Key points
- Check the person's right to work in the UK before they start.
- Register as an employer with HMRC before the first payday, and report every payment on or before payday.
- Pay at least the National Living Wage: £12.71 an hour from April 2026 for workers aged 21 and over.
- Enrol eligible staff in a workplace pension and take out employers' liability insurance.
The checklist, in order
- 1. Right to work checkBefore the first day, check original documents or use the Home Office online check, and keep a dated copy. Without it, you risk a civil penalty of up to £60,000 per illegal worker.
- 2. Contract and written statementGive a written statement of the main terms on or before the first day.
- 3. Employers' liability insuranceRequired from the first employee, with cover of at least £5 million. Some exemptions apply, for example a company whose only employee is its owner and director.
- 4. Register as an employer with HMRCBefore the first payday, but no more than 2 months before. Allow up to 5 working days to receive your PAYE reference and Accounts Office reference.
- 5. Payroll softwareEvery payment is reported to HMRC on or before payday (Real Time Information).
- 6. Workplace pensionCheck eligibility from the first day; enrol staff aged 22 to State Pension age earning over £10,000 a year.
- 7. Pay HMRCIncome Tax and National Insurance by the 22nd of the following month if you pay electronically.
Minimum wage from April 2026
| Age | Hourly rate |
|---|---|
| 21 and over (National Living Wage) | £12.71 |
| 18 to 20 | £10.85 |
| Under 18 and apprentices in their first year | £8.00 |
Unpaid trial shifts, deductions for uniforms and unpaid training time can all push pay below the minimum. HMRC enforces this and names employers who underpay.
The real cost of a salary
On top of the salary, the employer pays:
- Employer National Insurance: 15% on pay above £5,000 a year.
- Pension contributions: at least 3% of qualifying earnings (between £6,240 and £50,270).
- Insurance, equipment and payroll costs.
The Employment Allowance can cut employer National Insurance by up to £10,500 a year. It is not available if the only paid employee is a director. Taking on your first non-director employee can unlock it, which often makes the first hire cheaper than expected.
Employing family members
You can employ your spouse or children, but the pay must be real, for real work, at a rate you would pay someone else, and run through payroll. Children under 13 generally cannot be employed, and there are strict limits on hours for school-age children.
What does an employee really cost?
What to prepare
0 of 5 ready
One piece of advice
Set up payroll and the pension before the first payday, not after. Most problems we fix for new employers come from paying the first salary by bank transfer and sorting out the reporting later.
Test yourself
1. When must you check a new employee's right to work?
Before the first day, for everyone.
2. What is the National Living Wage from April 2026?
£12.71 an hour for workers aged 21 and over.
3. When is each payment reported to HMRC?
Real Time Information: every payday.
4. Can a company whose only employee is the director claim the Employment Allowance?
It is not available where the director is the only paid employee.
Law and sources
- GOV.UK: employing staff for the first timeThe employer checklist
- GOV.UK: check a job applicant's right to workChecks and penalties
- GOV.UK: National Minimum Wage and National Living Wage ratesRates from April 2026
- GOV.UK: register as an employerPAYE registration
- The Pensions Regulator: employer dutiesAutomatic enrolment
- GOV.UK: employers' liability insuranceWhen it is required
This guide explains the rules in general terms as at 5 October 2026. It is not advice for your situation. Rules and rates change.
