What if your first employee starts next month?

"I'm a café owner with a new employee starting soon. What tax and payroll responsibilities arise before the first payday?"

Someone typed that into Google this year, and Google showed them this website. It's a good question. The order you do things in matters much more than how long each one takes, and most of the jobs below take an hour or two.

We often hear from clients when it's a little too late: the HMRC letter has arrived after payday, or the right to work check wasn't done before the person started, and they've only just realised.

The short answer: when you employ someone for the first time, check they'll be an employee, then register with HMRC as an employer and sort out payroll before the first payday. You need employers' liability insurance from the day you become an employer, and your workplace pension duties start on their first day. Do the right to work check before they start, and give them the written statement of their terms on or before day one. On payday they get a payslip and HMRC gets a report, on or before the day you pay.

Here's the order:

Download the one-page first employee countdown (PDF)

Here's each step in a bit more detail. For the paperwork you give the new starter, see our post on legal documents for new employees.

Is the person an employee, a worker or self-employed?

Employees have the most rights, workers have fewer and people who are genuinely self-employed have the fewest, so this tells you which rules apply. If someone works the hours you set, in your café, with your equipment, they're almost certainly not self-employed, whatever the paperwork says.

For tax, HMRC has its own online tool, Check Employment Status for Tax. HMRC stands by its answer as long as what you put in is accurate. Get it wrong and you could owe the tax and National Insurance you should have taken off, plus penalties. Our post on employment status explains who gets which rights.

How much does it cost to employ someone?

For someone aged 22 or over working 30 hours a week on the minimum wage, expect about £22,460 a year in 2026/27, or nearer £20,240 if the Employment Allowance covers your National Insurance. That's £19,828 in wages, about £2,225 in employer's National Insurance and at least £408 for the workplace pension.

From 1 April 2026 the minimum wage is £12.71 an hour for anyone aged 21 or over, £10.85 for 18 to 20-year-olds and £8.00 for under-18s and apprentices who are under 19 or in their first year. The rates change every April. The government is expected to announce the April 2027 rates around the Budget on 28 October 2026, so check the page again before you set pay.

The same example, week by week:

The Employment Allowance takes up to £10,500 a year off your employer's National Insurance bill, so with one employee it often covers all of it. It isn't automatic: you claim it through your payroll software. A limited company can't claim it if the only person paid above £96 a week is a sole director. Once you employ someone else above that level, you can.

Plan for sick pay too. Statutory Sick Pay has been payable from the first full day off sick since 6 April 2026, at £123.25 a week or 80% of their average weekly earnings, whichever is lower, and you can't claim it back from HMRC. Our Statutory Sick Pay calculator works it out. Maternity and paternity pay are different: you can usually claim 92% back from HMRC, and small employers (£45,000 or less in Class 1 National Insurance in the last tax year) can claim back 109%, which is all of it plus a bit extra.

When do I register as an employer with HMRC?

Most of the businesses we work with have an accountant, and the accountant registers them as an employer. That's the easier option, so speak to yours first.

If you'd rather do it yourself, you register online with HMRC. Do it before the first payday, but no more than two months before you start paying people. Your employer PAYE reference comes by letter, and GOV.UK doesn't say how long that takes, so do it as soon as you know the start date.

If the letter hasn't arrived by payday, pay them anyway. GOV.UK says to run payroll, keep the report and send it to HMRC late once the reference arrives. Once you're registered, keep reporting: HMRC closes a new employer's PAYE scheme if it doesn't hear from you or get a payment within 120 days.

Almost every first employee means registering, whether you're a sole trader or a limited company. There's a narrow exception for very low pay, when nobody (company directors included) gets expenses, benefits or a pension or has had another job this tax year. GOV.UK's list of when you must register tells you whether it applies to you. Even then, keep records of what you pay and register as soon as anything changes. If you're a director paying yourself through a limited company, you may already be registered: the new employee goes on the same scheme.

Do I need payroll software or a provider?

You need one or the other. Every payday you work out the tax and National Insurance, give a payslip and send HMRC a report called a Full Payment Submission, on or before the day you pay. HMRC lists free payroll software for businesses with fewer than 10 employees, including its own Basic PAYE Tools. Or your accountant or a payroll provider does it for you. Either way, you're still legally responsible for it.

Then you pay HMRC what you've deducted by the 22nd of the following tax month (the 19th if you pay by post), or quarterly if your bill is usually under £1,500 a month and HMRC agrees. Keep payroll records for three years from the end of the tax year they relate to, and minimum wage and holiday records for six years. Our guide to how long to keep HR records has the rest.

The payslip is a legal requirement too, for employees and workers, on or before payday. It has to show pay before deductions, the deductions, pay after deductions and, if their pay varies with the hours they work, the hours.

The law doesn't say holiday pay, sick pay or maternity and paternity pay need their own lines on the payslip, but show them separately anyway. Most payroll software does it for you, and it keeps your records straight: since 6 April 2026 you have to keep records of each person's holiday and holiday pay for six years, and HMRC can ask you to show what sick pay you've paid.

When do my workplace pension duties start?

