Hiring your first employee: the checklist, in the right order

There comes a point when you cannot do everything yourself. Hiring your first employee is how a business grows beyond one person — and it brings new legal duties. GOV.UK sets out the steps. Here they are in a practical order, with the figures you need.

1. Make sure it really is a job

First decide whether you are taking on an employee or using someone self-employed. It is not your choice of label that decides it — it is how the work is actually done: who sets the hours, who provides the tools, whether they can send someone else. Employees have employment rights, and you run payroll for them.

2. Check you can afford it

The cost of an employee is more than their wages. Budget for:

• at least the National Minimum Wage or National Living Wage for their age;
• employer's National Insurance contributions;
• workplace pension contributions;
• holiday pay, and Statutory Sick Pay — which since April 2026 is paid from the first day of sickness;
• maternity, paternity and other family pay where it applies.

Work the full figure out before you advertise the job.

3. Check their right to work — before day one

You must check that the person has the right to work in the UK before they start, and keep a dated record. The fine for employing someone who does not have the right to work can be up to £60,000 per worker. Since 1 October 2026, similar duties also apply to many contractors and gig workers you engage.

4. Get employers' liability insurance

Most employers must have employers' liability insurance from the first day they employ someone. It must cover you for at least £5 million. You can be fined £2,500 for every day you are not properly insured, and up to £1,000 if you do not display the certificate.

You do not need it if you only employ close family members, or people based outside England, Scotland and Wales — check the GOV.UK list.

5. Register as an employer and set up payroll

Register with HMRC as an employer and set up PAYE. You then run payroll each time you pay staff, report it to HMRC, and give each employee a payslip. Many small businesses use payroll software or an accountant.

6. Workplace pension

You must enrol staff into a workplace pension if they are aged 22 or over (up to State Pension age), earn at least £10,000 a year and normally work in the UK. You must pay in at least 3% of their qualifying earnings. Others can ask to join.

7. Make the workplace safe and fair

You are responsible for health and safety, fire safety, data protection and avoiding discrimination. From 30 October 2026, employers must take all reasonable steps to prevent sexual harassment at work. For a small team, a short written policy and a clear way to raise concerns is a sensible start.

8. Put it in writing

On their first day, give your employee a written statement of the main terms — who the employer is, job title, pay, hours, holiday, place of work, any probation period and so on. Some details, such as pensions and disciplinary and grievance procedures, can follow within two months. Keep copies of everything.

9. Know the new rules on dismissal

From 1 January 2027, employees will be protected from unfair dismissal after six months of employment rather than two years. If you use a probation period, run it properly: set clear expectations, review progress, and write down what was discussed.

Mistakes first-time employers often make

• Starting someone before the checks are done. The right to work check has to happen before the first day, not in the first week.
• Treating an employee as self-employed to save money. If the work is really employment, the rights and the tax follow the reality, not the label.
• Forgetting the pension duty. Enrolment is not optional for eligible staff.
• No written terms. Disagreements about pay, hours or holiday are far easier to settle when the terms were written down on day one.
• No records. Keep copies of the right to work check, the written statement, payslips and any reviews. With the time limit for most tribunal claims now six months, keep them for longer than you think you need to.

Your checklist

1. Confirm employee status.
2. Budget the full cost.
3. Right to work check before day one.
4. Employers' liability insurance in place.
5. Registered with HMRC as an employer; payroll ready.
6. Pension scheme chosen; staff enrolled.
7. Health and safety, and a harassment policy.
8. Written statement of terms on day one.
9. A planned probation review.

Taking on a first employee is a sign that the business is working. Getting these steps right from the start saves a great deal of trouble later.