Taking on your first employee is the moment a business stops being a job you own and starts being an organisation — exciting, terrifying, and wrapped in legal obligations that most new employers discover by accident. The good news: hiring your first employee in the UK legally is a well-trodden path with clear steps. Miss the steps and the penalties range from fines to tribunal claims; follow them and it’s mostly admin. Here’s the complete checklist, in the order to do things.

Hire first employee UK legally: before you offer

1. Check you can afford the true cost

The salary is roughly 75–80% of what an employee actually costs. On top of a £25,000 salary, budget: employer National Insurance (~£2,000 at 2026 rates above the threshold), workplace pension auto-enrolment (minimum 3% employer contribution — ~£750), employers’ liability insurance (£100–£300/year, legally required), plus recruitment costs, equipment, training, and management time. The rule of thumb: multiply the salary by 1.25–1.3 for the true annual cost. If that number doesn’t fit comfortably in your cashflow (see our cashflow guide), consider whether a contractor or part-timer bridges the gap first.

2. Define the role properly

Write a real job description: responsibilities, required vs nice-to-have skills, hours, location, salary range. Vague hiring produces vague candidates. Decide employed vs contractor honestly — calling someone a contractor while treating them as an employee falls foul of IR35/employment status rules, and HMRC is increasingly aggressive here. If you control their hours, methods, and they work only for you, they’re an employee whatever the contract says.

The legal checklist (in order)

  1. Register as an employer with HMRC — do this before the first payday (up to 4 weeks before is ideal; the PAYE reference takes time to arrive). You can’t run payroll without it.
  2. Right to work check — before employment starts, verify the person’s right to work in the UK (passport, biometric permit, or the Home Office online check). This is a criminal offence to get wrong — fines up to £60,000 per illegal worker. Do it properly, keep copies, repeat the check if their permission is time-limited.
  3. Written statement of particulars — you must provide this on or before the first day (not within two months, as the old rule had it). It covers: job title, duties, pay, hours, holiday, notice periods, and where to find disciplinary procedures. Use ACAS’s free template — see acas.org.uk — rather than writing your own.
  4. Set up payroll — you must run Real Time Information (RTI) reporting to HMRC on or before each payday. Payroll software (even free options like HMRC’s Basic PAYE Tools for under 10 employees, or your accounting software’s payroll module) handles the calculations and submissions. Many new employers outsource payroll to their accountant (£10–£25/month per employee) — worth it for the peace of mind.
  5. Workplace pension auto-enrolment — assess and enrol eligible staff (aged 22–state pension age, earning over £10,000), set up a scheme (NEST is the free government-backed default), and handle opt-outs correctly. The Pensions Regulator fines for non-compliance start at £400 and escalate daily — this is the most commonly missed obligation.
  6. Employers’ liability insurance — legally required (£5m minimum cover) from the first day of employment, with the certificate displayed. See our business insurance guide.
  7. Health and safety — with employees, you need a written health & safety policy (5+ employees), risk assessments, and employer’s liability as above. For office-based roles this is proportionate and simple; for manual trades, take it seriously.

Getting the recruitment right

  • Where to advertise: Indeed and LinkedIn for reach; local Facebook groups and community boards for local roles (often better candidates, lower cost); industry-specific boards for specialists. Your network first — the best first hires often come recommended.
  • Interview legally: ask about ability to do the job, not protected characteristics (age, disability, pregnancy, religion, etc.). Keep notes — if a rejected candidate claims discrimination, your notes are your defence.
  • Reference and probation: take up references (they’re brief but occasionally revealing), and use a probation period (3–6 months) with a review meeting — it sets expectations and makes the difficult conversation easier if it’s not working.
  • Pay fairly: check the National Minimum/Living Wage (it rises most Aprils — verify the current rate), benchmark the role’s market rate, and remember that underpaying costs more in turnover than fair pay costs in salary.

The ongoing duties (beyond day one)

Employment isn’t a one-time setup: payslips every payday, RTI submissions on time (penalties for late filing), holiday management (28 days including bank holidays for full-timers, pro-rata), sick pay (SSP administration), pension re-enrolment every three years, and record-keeping (payroll records for 3 years minimum). None of it’s difficult with decent payroll software; all of it has penalties for neglect. This is another argument for the accountant-run payroll — £20/month to never think about RTI deadlines is money well spent.

GOV.UK’s employing staff pages are the authoritative step-by-step source — work through them alongside this guide. And ACAS offers free templates for contracts, policies, and procedures — the best free HR resource in the country.

The first 90 days: onboarding that works

The legal boxes are ticked; now make the hire actually work. Week 1: a proper induction — not just “here’s your desk” but the business story, the customers, the systems, and crucially who to ask about what. Assign a buddy (even if that’s you). Month 1: clear, written objectives for the probation period — what does “doing well” look like, specifically? Vague expectations produce vague performance. Month 3: the probation review — an honest two-way conversation. If it’s working, confirm and celebrate; if not, you have a decision framework rather than drift.

The mistake first-time employers make: hiring then neglecting. Your first employee needs more management attention, not less — weekly check-ins for the first couple of months, feedback in both directions, and patience with the learning curve. The investment pays back in retention: replacing an employee costs 50–200% of their annual salary in recruitment and lost productivity. A good onboarding is the cheapest retention tool you have.

The practical takeaway

Budget 1.25–1.3x the salary for true cost, then work the checklist: register as an employer, right-to-work check before day one, written terms on day one, payroll with RTI, pension auto-enrolment, employers’ liability insurance. Use ACAS templates, consider outsourcing payroll (£10–£25/month), and get the pension enrolment right — it’s the most commonly missed duty and the fines escalate daily. Do the admin properly and you can focus on the exciting part: building the team.