Hiring Employees

Hiring your first employee is a significant milestone for any business, but it comes with a range of legal and regulatory obligations. From issuing a written employment contract to operating payroll, checking right to work documents, and enrolling staff in a workplace pension, the compliance requirements can feel daunting. This step-by-step starter checklist covers everything you need to know before and after your new employee's start date.

Employment Contracts

By law, you must provide every employee with a written statement of employment particulars on or before their first day of work. For employees starting from 6 April 2020, this is a single document covering the main terms and conditions: the employer and employee names, start date, job title and description, place of work, hours of work (including any variations), salary and pay frequency, holiday entitlement, sick pay and pension arrangements, notice periods, grievance and disciplinary procedures, and the length of fixed-term contracts. The written statement is a legal right under the Employment Rights Act 1996 and must be updated if any terms change. You should also consider additional policies such as a staff handbook covering data protection, social media use, and equal opportunities.

Right to Work Checks

You must verify that every employee has the legal right to work in the UK before they start employment. Conduct a right to work check by examining original documents (passport, biometric residence permit, share code for EU/EEA/Swiss nationals) and retaining copies. Since 6 April 2022, you can use the Home Office online checking service for most non-British/Irish nationals. Failure to carry out right to work checks can result in a civil penalty of up to £45,000 per illegal worker — and potentially criminal sanctions if you knowingly employ someone without permission. Keep records of the check for the duration of employment and for two years after the employee leaves.

National Minimum Wage 2025/26

The National Living Wage (NLW) for employees aged 21 and over is £12.21 per hour from April 2025. The National Minimum Wage (NMW) for 18–20 year olds is £10.00 per hour, for under-18s (but above school leaving age) it is £7.55 per hour, and the Apprentice rate (for apprentices under 19 or in their first year of apprenticeship) is £7.55 per hour. These rates are typically updated each April. You must pay at least the minimum wage for every hour worked — including training time, travelling time, and time spent on mandatory meetings. HMRC actively enforces the NMW and can issue notices of underpayment and penalties of up to 200% of the underpaid wages (capped at £20,000 per worker).

Pension Auto-Enrolment

Under the Pensions Act 2008, you must automatically enrol eligible employees into a workplace pension scheme. An eligible employee is aged between 22 and State Pension age, earns at least £10,000 per year, and works in the UK. The minimum total contribution is at least 8% of qualifying earnings, of which the employer must pay at least 3%. You must deduct the employee's contribution from their pay and remit it to the pension provider alongside your own contribution. You can choose to enrol employees into a defined contribution scheme such as NEST, The People's Pension, or a commercial provider. You must complete a declaration of compliance with The Pensions Regulator within five months of your staging date. Failure to comply can result in fines and penalty notices.

HMRC New Employer Pack and Payroll Setup

Before your first pay run, register as an employer with HMRC at GOV.UK. You will receive an employer PAYE reference number and an Accounts Office reference. Choose payroll software — HMRC's free Basic PAYE Tools for up to nine employees, or commercial software such as Xero, Sage, or QuickBooks if your payroll is larger. Set up each employee's record with their name, date of birth, address, NI number, tax code, and pay details. Submit your first Full Payment Submission (FPS) on or before your first pay day. For a detailed walkthrough, see our Payroll and PAYE guide.

Starter Checklist Summary

• Obtain and check the employee's right to work documents.
• Provide a written statement of employment particulars on day one.
• Collect the employee's National Insurance number and bank details.
• Add the employee to your payroll software and use the correct tax code.
• Auto-enrol the employee into the workplace pension scheme (if eligible) within three months of their start date.
• Submit the FPS to HMRC on or before the first pay day.
• Order a P45 for the employee if they were previously employed.
• Register the employee for the Construction Industry Scheme if applicable (see our CIS guide).

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