Hiring your first employee: what a company must do

Published 3 September 2026 · updated 9 September 2026 · 6 min read

Taking on your first employee turns a company into an employer, with obligations that start on day one rather than at the end of the first month.

Register as an employer

You need a PAYE scheme before the first payday. Real time information submissions are made on or before each payment, so a scheme registered afterwards means late filings from the start. We can set the scheme up if you would rather not.

Employer's liability insurance

This one is a legal requirement, not a recommendation. Most employers must hold employer's liability cover of at least £5 million from the day the first employee starts, and the certificate must be available to employees. Penalties apply for every day you trade without it.

A written statement of employment particulars

Employees and workers are entitled to a written statement of the main terms on or before their first day. It covers pay, hours, holiday, notice, place of work and more. A verbal agreement and a handshake is not compliance.

Pensions

Automatic enrolment duties begin on the employee's start date, not later. You must assess the employee, enrol them if eligible, contribute, and complete a declaration of compliance with the Pensions Regulator. Even if nobody is eligible, the declaration is still required.

Right to work

Check and record the employee's right to work in the UK before they start. Doing it properly is what gives you a statutory excuse if the position later turns out to be wrong.

Practical order of events

1. Agree the terms, in writing.
2. Check right to work, and keep the evidence.
3. Register the PAYE scheme.
4. Arrange employer's liability insurance.
5. Set up payroll software and run the first RTI submission on or before payday.
6. Assess the employee for automatic enrolment and complete the declaration.

Directors count

A company paying its own director a salary is an employer for PAYE purposes. The pension position for a sole director with no employment contract can differ — confirm it rather than assuming either way.