Hiring your first employee: what changes

Taking on your first employee is a big step. You stop being a one person show and start being a boss. That brings new paperwork, new costs, and new legal duties.

None of it is hard. But none of it can be skipped. Here is what changes, in plain English.

Before they start

1. Check they can legally work in the UK. You must do a right to work check before their first day. Keep dated copies of what you saw. If you get this wrong, the fines are heavy.

2. Give them written particulars by day one. You must hand over the written terms of the job on or before their first working day. Pay, hours, holiday, notice period. This is the employment contract in all but name. Do not put it off.

3. Register as an employer with HMRC. You cannot run payroll without this. Register before the first payday. You can register up to two months before you start paying people. HMRC sends you a PAYE reference and an Accounts Office reference. Registration can take around five working days, so do it early.

4. Get Employers Liability insurance. This is compulsory. You need at least £5 million of cover in place before the employee starts. It covers you if they are injured or fall ill because of their work.

5. Do a risk assessment of where they will work. For a small firm this can be simple. Walk through the job, note the hazards, write down how you will control them. Share the Health and Safety Law information with your new starter.

What it actually costs you

Paying someone is not just their salary. Here is what sits on top of it.

1. The wage itself. You must pay at least the legal minimum. From 1 April 2026 the rates are £12.71 an hour for workers aged 21 and over, £10.85 for ages 18 to 20, and £8.00 for under 18s and apprentices. HMRC enforces these rates. Underpaying brings penalties and back pay.

A full time adult on the minimum wage at 40 hours a week earns about £508 a week. That is £26,436.80 over the year.

2. Employer National Insurance. You pay 15 percent on everything above £5,000 a year per employee. On that £26,436.80 salary that is about £3,215 a year.

But here is the good news. The Employment Allowance lets eligible employers cut up to £10,500 off their employer National Insurance bill each year. For a first hire, that usually wipes the whole NIC cost out. You claim it through your payroll.

3. The workplace pension. If your new hire is aged 22 to state pension age and earns over £10,000 a year from you, you must put them in a workplace pension. The minimum total contribution is 8 percent of their qualifying earnings. That band runs from £6,240 to £50,270 a year. You must pay at least 3 percent yourself. The rest comes from the employee, with tax relief on top.

On the £26,436.80 example, your 3 percent works out at about £606 a year.

4. The real headline. A full time adult on the minimum wage costs about £26,437 in salary, plus about £3,200 in employer National Insurance and about £600 in pension contributions. The Employment Allowance then cancels the National Insurance. So you need the work to cover the salary plus roughly £600 a year in pension, before you take a penny for yourself.

Check the maths against your prices before you commit. If your margins cannot carry that, raise your prices first.

Running payroll every payday

Every time you pay your employee you must send a Full Payment Submission to HMRC. This has to reach HMRC on or before payday. That is how the tax office gets the income tax and National Insurance you have deducted.

You must give your employee a payslip for every pay period. It has to show the deductions.

Then you pay HMRC what you owe by the 19th of the following month, or the 22nd if you pay electronically. Miss that and interest runs.

Keep all payroll and employment records for at least three years. Give your employee a P60 summary by 31 May after the end of each tax year.

You can run payroll yourself with HMRCs free Basic PAYE Tools if you have fewer than 10 employees. Or an accountant can run it for you.

Time off and sick pay

Full time employees must get at least 28 days of paid holiday a year. Bank holidays can count towards that. Part time staff get a pro rata amount.

You must also pay Statutory Sick Pay when an employee qualifies. Keep track of holidays and sick days from the start. A simple record beats a memory when there is a dispute.

The cash flow reality

Here is the change that catches people out. Your employee must be paid on payday, even when your clients are late. Their wage does not wait for your invoices to clear.

That makes cash flow discipline the real skill of being a boss. Invoice quickly. Chase late payments firmly. Keep a buffer so payroll never bounces.

How PlusWise helps

Before you hire, you need to know whether the work will cover the cost. PlusWise keeps your quotes, invoices, and expenses in one digital place, so you can see your real income and real margins at a glance. No shoebox. No guessing.

That is the exact information you need to answer the big question. Can I afford this hire. Run the numbers from your actual figures, not your gut.

PlusWise does not run payroll. You will still use HMRCs tools or your accountant for that. What PlusWise gives you is the financial clarity to hire with confidence.

Quick answers

Do I need to register as an employer if my new hire earns very little? You usually need to run PAYE if they earn more than £123 a week. Even below that, check the rules. Registration is free and fast, so do not gamble on it.

Can I just take them on as self employed to skip all this? No. HMRC looks at how the work is done, not what you call it. If you control their hours, give them the tools, and they work only for you, they are an employee. Calling them self employed does not make it true and can land you with back tax.

What if the hire does not work out? That is what a probation period is for. Put one in the written particulars, with a shorter notice period during it. And remember that employment rights grow with length of service, so sort problems early and fairly.

Should I get an accountant? For the first hire, a good one off session with an accountant is money well spent. They will set up your payroll correctly and flag anything you have missed. After that, routine payroll is manageable.

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Sources checked October 2026: GOV.UK national minimum wage rates and register as an employer guidance; HMRC employer National Insurance and Employment Allowance rates for 2026 to 2027; The Pensions Regulator auto enrolment thresholds and contribution minimums.