Small Business Accountants

How do I hire a new employee?

Hiring a new employee in the UK requires the employer to check the person's right to work, agree a written statement of employment particulars within two months, register as an employer with HMRC for PAYE, take out employer's liability insurance, and enrol eligible staff in a workplace pension. New starters should be added to the payroll on or before the first payday using Real Time Information reporting.

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Key takeaways

  • Register for PAYE with HMRC before your first payday. You need a PAYE reference number to report employee deductions, even if their earnings fall below the tax threshold.
  • Verify every new hire's right to work in the UK before their first day. Failing to carry out this check can lead to civil penalties of up to £45,000 per illegal worker.
  • Issue a written statement of employment particulars on or before the employee's start date, covering job title, pay, hours, holiday entitlement and notice period.
  • Take out employer liability insurance with minimum cover of £5 million. This is a legal requirement for almost all businesses that employ staff, including part-time workers.
  • Set up auto-enrolment into a workplace pension for eligible employees aged 22 to state pension age who earn above £10,000 per year, with a minimum 3% employer contribution.

<p>To hire a new employee, you need to:<br></p><ul><li>Check if your business is <a href="https://www.gov.uk/get-ready-to-employ-someone?step-by-step-nav=47bcdf4c-9df9-48ff-b1ad-2381ca819464" target="_blank">ready to hire a new staff</a> </li><li>Kickstart your recruitment efforts. You can recruit employees on <a href="https://www.acas.org.uk/hiring-someone" target="_blank">your own</a>, or by using a <a href="https://www.gov.uk/using-a-recruitment-agency-to-find-staff?step-by-step-nav=47bcdf4c-9df9-48ff-b1ad-2381ca819464" target="_blank">recruitment agency</a>. </li><li>Check that the candidate has the <a href="https://www.gov.uk/check-job-applicant-right-to-work?step-by-step-nav=47bcdf4c-9df9-48ff-b1ad-2381ca819464" target="_blank">right to work in the UK</a></li><li>Find out if they require a <a href="https://www.gov.uk/dbs-check-applicant-criminal-record?step-by-step-nav=47bcdf4c-9df9-48ff-b1ad-2381ca819464" target="_blank">DBS check</a></li><li>Check if you need to enrol the employee into a workplace pension scheme. Here's a <a href="https://www.thepensionsregulator.gov.uk/en/employers/new-employers" target="_blank">guide for first-time employers</a></li><li>Before carrying out salary negotiations, you need to check the National Minimum Wage for different <a href="https://www.gov.uk/national-minimum-wage-rates?step-by-step-nav=47bcdf4c-9df9-48ff-b1ad-2381ca819464" target="_blank">ages</a> and <a href="https://www.gov.uk/minimum-wage-different-types-work?step-by-step-nav=47bcdf4c-9df9-48ff-b1ad-2381ca819464" target="_blank">types of jobs</a>. You'll also need to finalise the <a href="https://www.gov.uk/employment-contracts-and-conditions" target="_blank">employment contract</a>, and provide a <a href="https://www.gov.uk/employment-contracts-and-conditions/written-statement-of-employment-particulars?step-by-step-nav=47bcdf4c-9df9-48ff-b1ad-2381ca819464" target="_blank">written statement of employment particulars</a> within 2 months of the start of employment. </li><li><a href="https://www.gov.uk/new-employee?step-by-step-nav=47bcdf4c-9df9-48ff-b1ad-2381ca819464" target="_blank">Notify HMRC</a> that you've hired a new employee. Make sure you're aware of the <a href="https://www.gov.uk/running-payroll?step-by-step-nav=47bcdf4c-9df9-48ff-b1ad-2381ca819464" target="_blank">steps you need to take when you start paying your employee</a>.<br></li></ul><p>If you're hiring staff for the first time, refer to HMRC's guide on the <a href="https://www.gov.uk/employing-staff" target="_blank">steps you need to take</a>.</p>

Frequently asked questions

What legal steps must I complete before hiring my first employee?
Before your first employee starts, you must register as an employer with HMRC to get a PAYE reference number, obtain employer liability insurance with at least £5 million cover, and prepare a written statement of employment particulars. You also need to check the candidate's right to work in the UK, decide whether a DBS check is required for the role, and choose a workplace pension provider for auto-enrolment.

When do I need to register for PAYE with HMRC?
You must register for PAYE before your first payday. HMRC advises registering as soon as you know you will be employing someone, because it can take up to 15 working days to receive your employer PAYE reference number and Accounts Office reference. You need these references to submit payroll reports and make tax payments on time.

How do I check an employee's right to work in the UK?
You must verify original documents such as a UK or Irish passport, or a valid visa or biometric residence permit. For individuals with a share code from the Home Office online checking service, you can verify their status digitally. Record the date of the check and keep copies of all documents. Carrying out the check correctly before the employee's start date gives you a statutory excuse against civil penalties.

What must be included in an employment contract?
A written statement of employment particulars must include the employer and employee names, job title, start date, pay rate and frequency, working hours, holiday entitlement, notice period, workplace location and pension arrangements. Since April 2020, this statement must be provided on or before the employee's first day of work rather than within two months of starting.

Do I need employer liability insurance?
Yes. Employer liability insurance is a legal requirement for nearly all UK businesses with employees. You must have at least £5 million of cover from an authorised insurer, and the certificate must be displayed where employees can easily read it or made available electronically. Failing to hold valid cover can result in a fine of up to £2,500 for each day you are not insured.

When do I need to set up a workplace pension?
You must set up a workplace pension scheme and auto-enrol eligible employees from their first day of employment. Eligible employees are aged between 22 and state pension age and earn more than £10,000 per year. The minimum employer contribution is 3% of qualifying earnings. You should choose a pension provider and have the scheme ready before your first employee's start date.

How much does it cost to employ someone beyond their salary?
On top of gross salary, you pay employer National Insurance at 15% on earnings above the £5,000 secondary threshold for 2025/26, though eligible businesses can claim up to £10,500 in Employment Allowance. You also pay minimum 3% employer pension contributions on qualifying earnings, plus employer liability insurance premiums. Budget for payroll software or accountancy fees if you outsource payroll processing.

What payroll records do I need to keep for each employee?
You must keep records of each employee's pay, tax and National Insurance deductions, hours worked, and any statutory payments such as sick pay or maternity pay. HMRC requires you to submit a Full Payment Submission (FPS) on or before every payday through Real Time Information. Payroll records must be retained for at least three years after the end of the tax year they relate to.

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