On the day your first employee starts work. You have duties even if nobody ends up being enrolled, says The Pensions Regulator. In order:

• before they start: choose a pension scheme. Do it early, because setting one up can take time
• on their first day: work out whether they have to be enrolled. Anyone aged 22 up to State Pension age who earns over £10,000 a year (£833 a month or £192 a week) must be
• within six weeks: put them in the pension, backdated to their first day, and write to them about it
• within five months: complete the declaration of compliance with The Pensions Regulator, even if nobody was enrolled

Enrolment is automatic: an eligible employee goes into the pension whether they want it or not. Only once they're in can they opt out, within one month, using the pension scheme's own form, and they get their contributions back. You must not ask, pressure or reward anyone to opt out, and that includes asking job applicants. If someone becomes eligible later, for example when their pay goes up, the same steps start from that day.

You can postpone enrolment for up to three months. There's nothing to send to The Pensions Regulator: you write to the employee within six weeks of their start date to say you're postponing, and you give the date the postponement ends when you complete your declaration of compliance. TPR's postponement page explains how it works.

The minimum is 8% of their qualifying earnings (pay between £6,240 and £50,270 a year in 2026/27), and at least 3% has to come from you.

Do I need employers' liability insurance?

Yes, as soon as you become an employer. It covers you if an employee is hurt or made ill by their work and claims against you. The cover has to be at least £5 million, from an authorised insurer, and you display the certificate where staff can read it. An electronic copy they can easily reach is fine.

There are only a few exemptions. A business that only employs close family members doesn't need it, but HSE says that exemption doesn't apply if the business is a limited company. A company whose only employee is its owner, holding at least half the shares, doesn't need it either. Going without when you need it can mean a fine of up to £2,500 for every day you're uninsured.

What checks must I do before day one?

The right to work check. Before they start work, every time, and in the same way for everyone, British citizens included. There are three ways to do it: checking original documents, the Home Office online check with a share code (the only way for anyone with an eVisa) or a digital check through a certified provider, for valid British and Irish passports. Keep a dated copy for as long as they work for you and two years after. The civil penalty for employing someone without the right to work is up to £60,000 for each person.

Since 1 October 2026 the check also covers people you take on as workers rather than employees, such as some casual staff, and individuals you subcontract to do work you've agreed to provide for a customer. It applies to arrangements made from that date. A genuinely independent business, such as a plumber with plenty of other customers, isn't covered. Our post on legal documents for new employees shows you how to do the check.

A DBS check, for some roles. Work with children or adults who need care, for example. Most roles don't need one.

Under-18s. Children under school leaving age usually need a child employment permit, which you apply for from the council, and the law and the council's byelaws limit their hours and the work they can do: in Surrey that's Surrey County Council, in London the borough where they'll work. For anyone under 18, your risk assessment has to take their age and inexperience into account before they start.

Health and safety basics. Every business needs a health and safety policy and a risk assessment. Once you have five or more employees, both have to be written down. You also need a fire risk assessment. In England and Wales it has to be written down whatever your size. In Scotland it has to be written down once you have five or more employees, or if your premises need a licence or registration. From the first employee you also display the health and safety law poster (or give them the leaflet) and have first aid covered: at minimum a stocked kit and someone in charge of it. HSE's simple guide covers the rest, and our health and safety support page explains what our partner can set up for you.

Their data. You'll hold their bank details, National Insurance number and emergency contacts, so tell them what you collect and why when you collect it. You may also need to pay the ICO's data protection fee. Businesses that only use personal data for their own staff administration, accounts and marketing are usually exempt, but CCTV to prevent crime usually means you pay. The ICO's self-assessment tells you in a few minutes.

What must they have in writing on their first day?

The written statement of their main terms: pay, hours, holiday, where they work, any probation and the rest of the list in section 1 of the Employment Rights Act 1996. It's due on or before their first day, for employees and workers. Pensions, the training you offer and your disciplinary and grievance rules can follow within two months, but training they must complete goes in on day one. Most small employers put all of it into one employment contract, which is the tidier way to do it.

Two dates to know about if you're hiring now. From 30 October 2026, every employer has to take all reasonable steps to prevent sexual harassment of their staff, including by customers. From the same date you must not let customers or other third parties harass your staff, and that covers harassment related to race, disability or most other protected characteristics, not only sexual harassment. So a short policy and a chat about it in their first week are worth doing. And from 1 January 2027, the government's planned date, employers will have to give new workers a standard government statement of their right to join a trade union, alongside the written statement. The government will publish the wording. Our employment law changes page keeps track of both dates.

Do you need a staff handbook for one employee? Probably not yet. A contract that fits the job, a few short policies and a plan for their first week will do more.

What happens on the first payday?

Before it, collect what payroll needs: their P45 from their last job or, if they don't have one, HMRC's starter checklist, plus their National Insurance number and bank details. Our new starter form gathers the details on one page.

On the day, your first Full Payment Submission registers them with HMRC. They get their payslip on or before payday. And if you haven't written the pension letter yet, remember its six weeks started on their first day.

Quick answers

Who can set this up with you?

Most of this list is a job you do once, then reuse for every hire after. The HMRC and pension parts often sit with your accountant or payroll provider, and it's worth asking them early.

The HR side is what First Hire Ready covers: a contract written for the role, five core policies, a right to work process and an onboarding checklist, ready before they walk through the door, at a fixed price. See First Hire Ready. We work with owners across Surrey and South London.

Not found the right person yet? Start with our job advert guide, or ask about Recruitment Support.

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This is general information for employers in England, Scotland and Wales, not legal or tax advice. If you're dealing with a specific situation, speak to an employment solicitor or your accountant. Checked against GOV.UK, HMRC, The Pensions Regulator, HSE, the ICO and legislation.gov.uk on 19 October 2026.