pay: agree a rate that is at least the minimum wage for their age (see below).

When do I register as an employer with HMRC?

You must register before your first payday, but you cannot register more than 2 months before you start paying people. Your employer PAYE reference number arrives by letter, so leave time for it. You must also register if you are only employing yourself, for example as the sole director of a limited company.

How much do I have to pay them?

At least the National Minimum Wage. From 1 April 2026 the hourly rates are:

• £12.71 for workers aged 21 and over (the National Living Wage)

• £10.85 for those aged 18 to 20

• £8.00 for those under 18 (above school leaving age), and for apprentices aged under 19 or in the first year of their apprenticeship

Holiday is part of the cost too. Most workers on a 5-day week must get at least 28 days' paid annual leave a year (5.6 weeks), and you can choose to include bank holidays in that.

What does running payroll involve?

Each payday, you use payroll software to work out tax and National Insurance, give your employee a payslip and send a Full Payment Submission (FPS) to HMRC on or before that payday.

• Tell HMRC about your new employee on or before their first payday, using their P45 or, if they don't have one, HMRC's starter checklist to work out their tax code.

• Pay what you owe HMRC by the 22nd of the next tax month (the 19th if you pay by post).

• If you usually pay less than £1,500 a month, you may be able to pay quarterly instead.

If you'd rather not run payroll yourself, our payroll and auto-enrolment service covers registration, payslips and the FPS each payday.

How much will employer National Insurance cost?

For the 2026/27 tax year, employers pay 15% National Insurance on earnings above the secondary threshold of £96 a week, £417 a month or £5,000 a year.

If your employee is under 21, or an apprentice under 25, you pay 0% employer National Insurance on their earnings up to £967 a week (£50,270 a year) in 2026/27, and 15% above that.

For 2026/27, Employment Allowance can reduce your annual employer National Insurance bill by up to £10,500. You claim it by answering "Yes" to the Employment Allowance indicator on an Employer Payment Summary (EPS) in your payroll software. If your company has only one director, that director must not be the only employee liable for employer National Insurance, so it is worth checking your eligibility again once your first employee is on the payroll.

Do I have to put them in a workplace pension?

If they qualify, yes. Your pension duties start on the day your first member of staff starts work. You must automatically enrol staff who are aged between 22 and State Pension age, earn at least £10,000 a year (the 2026/27 earnings trigger) and normally work in the UK.

The minimum total contribution is 8%, of which the employer must pay at least 3%. For automatic enrolment in 2026/27, this is worked out on earnings between £6,240 and £50,270 a year.

What paperwork does my employee need on their first day?

A written statement of employment particulars. The main (principal) statement must be given on the first day of employment, with a wider written statement within 2 months. The principal statement includes, among other things:

• your name, their name, job title and start date

• how much and how often they are paid

• working hours and days

• holiday entitlement

• where they will work

• any probation period and other benefits

What if they are off sick?

For the 2026/27 tax year, Statutory Sick Pay is £123.25 a week, or 80% of the employee's average weekly earnings if that is lower. It is paid for the full days they are off sick that they would normally have worked, for up to 28 weeks.

Figures checked against GOV.UK guidance on 31 October 2026 for the 2026/27 tax year. Written by the Jackson Lee Accountants team, chartered certified accountants in Bury.

Need a hand with this? We're accountants in Bury, and our payroll service covers it for a fixed fee.

Talk it through with us

If you're about to take on your first employee, book a free, no-obligation 30-minute chat by phone, Teams or at our Bury office, or see your fixed fee online in 2 minutes. Prefer to talk now? Call 0161 327 0047.

Sources: GOV.UK – Get ready to employ someone for the first time; Register as an employer; Rates and thresholds for employers 2026 to 2027; Running payroll; Claim Employment Allowance; Employers' liability insurance; Check a job applicant's right to work; Written statement of employment particulars; Holiday entitlement; Workplace pensions for employers; Workplace pensions: what you, your employer and the government pay; Statutory Sick Pay.