Hiring Your First Employee in the UK: Everything You Need to Do

Before you hire anyone

Taking on your first employee is a significant step. You take on legal obligations from the moment someone starts work — and some begin before they do.

Step 1: Check their right to work in the UK

Before anyone starts, you must check they have the legal right to work in the UK. Failure to do so can result in a civil penalty of up to £60,000 per illegal worker.

For British and Irish citizens, check one document from List A of the Home Office guidance. For others, use the government's online right to work checking service at gov.uk/check-job-applicant-right-to-work.

Step 2: Get employer's liability insurance

Legally required under the Employers' Liability (Compulsory Insurance) Act 1969. Minimum cover: £5 million. Fine for non-compliance: £2,500 per day. Get this before your employee starts.

Step 3: Register as an employer with HMRC

Register at gov.uk/register-employer before your employee's first payday. HMRC will give you a PAYE reference number. Allow up to 5 working days.

Step 4: Set up payroll

You need payroll software to calculate and report PAYE income tax and National Insurance. Under Real Time Information (RTI), you must report pay and deductions on or before each payday.

• Free: HMRC's Basic PAYE Tools (up to 10 employees)
• Paid: Xero, QuickBooks, Sage, Brightpay

Step 5: Pay at least National Minimum Wage

From April 2025:

• Age 21 and over (National Living Wage): £12.21 per hour
• Age 18–20: £10.00 per hour
• Under 18: £7.55 per hour
• Apprentices: £7.55 per hour

Paying below NMW is a criminal offence. HMRC enforces this actively.

Step 6: Provide a written statement of terms

From day one, provide a written statement covering: name, start date, job title, pay, hours, holiday, notice periods, sick pay, and pension. Most employers provide a full employment contract. Use a solicitor or HR platform like CharlieHR for a compliant template.

Step 7: Set up auto-enrolment

If your employee is aged 22 to State Pension age and earns over £10,000/year, you must automatically enrol them into a workplace pension.

1. Choose a provider (NEST is free and government-backed)
2. Enrol from their first day
3. Make minimum 3% employer contributions
4. Write to them within 6 weeks explaining what you've done

The Pensions Regulator enforces this strictly.

Step 8: Holiday entitlement

All workers are entitled to 5.6 weeks' paid holiday per year (28 days for a 5-day week). This can include bank holidays. Part-time workers get the same pro-rated.

Step 9: Statutory Sick Pay

If off sick for 4+ consecutive days, pay SSP from the 4th qualifying day. Current rate: £116.75/week for up to 28 weeks.

Ongoing obligations

• Run payroll and submit RTI reports on or before every payday
• Pay PAYE and NI to HMRC monthly or quarterly
• Provide payslips on or before every payday
• Provide P60s by 31 May each year
• Manage pension contributions and re-enrolment every 3 years

What to do next

1. Register as an employer at gov.uk/register-employer
2. Get employer's liability insurance
3. Set up payroll software
4. Prepare a written statement of employment particulars
5. Set up auto-enrolment with NEST

---

Employment law changes regularly. ClearPath can answer specific questions about your situation.