Hiring Your First Employee: A Checklist
Taking on your first member of staff marks an important milestone for any limited company. Along with the excitement of growing the business, you take on a set of legal and administrative duties that must be completed before — and after — the employee starts. This checklist covers every step you need to follow to hire correctly and stay compliant with UK employment law.
Hiring your first employee in the UK requires registering as an employer with HMRC for PAYE, verifying the employee's right to work, obtaining employer's liability insurance, setting up a workplace pension scheme, issuing a written employment contract on day one, and notifying HMRC on or before the first pay day. Many of these steps must happen before the person even starts — some need to be completed weeks in advance.
Key takeaways
- HMRC employer registration can take up to two weeks — apply as soon as you have agreed a start date and salary.
- Checking the employee's right to work in the UK is a legal requirement before they start; there is no grace period after employment begins.
- Employer's liability insurance is compulsory from the moment you have staff, with a minimum cover of £5 million.
- Workplace pension auto-enrolment must be completed within six weeks of the employee's start date for eligible workers.
- Every employee is entitled to a written statement of employment particulars from day one — this is a legal right, not optional.
What does it cost to employ someone?
Before you hire, understand the full cost. The salary you advertise is not the only cost to the company.
Salary. Must be at or above the National Living Wage (for workers aged 21 and over, £12.71 per hour from April 2026) or the National Minimum Wage for younger workers. Check GOV.UK for current rates.
Employer's National Insurance. Your company pays employer's NI on the employee's earnings above the Secondary Threshold. This is payable to HMRC each month via PAYE. Check GOV.UK for current rates and thresholds.
Pension contributions. As the employer, you must contribute a minimum of 3% of the employee's qualifying earnings to their workplace pension. The employee contributes at least 5%.
Holiday pay. The statutory minimum is 5.6 weeks' paid holiday per year. For a full-time employee, that is 28 days. This is a real cost — you are paying the employee when they are not working.
Employer's liability insurance. A legal requirement; budget for the annual premium.
As a rough guide, the total employer cost of someone on a given salary is typically 12–15% above that salary once NI and pension contributions are included. Factor this into your budget before extending an offer.
Before you hire: preparation checklist
Confirm employment status
Before advertising, decide whether you need an employee or a self-employed contractor. An employee has full employment rights — holiday pay, sick pay, protection from unfair dismissal, and more. A contractor has different rights and different tax treatment. HMRC's Check Employment Status for Tax (CEST) tool on GOV.UK helps you determine the correct status.
Write a clear job description
Define the role, responsibilities, required skills, and working hours. Be specific — a vague description leads to poor applications and makes it harder to set expectations once someone starts.
Advertise fairly
Job adverts must not discriminate on the basis of age, sex, race, disability, religion or belief, sexual orientation, gender reassignment, pregnancy, or maternity. Requirements in adverts must be genuinely necessary for the role — unjustifiable requirements can constitute indirect discrimination.
Conduct structured interviews
Certain questions are off-limits in interviews — for example, asking about pregnancy, childcare arrangements, or health conditions in a way that could be discriminatory. Focus on skills, experience, and competencies relevant to the role.
Legal requirements checklist
1. Check the right to work
Before the employee starts — on the first day at the absolute latest — you must verify that they have the legal right to work in the UK. This means checking original identity documents (such as a UK passport or biometric residence permit) and keeping a copy on file.
If you employ someone who does not have the right to work and you failed to check, you face a civil penalty of up to £60,000 per worker. Knowingly employing someone without the right to work is a criminal offence. There is no grace period. GOV.UK's right to work guidance explains which documents are acceptable.
2. Obtain employer's liability insurance
As soon as you have an employee, you are legally required to hold employer's liability insurance with a minimum cover of £5 million. This protects you financially if an employee is injured or becomes ill as a result of working for you. You must display the current certificate of insurance where employees can see it — or make it available digitally.
Trading without employer's liability insurance carries a fine of £2,500 per day. Most business insurers offer this as part of a broader commercial insurance package.
3. Issue a written statement of employment particulars
From the first day of employment, every employee is entitled to a written statement of their principal terms and conditions. This is a legal right under the Employment Rights Act 1996. The statement must cover:
- Names of the employer and employee
- Start date
- Pay rate, frequency, and payment method
- Hours of work and normal working days
- Holiday entitlement
- Notice periods (both employer and employee)
- Job title and a brief job description
- Place of work
4. DBS check (if required)
If the role involves working with children or vulnerable adults, you must carry out a Disclosure and Barring Service (DBS) check before the employee starts. For most office, sales, or technical roles, DBS checks are not required. Check GOV.UK's DBS guidance to confirm whether this applies to your role.
Payroll and tax setup checklist
5. Register as an employer with HMRC
You must register your company as an employer with HMRC before the employee's first pay day. Registration is done online via your Government Gateway account and can take up to two weeks. HMRC will issue a PAYE reference and an Accounts Office reference — you need both to run payroll and make payments.
Do not wait until after the employee has started. Apply as soon as you have agreed a start date. Our guide on How to Register as an Employer for PAYE explains each step in detail.
6. Set up payroll software
You need HMRC-approved payroll software to calculate PAYE deductions and submit Real Time Information (RTI) returns. Free software is available for employers with fewer than 10 employees. The software calculates income tax and National Insurance to deduct from the employee's pay, and your employer's NI contribution.
See our guide on Running Payroll for a Small Limited Company for guidance on choosing software and managing payroll each month.
