Hiring your first employee in the UK? Learn how to set up payroll, register with HMRC, and meet pension requirements. Simple step-by-step guide.
Taking on your first employee is an exciting milestone for any business. It often signals growth, increased demand, and the next step in building your company.
However, becoming an employer also brings new responsibilities, particularly when it comes to payroll, PAYE, and workplace pensions. Getting things right from the start will help you stay compliant and avoid unnecessary stress or penalties.
This guide explains everything you need to know about hiring your first employee in the UK.
1. Register as an Employer with HMRC
Before paying your first employee, you must register as an employer with HMRC.
This allows you to operate PAYE (Pay As You Earn), the system used to deduct Income Tax and National Insurance.
You should register in advance, as it can take several days to receive your employer PAYE reference.
🔑 All employers need a PAYE reference to process payroll for their employees. You will receive this once registered with HMRC. (https://www.gov.uk/register-employer)
2. Set Up Payroll for Your Employee
Once registered, you’ll need to set up a payroll system.
Payroll is used to:
- Calculate employee pay
- Deduct tax and National Insurance
- Produce payslips
- Submit information to HMRC
In the UK, payroll must be reported through Real Time Information (RTI), meaning you must submit details to HMRC every time you pay your employee.
You can either run payroll yourself using software or outsource it to a specialist.
🔑 Payroll must be reported to HMRC via RTI on or before each payday.
3. Collect Employee Details
To run payroll correctly, you’ll need the following information from your employee:
- Full name and address
- Date of birth
- National Insurance number
- P45 or starter checklist
Accurate information ensures your employee is taxed correctly from the beginning.
🔑 Every employee must be correctly set up on payroll using accurate personal details.
4. Provide Payslips (Legal Requirement)
Employers must provide payslips to their employees on or before each payday.
Payslips must include:
- Gross pay
- Deductions (tax, NI, pensions)
- Net pay
🔑 Providing payslips is a legal requirement for all UK employers.
5. Set Up Workplace Pensions (Auto-Enrolment)
When hiring your first employee, you must meet auto-enrolment pension duties.
This includes:
- Assessing employee eligibility
- Automatically enrolling eligible staff
- Making employer contributions
- Writing to employees with required information
Even if your employee does not qualify, you still have responsibilities as an employer.
🔑 All employers must comply with auto-enrolment duties, regardless of employee eligibility.
6. Understand Statutory Payments
As an employer, you may need to manage:
- Statutory Sick Pay (SSP)
- Statutory Maternity Pay (SMP)
- Other family-related payments
These must be calculated correctly and reported through payroll.
🔑 Most employees qualify for SSP, so understanding your responsibilities is essential.
7. Meet Payroll Deadlines and Keep Records
UK employers must:
- Submit RTI reports on or before payday
- Pay HMRC on time
- Keep accurate payroll records
Missing deadlines can result in HMRC penalties.
🔑 Strict payroll deadlines apply, missing them can result in fines starting from £100.
8. Should You Outsource Payroll?
Many new employers choose to outsource payroll to avoid errors and save time.
Using a payroll specialist can help ensure:
- Accurate calculations
- On-time submissions
- Full compliance with HMRC and pension rules
This is particularly useful when hiring your first employee.
🔑 Payroll involves multiple responsibilities, getting it right from the start helps you stay compliant and avoid unnecessary stress (and fines!).
FAQs
Do I need payroll for one employee in the UK?
Yes, you must operate PAYE and submit payroll information to HMRC.
When should I register as an employer?
Before your first payday, as registration can take several days.
Final Thoughts
Hiring your first employee in the UK is a big step, but payroll doesn’t need to be complicated.
With the right setup, you can ensure everything runs smoothly while focusing on growing your business.
Need Help with Payroll for Your First Employee?
If you’re setting up payroll for the first time, SAH Payroll offers a simple, all-inclusive service covering both payroll and workplace pensions.
With over 15 years’ experience, you’ll receive clear guidance, accurate processing, and ongoing support, all with transparent pricing and no hidden fees.
Feel free to get in touch for friendly, expert help.
SAH Payroll: Contact Services & Fees
Compliance Disclaimer
Disclaimer: This article is for general information only and does not constitute legal or payroll advice.
For the most up-to-date official guidance, please refer to: