Hiring Your First Employee: A Step-by-Step Guide

Hiring your first employee is an exciting milestone. But it also brings a series of legal and administrative responsibilities. Getting these right from the start will help you create a strong foundation for your business. Here’s everything you need to know when employing someone for the first time in the UK.

Pay and Entitlements

You’ll need to set a fair rate of pay for the role. By law, you must pay at least the National Minimum Wage, currently £12.21 per hour for workers aged 21 and over.

In addition to pay, full-time employees are entitled to a minimum of 28 days paid annual leave (20 days plus bank holidays). You’ll also need to be prepared to provide statutory sick pay and, where applicable, statutory maternity or paternity pay in line with UK law.

Recruitment and Employment Checks

Before your employee starts work, you must confirm their right to work in the UK. In some sectors- particularly where staff work with children or vulnerable adults- you may also need to obtain a Disclosure and Barring Service (DBS) check.

Once you’ve recruited, you are legally required to provide details of the job in writing. This written statement acts as a form of contract and must include key details such as pay, hours, job title, and start date. Setting this out clearly helps avoid misunderstandings or disputes.

Insurance Responsibilities

From the moment you become an employer, you are legally required to hold Employers’ Liability insurance. This should provide you with at least £5 million of cover, to protect your business against the cost of compensation and legal fees if an employee becomes ill or is injured at work. Your insurance policy must be purchased from an insurer authorised by the Financial Conduct Authority (FCA). 

HMRC Registration and Payroll

You must register as an employer with HMRC before your new hire is paid. This allows you to run PAYE (Pay As You Earn), through which income tax, National Insurance, and other statutory deductions are collected.

Once payroll is in place, you are responsible for:

• Calculating deductions (tax, national insurance, and pension contributions)

• Producing a payslip each pay period

• Submitting reports to HMRC in real time

• Paying collected deductions to HMRC’s designated account

Many businesses choose to outsource this to an accountant to ensure compliance

On the other hand, some decide to manage this themselves, with software such as Sage, Xero, or QuickBooks. You can read our blog post about Making Tax Digital and which software we recommend here: https://sawford-bullard.co.uk/from-paper-to-digital-preparing-for-hmrcs-2026-making-tax-digital-mtd-mandate/

Pensions and Auto-Enrolment

Another key responsibility is workplace pensions. You must automatically enrol an employee if they:

• Are aged between 22 and State Pension age

• Earn at least £10,000 a year

• Normally work in the UK

If these criteria are met, you must enrol the employee into a workplace pension scheme and make the required employer contributions, alongside your employee’s contributions.

Employing your first member of staff can feel daunting, but by understanding these requirements- from pay and contracts to insurance and pensions- you’ll be well placed to meet your obligation.