Taking on your first employee:
PAYE, payslips and pensions

You’ve found the right person and agreed a start date. Before their first payday you need to be set up with HMRC, have a way to run payroll, and know your pension duties. None of it is difficult once it’s in place, but the order matters.

Register as an employer

You normally need to register with HMRC as an employer before your first payday, to get your employer PAYE reference. You can’t register more than two months before you start paying people. This applies even if the only person you’re paying is yourself, as the sole director of a limited company.

The reference comes by post, so leave time. If payday arrives first, run payroll as normal, keep the submission and send it to HMRC once you have the reference.

Set up payroll

You’ll need payroll software, or someone to run payroll for you. Before the first pay run, collect your new starter’s details: their P45 from their last job, or a completed starter checklist if they don’t have one.

Then, each payday:

• work out their pay, tax and National Insurance
• report it to HMRC on or before payday in a Full Payment Submission (FPS). This is Real Time Information, or RTI
• give them a payslip

Payslips

Employees and workers are entitled to a payslip on or before payday. It must show their pay before and after deductions, and the deductions that can change each time, such as tax and National Insurance. If their pay depends on hours worked, it must show the hours too.

Paying HMRC

You pay the tax and National Insurance you’ve deducted, plus employer’s National Insurance, to HMRC:

• by the 22nd of the next tax month if you pay electronically
• by the 19th if you pay by cheque through the post
• quarterly instead, if you expect to pay HMRC less than £1,500 a month

Employer’s National Insurance is 15% on earnings above £5,000 a year (£96 a week). Many employers can claim the Employment Allowance, which takes up to £10,500 a year off their employer’s National Insurance bill, but not everyone qualifies.

Minimum wage

From 1 April 2026, the National Living Wage is £12.71 an hour for workers aged 21 and over. There are lower rates for younger workers and apprentices.

Workplace pensions

Your pension duties start on the day your first employee starts work. This is your duties start date. You must automatically enrol staff who:

• are aged between 22 and State Pension age
• earn at least £10,000 a year
• normally work in the UK

Other staff can ask to join. Contributions must be at least 8% of qualifying earnings in total, with at least 3% from you. Qualifying earnings are pay between £6,240 and £50,270 a year.

If someone becomes eligible later, through age or a pay rise, you have six weeks to enrol them. Within five months of your duties start date, send The Pensions Regulator a declaration of compliance, even if nobody needs enrolling.

Records

Keep payroll records for three years from the end of the tax year they relate to: pay, deductions, what you reported and paid to HMRC, sickness and leave, tax code notices and any taxable benefits.

What you need to do

• Register as an employer with HMRC, no more than two months before your first payday.
• Choose payroll software or someone to run it.
• Get your new starter’s P45 or a starter checklist.
• Set up a workplace pension scheme and enrol anyone who qualifies.
• Send an FPS and a payslip on or before every payday.
• Pay HMRC by the 22nd of each month, or quarterly if you qualify.
• Send your declaration of compliance within five months of your first employee starting.

Key dates

• Before the first payday: employer registration and PAYE reference.
• Every payday: FPS to HMRC and a payslip to your employee.
• 22nd of each month: PAYE payment to HMRC, if you pay electronically.
• Within 5 months of your duties start date: declaration of compliance.
• 31 May: P60s to staff who are with you on 5 April.