Employing your first member of staff
Before your first employee starts you must register as an employer with HMRC, set up PAYE, arrange employers' liability insurance and prepare a written statement of employment particulars. Budget roughly 15% to 20% above the salary for employer National Insurance and pension contributions.
What it really costs
The salary is not the cost. For someone on £30,000:
| Item | Cost |
|---|---|
| Gross salary | £30,000 |
| Employer National Insurance at 15% above £5,000 | £3,750 |
| Employer pension at 3% of qualifying earnings | £713 |
| Employers' liability insurance | £150, £300 |
| Total | About £34,700 |
The Employment Allowance can relieve up to £10,500 of employer National Insurance for eligible businesses, but not for a single-director company where the director is the only employee.
Before they start
Register as an employer with HMRC. Do it before the first payday; it can take a couple of weeks to get your PAYE reference.
Get employers' liability insurance. It is a legal requirement for almost every employer, minimum £5 million of cover, and the fine is up to £2,500 for every day you are without it.
Check they have the right to work in the UK, and keep a copy of the evidence. The civil penalty for getting this wrong runs to tens of thousands per worker.
Prepare a written statement of employment particulars. Since April 2020 this must be given on or before the first day, not within two months as it used to be.
Every payday
Run payroll and send a Full Payment Submission to HMRC on or before the day you pay them. Late RTI submissions bring automatic penalties from £100 a month.
Give a payslip showing gross pay, deductions and net pay. This is a legal right, not a courtesy.
Pay the PAYE and National Insurance to HMRC by the 22nd of the following month.
The things new employers forget
Holiday. 5.6 weeks a year including bank holidays, which is 28 days for someone working five days a week. Part-timers accrue pro rata.
Statutory sick pay, and statutory maternity, paternity and adoption pay when they arise.
Auto-enrolment, which applies from the day you employ someone eligible. There is no grace period.
P60s by 31 May, and P11Ds by 6 July if you provide any benefits in kind.
This guide is general information, current at 10 November 2026. Tax rules change and depend on your circumstances. Please take advice before acting on it.