Hiring your first employee? That’s huge — congrats! It means your business is growing, and you’re bringing in fresh talent to help make things even better. But let’s talk payroll. It might sound scary (all that tax stuff), but don’t sweat it. With this simple step-by-step payroll checklist, you’ll be ready to roll in no time. Let’s dive in!
Register as an Employer with HMRC
Before you can pay your new hire, you need to register as an employer with HM Revenue & Customs (HMRC). Think of it as getting your official payroll license. If you skip this step, HMRC’s fines and penalties won’t be fun — trust me.
How to do it:
- Hop onto the HMRC website and fill out their online form.
- It can take up to five working days to process, so plan ahead.
Set yourself a reminder to check the status after a few days. Better safe than sorry!
Set Up a
Payroll System

Next up, you’ll need a payroll system to handle things like wages, taxes, and deductions. You can go DIY with payroll software or hire a payroll provider to do the heavy lifting.
Your options:
- HMRC has free payroll software for small businesses with up to 10 employees. It’s basic but does the job.
- Cloud-based payroll software can automate everything from payslips to tax filings.
Investing in good software is a game-changer. It saves time, keeps errors at bay, and makes life easier. Trust me, future-you will be grateful.
Check Their Right to Work
Before your new hire starts, you must check if they’re legally allowed to work in the UK. It’s a non-negotiable!
Here’s what to do:
- Ask for original documents like a passport or visa.
- Use the Home Office’s online tool if needed.
- Keep copies of everything and note the date you did the check.
Pro tip: Don’t skip the paperwork. It’s a legal safeguard that can save you trouble later.
Provide a Written Statement of Employment
This is a fancy way of saying, “give them a contract.” It sets clear expectations and is legally required within two months of their start date.
What to include:
- Job title and responsibilities
- Start date
- Pay details (how much and how often)
- Working hours and holidays
- Notice period
Not sure where to start? A professional template or legal advice is a good shout. If you’re an FSB member like me, check out their legal hub. It makes life so much easier.
Get Their Tax Code Right
The right tax code = the right tax payments. Get it wrong, and your employee might end up paying too much (or too little). That’s a headache for everyone.
How to find it:
- Ask for their P45 from their last job.
- No P45? Have them fill out HMRC’s Starter Checklist.
Using the wrong tax code could lead to frustrating corrections down the road. Stay sharp on this one.
Set Up Auto-Enrolment for Pensions
Got an employee over 22 earning more than £10,000 a year? You’re on the hook for auto-enrolling them in a workplace pension. Yep, it’s the law.
What to do:
- Pick a pension provider.
- Use payroll software that plays nicely with pensions.
- Tell your employee about the pension and their opt-out option.
Being upfront about pensions shows your professionalism. Bonus points for keeping employees happy.

Calculate PAYE Taxes and Deductions
PAYE isn’t just another acronym. It’s the system for handling Income Tax, National Insurance, and other deductions (think student loans or childcare vouchers).
Make it easy:
- Let payroll software handle the calculations.
- Submit real-time information (RTI) to HMRC every payday.
Automation here is a lifesaver. Seriously, let the software do the hard stuff.
Keep Good Payroll Records
Keeping records might not be glamorous, but it’s super important. Stay organised, and you’ll avoid future headaches (and fines).
What to track:
- Gross pay, deductions, and net pay
- Tax and National Insurance contributions
- Copies of P45s, P60s, and other docs
Store records for at least three years. Digital software makes it easy-breezy.
Pay Your Employee On Time
Payday is sacred. Get it right every time, and your employees will love you for it.
Tips for consistency:
- Pick a regular payday that works for your cash flow.
- Use reminders or automated payroll to stay on track.
People work hard for their money. Make payday predictable and painless.
Stay on Top of Payroll Compliance
Payroll rules change. Keeping up means no nasty surprises.
How to stay informed:
- Subscribe to HMRC’s employer updates.
- Follow us on social media or join our newsletter!
- Check yearly changes to things like minimum wage and tax rates.
Being proactive here can save you headaches. Trust me on this one
Final Thoughts
Hiring your first employee is a major win — and with this payroll checklist, you’re ready to crush it. Get your systems set-up early, and you’ll have more time to focus on growing your business and supporting your team.
And remember, you don’t have to do it alone. If payroll, taxes, and compliance feel overwhelming, we’re here to help. Reach out today, and let’s make your payroll simple, smooth, and stress-free.
Welcome aboard your new hire, enjoy the adventure, and remember: You’ve got this!
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