What do I need to do to hire my first employee in the UK?

GuideUKChecked 30 October 202622 primary sources8 min readUS version

The short answer

In the UK, before your first employee starts: check their right to work, register for PAYE before the first payday, get employers' liability insurance and give a written statement of terms on day one. Pay at least the minimum wage (£12.71 an hour at 21 and over, As of Oct 2026) and enrol them in a workplace pension.

What must I do before they start?

Six steps, in this order:

  1. Decide honestly whether they are an employee (see below).
  2. Check their right to work.
  3. Register as an employer with HMRC, before the first payday.
  4. Get employers' liability insurance.
  5. Prepare the written statement of particulars.
  6. Set up the workplace pension: your duties start on their first day.

This page covers Great Britain. Northern Ireland has its own employment law (Employment Rights (Northern Ireland) Order 1996).

How do I check their right to work?

Before employment begins, with a prescribed check, keeping a dated copy. Done properly, it gives you a statutory excuse (Immigration, Asylum and Nationality Act 2006 s.15).

Without that excuse, employing someone with no right to work can cost a civil penalty of up to £45,000 per illegal worker for a first breach, and up to £60,000 per worker for a repeat breach within 3 years (As of Oct 2026). For someone with time-limited permission, repeat the check before it runs out. Since 1 October 2026 the duty also covers workers and individual sub-contractors you engage (s.14A).

How do I register for PAYE?

Register as an employer with HMRC before the first payday. From then, report each pay run to HMRC on or before payday, and pay the PAYE and National Insurance you owe by the 22nd after each tax month if you pay electronically.

Employer National Insurance is 15% of pay above £5,000 a year. The Employment Allowance takes up to £10,500 a year off that bill, unless a company's only employee is a single director (As of Oct 2026).

What is the minimum I must pay?

The National Minimum Wage for their age, or the National Living Wage at 21 and over. From 1 April 2026 (As of Oct 2026):

Age or statusHourly rate
21 and over (National Living Wage)£12.71
18 to 20£10.85
16 to 17£8.00
Apprentice under 19, or in the first year of the apprenticeship£8.00

Rates rise every April, and a worker moves band on their birthday, so check pay at both. Underpaying brings arrears and a penalty of 200% of the underpayment, from £100 up to £20,000 per worker (As of Oct 2026).

What goes in the written statement?

The main terms of the job, given no later than the first day of work (Employment Rights Act 1996 s.1).

It covers, among other things, the start date, pay and pay intervals, hours, holiday, sick pay, notice, job title, place of work and any probation. Where one does not apply, say so (s.2). Tell them of any change in writing within one month of it (s.4). See the Academy lesson on taking on summer labourers.

Do I need employers' liability insurance?

Yes, in almost every case: at least £5 million of cover, and each day without it can bring a fine of up to £2,500 (Employers' Liability (Compulsory Insurance) Act 1969 s.5; 1998 Regulations reg 3; As of Oct 2026).

The exemptions are narrow: a company whose only employee owns at least 50% of its issued shares, and specified close-family employees of an unincorporated business. Display the certificate where staff can see it, or make it available electronically.

What pension must I provide?

Your automatic enrolment duties start on their first day. Enrol anyone aged 22 to State Pension age who earns over £10,000 a year (Pensions Act 2008 s.3).

The minimum is 8% of qualifying earnings, the slice of pay between £6,240 and £50,270, with at least 3% from you (As of Oct 2026). Someone earning less can opt in, and above £6,240 you must still contribute. Send the Pensions Regulator your declaration of compliance within 5 months of your duties start date: missing it can bring a £400 fixed penalty, then escalating ones (SI 2010/5 regs 12 and 13).

How much holiday and sick pay do they get?

At least 5.6 weeks' paid holiday a year, capped at 28 days, which is 28 days for a five-day week including bank holidays (Working Time Regulations 1998 regs 13 and 13A). For irregular-hours and part-year workers, holiday accrues at 12.07% of hours worked (reg 15B).

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).

What will a first employee really cost?

Add employer National Insurance and the pension to the salary:

Employee on £25,000 a year (indicative, As of Oct 2026)Amount
Salary£25,000.00
Employer National Insurance: 15% of £20,000 (pay above £5,000)£3,000.00
Minimum employer pension: 3% of £18,760 (pay above £6,240)£562.80
Total before the Employment Allowance£28,562.80
Total if the Employment Allowance covers the National Insurance£25,562.80

Is my subcontractor really an employee?

Status turns on how the work actually happens, not the label, the contract title or a CIS registration.

Control, personal service, mutual obligation, equipment and financial risk all count, and HMRC's CEST tool is only as good as its inputs. If HMRC decides someone was an employee, it can normally assess PAYE 4 years back, 6 if the loss was careless and 20 if deliberate (Taxes Management Act 1970 ss.34 and 36). A worker who is not an employee still gets the minimum wage and holiday pay. See the Academy lesson on a labour-only subbie who looks like an employee.

One date to plan around: where the effective date of termination is on or after 1 January 2027, the qualifying period for ordinary unfair dismissal falls from 2 years to 6 months (Employment Rights Act 2025 s.25; SI 2026/559). Set expectations early and keep written reviews.

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Questions owners ask

How much does it cost to employ someone in the UK?

On £25,000 a year, about £28,562.80 with employer National Insurance (15% above £5,000) and the minimum 3% pension, or £25,562.80 if the Employment Allowance covers the National Insurance. 2026/27 rates, As of Oct 2026.

When must I give a new employee their written terms?

No later than their first day of work (Employment Rights Act 1996 s.1, Great Britain). Northern Ireland has its own rule in the Employment Rights (Northern Ireland) Order 1996.

What is the minimum wage from April 2026?

£12.71 an hour at 21 and over, £10.85 at 18 to 20, and £8.00 at 16 to 17 and for apprentices under 19 or in their first year. As of Oct 2026.

Do I have to put my first employee in a pension?

If they are 22 to State Pension age and earn over £10,000 a year, yes: your duties start on their first day, and at least 8% of qualifying earnings must go in, 3% from you. As of Oct 2026.

What is the fine for not checking right to work?

A civil penalty of up to £45,000 per illegal worker for a first breach, and up to £60,000 per worker for a repeat breach within 3 years. A prescribed check before employment starts gives you a statutory excuse. As of Oct 2026.

When should I get advice?

See an employment solicitor or HR adviser for the contract, a status question or a dismissal, and an accountant or payroll bureau for PAYE and the pension.

Sources

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