The gap between "you're hired!" and a correct first payslip is about six admin jobs. Done in order, in the fortnight before the start date, they are all straightforward. Done in arrears, they turn into penalties, backdated pension contributions and an awkward conversation with someone who has just left a secure job to join you.

This is the sequence, at 2026/27 rates, with the real cost of the hire at the end — including the one relief that most first-time employers do not realise they have just become eligible for.

1. Register as an employer with HMRC

You need an employer PAYE reference before you can file anything, and you cannot get one retrospectively without friction. Two timing rules matter and they squeeze you from both ends: you must register before the first payday, and you cannot register more than two months before you start paying people. That gives you a working window of about eight weeks, so the right moment is the day the offer is accepted.

If the reference has not arrived by payday, do not delay the payslip. Run the payroll, keep the submission, and send it as a late Full Payment Submission once the reference lands — HMRC's own guidance sets out that route.

2. Check right-to-work documents, and keep the evidence

This is the single most expensive thing on the list to get wrong. The civil penalty for employing someone without the right to work rose in early 2024 to a maximum of £45,000 per worker for a first breach and £60,000 per worker for a repeat breach within three years.

The protection is a statutory excuse: carry out the check in the way the Home Office prescribes, before employment starts, and keep the evidence, and you are not liable for the penalty even if the person turns out to be disqualified. The excuse comes from following the process, not from good faith. Do the check, date it, and store the copy with the personnel file.

3. Issue the written statement of employment particulars

The principal statement must be given on the first day of employment — not within two months, as the rule used to be, and it applies to workers as well as employees. It has to cover names, job title, start date, pay and pay frequency, hours and how they may vary, holiday entitlement, work location, any probation period and its conditions, benefits, and any obligatory training.

A wider written statement, covering pension arrangements, collective agreements and training entitlement, follows within two months. Sick pay procedure, other paid leave and notice periods are day-one information too — either in the principal statement or in a document the employee can readily access.

4. Buy employers' liability insurance

Easy to forget and legally non-negotiable. You must hold employers' liability cover of at least £5 million from the moment you become an employer. The fine is £2,500 for every day you are uninsured, and a further £1,000 for failing to display the certificate. The only common exemptions are employing family members only, or employing only people based outside England, Scotland and Wales — neither of which applies to a normal first hire.

5. Set up the workplace pension

Auto-enrolment duties start on your employee's first day. You must enrol anyone aged 22 to State Pension age earning over £10,000 a year, and the minimum contribution is 8% of qualifying earnings, of which at least 3% must come from you.

Qualifying earnings are not the whole salary. For 2026/27 the band runs from £6,240 to £50,270, and only the slice between those two figures counts. On a £30,000 salary that is £23,760 of qualifying earnings, so your 3% is £712.80 a year, not £900. Schemes such as NEST accept any employer and cost nothing to set up.

Then the part people miss: you must complete a declaration of compliance with The Pensions Regulator within five months of your duties start date. It is a legal requirement in its own right, and it is separate from enrolling anybody — you complete it even if your only member of staff opted out.

6. Run payroll on time, every time

Real Time Information means a Full Payment Submission reaches HMRC on or before every payday, not at the end of the month or the quarter. Late filing penalties are charged monthly and scale with headcount: £100 a month for 1 to 9 employees, £200 for 10 to 49, £300 for 50 to 249 and £400 for 250 or more. Your first late report in a tax year is not penalised, so a one-off slip is survivable; a habit is not.

What a £30,000 hire actually costs

Here is the arithmetic in full, for a company whose founder is currently its only director on a £12,570 salary, hiring one person on £30,000 from 6 April 2026. Figures are illustrative but the rates are the real 2026/27 ones.

  • Salary: £30,000
  • Employer National Insurance: 15% on earnings above the £5,000 secondary threshold = (£30,000 − £5,000) × 15% = £3,750
  • Pension: 3% of £23,760 qualifying earnings = £712.80
  • Employers' liability insurance, laptop, software seats: realistically £1,000–£2,500 in year one

Gross loaded cost before relief: roughly £35,500–£37,000, or about 1.18–1.23× salary.

The relief your first hire unlocks

Now the part that changes the answer. The Employment Allowance is £10,500 a year off your employer's Class 1 National Insurance bill. A company whose only employee paid above the secondary threshold is a single director cannot claim it. That is most pre-hire startups, which is why founders often assume it does not apply to them.

Take on one employee and that bar falls away. In the example above:

  • Employer NI on the new hire: £3,750
  • Employer NI on the founder's own £12,570 salary: (£12,570 − £5,000) × 15% = £1,135.50
  • Total employer NI: £4,885.50 — all of it covered by the £10,500 allowance

So the cash cost of employer NI in year one is nil, on the new hire and on the founder. The real loaded cost drops to about £31,700–£33,200, or roughly 1.06–1.11× salary. The allowance is not automatic — you claim it through your payroll software, and you claim it each tax year. Miss the tick box and you hand HMRC £4,885 you did not owe.

One caveat worth knowing: since April 2025 employers with more than £100,000 of Class 1 liabilities can also apply for the allowance, so growth no longer knocks you out of it the way it once did.

What to do this week

  1. Register for PAYE the day the offer is accepted — no earlier than two months before payday.
  2. Do the right-to-work check before the start date and file the dated evidence.
  3. Draft the principal statement now so it can be handed over on day one.
  4. Get an employers' liability quote — it is usually a modest annual premium and the fine is £2,500 a day.
  5. Open the pension scheme and diarise the declaration of compliance for five months out.
  6. Put the start date, the loaded cost and the Employment Allowance into your cashflow forecast — hiring dates are the biggest single lever on a startup's burn.

If equity is part of the package rather than cash, read this alongside our guide to EMI share options; the 25-hours-a-week test there is aimed at exactly this kind of first hire.

What it costs to have done for you

Our payroll runs from £8 per employee per month, with a £25 monthly minimum, and pension administration from £2 per enrolled employee — payslips, RTI filing, starters and leavers, pension submissions and the Employment Allowance claim, all handled. For a first hire that is less than the cost of one founder-hour a month spent doing it badly. Get started.