How Do I Hire My First Employee in the UK?

If you’re wondering how do I hire my first employee in the UK, chances are you’ve hit that wonderful, terrifying moment every growing business faces: there’s more work than you can do, and doing it all yourself has stopped being heroic and started being a bottleneck. I remember the first hire I ever made — I spent more time worrying about getting the paperwork wrong than about finding the right person. This guide is the one I wish I’d had.

Hiring your first employee in the UK involves a clear sequence of legal steps. Miss one and you can face fines from HMRC or a tribunal claim before you’ve even finished the induction. Get them right and it’s mostly common sense wrapped in paperwork. Let’s go through it in order.

Step 1: Register as an Employer with HMRC

Before your employee’s first payday — ideally a few weeks before — you must register as an employer with HMRC and set up PAYE (Pay As You Earn). You can register online, and HMRC will send you a PAYE reference number and an Accounts Office reference. You can’t run payroll properly without these, so don’t leave it until the last minute.

You’ll also need employer’s liability insurance with cover of at least £5 million. This is a legal requirement for almost every employer, and you must display the certificate where employees can see it. The one exception is if you’re a family business where all employees are closely related to you — everyone else needs it, no exceptions.

Step 2: Check They Can Legally Work in the UK

You must carry out a right to work check before employment begins. For most UK and Irish citizens, this means checking an original passport or birth certificate with proof of National Insurance. For everyone else, use the Home Office online checking service with the employee’s share code.

Do this for every single hire, including British citizens, and keep records. The civil penalty for employing someone without the right to work is up to £60,000 per worker — a figure that would end most small businesses on the spot. Copy the documents, note the date you checked them, and file them away.

Step 3: Decide on Pay — and the Minimum Wage

You must pay at least the National Minimum Wage or National Living Wage, depending on the worker’s age. The rates change every April, so always check the current figures rather than relying on last year’s numbers. The current National Minimum Wage rates are published on GOV.UK.

Beyond the legal minimum, think hard about what will attract and keep the right person. A first employee in a small business wears many hats, so paying a bit above the market rate for someone genuinely good is usually money well spent. It’s also worth reading what the minimum wage rules require you to pay staff in the UK so you understand exactly how the age bands and apprentice rates work.

Step 4: Issue a Written Statement of Employment Terms

Since April 2020, you must give every employee a written statement of employment particulars on or before their first day — not within two months, as the old rules allowed. This must include:

• The employer’s and employee’s names
• The start date and job title (or a brief description of the work)
• Pay, how often it’s paid, and how it’s calculated
• Hours of work and days of the week
• Holiday entitlement and holiday pay
• Notice periods for both sides
• Where they’ll work
• Probationary period terms, if any
• Sick pay arrangements
• Pension arrangements
• Disciplinary and grievance procedures

Don’t just download a template and file it. A first employee will read this document carefully — it’s the foundation of your working relationship. Make it clear, make it fair, and make sure you can actually deliver everything it promises.

Step 5: Set Up Payroll and Auto-Enrolment Pension

You’ll need payroll software (or a payroll provider — many small businesses find an accountant or a service like this money well spent for the first hire) to calculate PAYE tax and National Insurance, file Real Time Information (RTI) submissions to HMRC on or before each payday, and issue payslips.

Separately, you must comply with workplace pension auto-enrolment. If your employee is aged 22 to State Pension age and earns above the earnings trigger (currently £10,000 a year), you must automatically enrol them in a qualifying pension scheme and contribute a minimum employer percentage. Even if they’re not eligible, they have the right to opt in, and you must tell them so. The Pensions Regulator can fine you for getting this wrong, and their fines escalate fast.

Step 6: Know the Day-One Employment Rights

A common myth is that employees have no rights until they’ve worked for you for two years. Wrong. Several rights apply from day one, including protection against discrimination, the right to the National Minimum Wage, statutory sick pay, maternity and paternity rights, and the right to a payslip. The two-year threshold mainly relates to claiming ordinary unfair dismissal — automatically unfair dismissals (whistleblowing, pregnancy, trade union activity) have no qualifying period at all.

ACAS is the best free resource you’ll find on all of this. Their guides on hiring, contracts and managing people are written in plain English and are genuinely authoritative.

Related reading: if hiring is part of a bigger growth push, read our guide to when the best time to expand a small business is before you commit.

Practical Takeaway

Hiring your first employee boils down to six moves: register as an employer and get employer’s liability insurance, verify right to work before day one, set compliant pay, issue written terms on or before the first day, run payroll and auto-enrolment properly, and respect day-one employment rights. It sounds like a lot, but each step is a single task you can tick off. And once the paperwork’s done, you get to enjoy the best part — watching someone talented take work off your plate and make your business better than it was when it was just you.

One final thought from experience: don’t hire the cheapest person you can find, and don’t hire in a panic. Your first employee sets the culture of your business more than any mission statement ever will. Take the time to write a proper job description, interview properly, and check references. The admin in this guide takes a few hours; a bad hire costs you months.