Hiring Your First Employee in the UK: A Step-by-Step Guide
Taking on your first employee opens up capacity you couldn’t have alone — but it brings a set of legal, financial, and administrative obligations worth understanding before you advertise the role. Here’s everything you need to know.
Work out the true cost of hiring your first employee
Most first-time employers underestimate the cost of taking on an employee. The salary is only part of it. A rough rule of thumb: expect total employment costs to be around 1.2–1.3 times the base salary once NIC, pension, and other on-costs are factored in.
15% on earnings above £5,000 per year. On a £30,000 salary, that’s roughly £3,750 per year. Employment Allowance (up to £10,500) can offset this — but sole director companies cannot claim it.
Minimum employer contribution under auto-enrolment is 3% of qualifying earnings. On a £30,000 salary, roughly £900 per year. Mandatory for eligible employees from day one.
Job boards, agency fees (typically 10–20% of first-year salary for permanent roles), or your own time. Don’t forget the cost of interviewing — yours and any colleagues involved.
Laptop, phone, tools, desk, software licences. Budget for everything they’ll need to be productive from day one — it’s easy to underestimate this.
Legally required from day one of employment, minimum £5 million cover. Failure to hold it carries a fine of up to £2,500 per day. Typically £100–200 per year for a small business.
Your time getting the new person up to speed has a real cost. Budget for a slower period of productivity while they settle in — typically four to eight weeks before someone is fully effective.
The legal checklist for hiring in the UK
Before anyone starts, you must check they have the legal right to work in the UK. Failure to do so can result in a civil penalty of up to £45,000 per worker. See and record the required documents, and note the date the check was done. For non-UK/Irish nationals the requirements vary by immigration status — check gov.uk/check-job-applicant-right-to-work.
Employees must receive a written statement of employment particulars from day one — not later once things settle down. It must cover job title, pay, hours, holiday entitlement, notice period, location, pension, and disciplinary procedures. Use a solicitor or a legally reviewed template for your first contract.
Register before the first payday at gov.uk/register-employer — takes up to 5 working days and provides your PAYE reference number, needed to run payroll and make payments to HMRC.
You need payroll software to calculate income tax and NIC, produce payslips, and submit Real Time Information reports to HMRC on or before each payday. Most small businesses use Xero, QuickBooks, FreeAgent, or Sage. See our PAYE guide for the full details.
Eligible employees (aged 22 to State Pension age, earning over £10,000 per year) must be automatically enrolled in a qualifying workplace pension from day one, with enrolment completed within six weeks. Minimum employer contribution: 3% of qualifying earnings. See our auto-enrolment guide for the full process.
Legally required from day one. Cover must be at least £5 million from an authorised insurer. Certificates must be displayed (digitally is fine). Failing to hold it costs up to £2,500 per day — don’t skip this step.
As an employer, you have a duty to provide a safe working environment. For most small businesses, this means a basic risk assessment and a health and safety policy (required in writing once you have 5 or more employees).
Day-one employment rights (2026)
Under the Employment Rights Act 2025, a significant number of rights now apply from the first day of employment, with no qualifying period. As of April 2026:
| Right | What it means | What changed |
|---|---|---|
| Statutory Sick Pay | Payable from day one of absence, to all employees regardless of earnings | Previously required 3 waiting days and a minimum earnings threshold of £125/week |
| Paternity leave | Available from the first day of employment | Previously required 26 weeks’ continuous service |
| Unpaid parental leave | Available from the first day of employment | Previously required one year’s service |
| Unfair dismissal protections | Qualifying period has been reduced | Employers must manage probation and early employment with greater care and documentation |
Writing a job advert that attracts the right people
A well-written job advert does two things: attracts candidates who are a genuine fit, and filters out those who aren’t. The most effective adverts for small businesses:
- Lead with what makes the role interesting. Candidates are choosing you as much as you’re choosing them. Start with what’s compelling about the role and the business — not a list of requirements.
- Be specific about the role. Describe what the person will actually do day to day, what success looks like after six months, and what the team or working environment is like. Vague descriptions attract vague candidates.
- Be honest about the salary. Transparency is increasingly expected and saves time on both sides. Candidates won’t apply for roles that don’t meet their requirements; you won’t interview people who won’t accept the offer.
- State the practical details clearly. Location (including remote or hybrid arrangements), hours, whether it’s permanent or fixed-term, and the application process. Ambiguity here creates friction.
The interview and selection process
- Ask the same core questions of every candidate. Structured interviews consistently outperform unstructured ones for predicting job performance — and they’re also more defensible if a decision is challenged.
- Avoid questions that could constitute discrimination. Age, family plans, relationship status, religion, and health are off-limits. Focus entirely on the person’s ability to do the job.
- Check references before making an offer. A reference check takes 20 minutes and can surface information that saves a significant amount of time and effort later. Make it standard practice.
- Keep notes. If a rejected candidate challenges your decision, contemporaneous notes of the interview and your reasoning are your best protection.
Making an offer and the probationary period
Once you’ve selected your candidate, make the offer verbally and follow up with a written offer letter confirming the key terms. Don’t wait for the contract to be fully drafted — good candidates are often fielding multiple offers.
Probationary periods of three to six months are standard practice and give both sides the opportunity to assess fit. During probation:
- Document your observations. Record performance discussions, training provided, and any concerns raised — in writing, dated, and ideally shared with the employee at the time.
- Provide regular feedback. Formal mid-probation and end-of-probation reviews are a minimum. Don’t save feedback for the end.
- Address concerns early. Under the reduced unfair dismissal qualifying period introduced in 2026, managing underperformance transparently and fairly from the outset matters more than ever.
Your ongoing obligations as an employer
Once someone is employed, your obligations don’t stop at payroll:
| Obligation | What’s required | When |
|---|---|---|
| Payslips | Every employee is entitled to a payslip on or before each payday | Each pay period |
| PAYE submissions | Full Payment Submission to HMRC on or before each payday | Each pay period |
| Holiday pay | 5.6 weeks’ paid holiday per year (pro-rated for part-time), paid at normal earnings rate | Ongoing |
| Statutory Sick Pay | £123.25/week or 80% of average weekly earnings (whichever is lower), from day one of absence | When employee is sick |
| Pension contributions | Pay and report contributions to your pension provider | Each payroll period |
| P60 | Issue to every employee still employed at 5 April | By 31 May annually |
| P11D | Report benefits in kind if applicable | By 6 July annually |
Useful resources
- HMRC employing staff guidance — gov.uk/employing-staff
- Acas — free guidance on employment law, contracts, and dispute resolution at acas.org.uk
- The Pensions Regulator — auto-enrolment guidance and your staging date at thepensionsregulator.gov.uk
- Right to work checks — gov.uk/check-job-applicant-right-to-work
- Your accountant — essential for getting payroll, pension, and employer NIC right from the start
- An employment solicitor — worth consulting for your first employment contract at minimum. One well-drafted template saves significant expense later.
More guides for UK small business owners
Right Hand Man covers everything from hiring your first employee to PAYE, auto-enrolment, cash flow, and writing a business plan. Browse our guides or get in touch if you have a question.