- Decide employee or subcontractor honestly.It is determined by how the work actually happens, not by what you call it. HMRC has a status tool, and CIS has its own rules if you are in construction.
- Register as an employer with HMRC.You need a PAYE scheme before the first payday, not after it.
- Get employers liability insurance.Legally required in almost all cases, with cover of at least £5 million, and the certificate has to be available to staff (As of Oct 2026).
- Set up the workplace pension.Automatic enrolment duties start from their first day of employment. Assessing them late means backdating contributions.
- Check their right to work.Before they start, not after. Keep a dated copy. Employing someone without the right to work can cost up to £45,000 for a first breach (As of Oct 2026).
- Give written terms on or before day one.A written statement of employment particulars is a legal requirement under the Employment Rights Act 1996 s.1 in Great Britain, not a nice-to-have. Northern Ireland has its own, under the Employment Rights (Northern Ireland) Order 1996.
PAYE scheme with HMRC. Register now, it takes days not hours, and you need it before the first payday.
Employers liability insurance. Legally required, and the certificate must be available to them.
Pension. Auto-enrolment applies from day one if they qualify. Assessing them late means backdating your contributions.
Right to work check. Before they start, dated copy kept.
Written particulars. On or before day one. Legal requirement, not a courtesy.
Employers National Insurance. On £32k that is £4,050 a year on top of salary: 15% of pay above £5,000. The minimum pension adds £772.80.
Real cost is £36,822.80, not £32k. If you can claim the Employment Allowance, and an employer of any size can, it covers the whole £4,050 and the cost is £32,772.80. Want MARCUS to model it against a subcontractor?
It quoted the employer National Insurance nobody mentions, then the allowance that can cancel it.
The pension floor
Enrol anyone aged 22 to State Pension age who earns over £10,000 a year. The minimum is 8% of qualifying earnings, the slice of pay between £6,240 and £50,270, and at least 3% of it must come from you. Send the Pensions Regulator your declaration of compliance within 5 months of your duties start date: missing it brings a £400 fixed penalty, then daily ones. As of Oct 2026.
Pensions Act 2008
| Salary | £32,000 |
| Employer National Insurance: 15% of pay above £5,000 | £4,050 |
| Minimum employer pension: 3% of £25,760 of qualifying earnings | £772.80 |
| Cost before the Employment Allowance | £36,822.80 |
| Cost if you can claim the Employment Allowance | £32,772.80 |
The allowance takes up to £10,500 a year off your employer National Insurance, which covers the whole £4,050 here. A company whose only employee is a single director cannot claim it.
Sick pay starts on day one
In Great Britain, since 6 April 2026 Statutory Sick Pay runs from the first full qualifying day of sickness, with no waiting days and no earnings floor, at the lower of £123.25 a week or 80% of average weekly earnings, for up to 28 weeks. As of Oct 2026.
Employment Rights Act 2025; SI 2026/373 reg 2
One date to plan around: in Great Britain, for dismissals taking effect on or after 1 January 2027, the qualifying period for unfair dismissal drops from 2 years to 6 months of service (Employment Rights Act 2025 s.25; SI 2026/559; As of Oct 2026). Northern Ireland has its own employment law, where it stays at 1 year. Set clear expectations early and keep written reviews from the first month.
GRACE covers the hiring. MARCUS covers what it does to your numbers. Worth asking both in one conversation.
I want to hire my first employee rather than use subcontractors. My business is [what you do] in [England, Scotland, Wales or Northern Ireland] with [how many] people, and I expect to pay about [salary]. Tell me what changes for me, what it really costs, and what I need in place before their first day.
Every lesson ends with a question to hand to a Greymill specialist, who answers with what it knows about your business.
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