7. Collect starter information
On or before the first pay day, collect the following from the employee:
- Full name, address, and date of birth
- National Insurance number
- Their P45 from a previous employer, or a new starter checklist if they do not have one
8. Pay at least the National Minimum Wage
Every employee must be paid at or above the relevant minimum wage for their age group. As of April 2026, the rates are:
| Age group | Minimum hourly rate |
|---|---|
| 21 and over (National Living Wage) | £12.71 |
| 18 to 20 | £10.85 |
| Under 18 | £8.00 |
| Apprentice | £8.00 |
9. Report and pay HMRC on time
Submit an RTI filing to HMRC on or before each pay day. Pay HMRC the income tax, employee NI, and employer NI by the 22nd of the following month (the 19th if paying by post). Failure to pay on time incurs interest and late-payment penalties.
Workplace pension checklist
10. Assess eligibility for auto-enrolment
From the first day of employment, you must assess whether the employee qualifies for automatic enrolment into a workplace pension. They are eligible if they are:
- Aged between 22 and State Pension age
- Earning above the auto-enrolment earnings trigger (check The Pensions Regulator for the current threshold)
- Working, or ordinarily working, in the UK
11. Choose a pension provider
You need a qualifying pension scheme in place before auto-enrolment falls due. If you have not yet chosen one, NEST (the government-backed scheme) is free to join and use. As the employer, you must contribute a minimum of 3% of qualifying earnings. The employee contributes at least 5%, deducted from their pay through payroll.
12. Tell The Pensions Regulator
After completing enrolment, you must submit a declaration of compliance to The Pensions Regulator within five months of your duties start date. This is done online and confirms that you have met your auto-enrolment obligations.
Key employment rights your employee has from day one
The right not to be discriminated against
Employees are protected from discrimination under the Equality Act 2010 from the moment employment begins — and from the point of recruitment in some respects. The nine protected characteristics are: age, disability, gender reassignment, marriage or civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation.
The right to the National Minimum Wage
No employee can lawfully waive their right to the National Minimum Wage, even by signing a contract that agrees to less. Any contract clause setting pay below the statutory minimum is void.
The right to 5.6 weeks' paid holiday
All employees are entitled to 5.6 weeks' paid annual leave per year from their first day. For a full-time employee working five days per week, this is 28 days per year. The statutory minimum does not require bank holidays to be given separately, but most employers include them within the 28 days.
The right to payslips
Every employee must receive a payslip on or before each pay day, showing gross pay, deductions, and net pay. Since April 2019, payslips for workers whose pay varies by hours must also show the number of hours the pay covers.
The right to Statutory Sick Pay (SSP)
If the employee is off sick for four or more consecutive days (including non-working days), they may be entitled to SSP from day four of their absence. The current weekly SSP rate is published on GOV.UK.
Ongoing employer duties after hiring
Hiring an employee creates an ongoing compliance rhythm:
Monthly. Run payroll and submit RTI to HMRC on or before each pay date. Pay HMRC by the 22nd.
Each pay period. Issue a payslip showing gross pay, deductions, and net pay.
Annually. Issue a P60 to every employee on your payroll on 5 April. Submit a P11D for any employees receiving expenses or benefits not processed through payroll. Review and renew employer's liability insurance.
On change. If the employee's pay, hours, or terms change materially, issue an updated written statement of employment particulars within one month of the change.
For a broader view of what you can legitimately claim as a business expense when employing staff, see our guide to Allowable Business Expenses for Limited Companies.
Hiring your first employee: complete step checklist
- Confirm employment status (employee vs contractor)
- Write a clear, non-discriminatory job description
- Advertise and shortlist candidates fairly
- Conduct structured, compliant interviews
- Make a conditional offer subject to right to work check
- Check right to work — before or on the first day
- Obtain employer's liability insurance (minimum £5 million)
- Register as an employer with HMRC — allow up to two weeks
- Set up HMRC-approved payroll software
- Issue a written statement of employment particulars on day one
- Complete any required DBS check before the employee starts
- Collect starter information (P45 or new starter checklist)
- Assess the employee for auto-enrolment eligibility
- Enrol eligible employees in a workplace pension within six weeks
- Run first payroll and submit RTI to HMRC on or before the first pay date
- Pay HMRC income tax, employee NI, and employer NI by the 22nd of the following month
- Complete declaration of compliance with The Pensions Regulator within five months
Frequently Asked Questions
When do I need to register as an employer with HMRC?
You must register before your employee's first pay day. HMRC registration can take up to two weeks, so apply as soon as you have agreed a start date. You can register up to two months before the first pay date. Registration is done online via your Government Gateway account.
Do I have to enrol my employee in a pension immediately?
You must assess and enrol eligible employees within six weeks of their start date. If they are eligible, enrolment cannot be delayed beyond this window. Employees can opt out after being enrolled, but you must enrol them first and keep records of any opt-out.
What documents can I use to check the right to work?
Acceptable documents include a UK or Irish passport, a biometric residence permit, or a share code from the Home Office online service for foreign nationals with leave to remain. GOV.UK publishes the complete list of acceptable documents.
Is employer's liability insurance compulsory if I only have one employee?
Yes. The legal requirement applies as soon as you have any employee, even one. You need a minimum of £5 million cover. Failing to hold employer's liability insurance carries a fine of £2,500 per day.
What is a P45 and what do I do if my new employee does not have one?
A P45 is a form issued by an employee's previous employer when they leave, showing their pay and tax deductions for the year to date. If your new employee has a P45, enter the tax code from it into your payroll software. If they do not have one — perhaps because this is their first job — use a new starter checklist to establish their correct tax code instead.
Summary
Hiring your first employee is an exciting step, but the legal and administrative duties are substantial. Start the HMRC employer registration process as early as possible — allow at least two weeks — then work through this checklist before and after the employee's first day. Getting the right to work check, payroll setup, written contract, and pension assessment right from the outset sets a solid foundation for growing your team compliantly.