What do I need to do before hiring my first employee?

Taking on staff turns a sole trader into an employer overnight, and most of the obligations bite before the first shift rather than after it.

The pre-start checklist

1. Right to work check. Verify and copy the evidence before they start. A check done afterwards gives you no statutory excuse if it later emerges the person had no right to work.
2. Register for PAYE with HMRC, ideally about four weeks before the first payday, and get RTI-compatible payroll software. Free software is available for employers with fewer than ten staff.
3. Employers' liability insurance with at least £5 million of cover, in force from day one and the certificate displayed.
4. Written statement of particulars — the core employment contract — given on or before the first day.
5. Choose a qualifying pension scheme. NEST is free for employers and accepts everyone.

What the contract must contain

The written statement must cover the names of both parties, the start date and any earlier service that counts as continuous, the job title or description, place of work, pay rate and frequency, working hours, holiday entitlement and pay, sick pay arrangements, notice periods on both sides, pension details, any collective agreement, and any probationary period. Confidentiality clauses, post-termination restrictions and other benefits go in as additional terms. Part-time and zero-hours workers are entitled to the same statement from day one.

Then plan for the running costs. Beyond salary you pay employer National Insurance on earnings above the secondary threshold of £5,000, a minimum 3% pension contribution on qualifying earnings, and the insurance premium — typically a few hundred pounds a year for a small business. Pay at least the National Minimum or National Living Wage for the worker's age, and review rates each April when they change.

Auto-enrolment starts immediately: enrol anyone aged 22 to State Pension age earning over £10,000 within six weeks of their start date, write to them within the same six weeks, and declare compliance to The Pensions Regulator within five months. Ongoing, you must run payroll and file an FPS on or before each payday, pay HMRC by the 22nd if paying electronically, issue itemised payslips, keep personnel and payroll records, and re-enrol opted-out staff every three years. Paying cash in hand outside PAYE is tax evasion, not an informal arrangement.