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Hiring your first employee is a big step for any business. It usually means you are growing, taking on more work and starting to build a team around you. It can also feel a little daunting, especially if payroll is new to you.
When you employ someone for the first time, you are not just agreeing a salary and sending money each month. You also need to think about PAYE, National Insurance, pension duties, payslips, reporting to HMRC and keeping the right records. Getting these things right from the start makes life much easier later on.
If you want support with setup and ongoing payroll, Asmat & Co Accountants offers professional payroll services Slough businesses can rely on to stay organised and avoid early mistakes while still finding their feet.
The good news is that payroll does not need to be overly complicated. Once you understand the main steps and put a proper system in place, it becomes a routine part of running your business.
Register As An Employer At The Right Time
Before your employee’s first payday, you may need to register as an employer with HMRC and set up PAYE. HMRC says you must register for PAYE if, in the current tax year, an employee is paid £96 or more a week, gets expenses or company benefits, has another job, or receives certain benefits or a pension. HMRC also notes that registration should be done before the first payday and can take up to 5 working days.
That means you should not leave payroll setup until the last minute. Even if you only have 1 employee, you still need to check whether PAYE applies and be ready in time.
Once registered, HMRC will send you the references you need to run payroll properly.
Collect The Right Information Before They Start
When you take on your first employee, you need accurate details from the beginning. This includes their full name, address, date of birth, National Insurance number, start date and pay details.
You may also need information about their previous employment. If they have a P45 from an earlier job, that can help you apply the right tax code. If they do not have 1, you will need to follow HMRC’s starter process so you can tax them correctly from the beginning.
It is also a good idea to confirm their hours, pay frequency, holiday entitlement and whether there are any deductions or benefits that need to be handled through payroll.
Choose A Payroll System That You Can Actually Manage
A lot of first-time employers underestimate how important the payroll system is. If your process is unclear, even simple tasks can become messy.
You need a system that can:
- record gross pay
- calculate tax and National Insurance
- produce payslips
- send payroll information to HMRC
- keep payroll records safely
- handle pension deductions if needed
Some businesses use payroll software, while others hand it over to an accountant or payroll provider. The right option depends on your confidence, how much time you have and whether you expect payroll to become more complicated soon.
If you are already busy managing sales, customers and cash flow, outsourcing payroll can often be more practical than trying to learn everything at once.
Understand What PAYE Really Means
PAYE stands for Pay As You Earn. It is the system used to collect Income Tax and National Insurance from employees’ pay.
As an employer, you are responsible for calculating the deductions, taking them from wages where required and reporting the payroll information to HMRC in real time. HMRC’s employer guidance explains that payroll reporting operates through Real Time Information, meaning you report payments and deductions as you pay your staff.
This is one of the biggest reasons payroll needs to be accurate. If figures are wrong, your employee may be taxed incorrectly and your reporting to HMRC may also be wrong.
Make Sure Pay Meets Minimum Wage Rules
When you set pay for your first employee, you must make sure it meets the current minimum wage rules for their age and status.
From April 2026, the National Living Wage for workers aged 21 and over is £12.71 per hour. The 18 to 20 rate is £10.85, the 16 to 17 rate is £8.00, and the apprentice rate is also £8.00.
This matters because payroll is not only about processing pay correctly. It is also about making sure the amount you pay is lawful. If working time, deductions or unpaid time reduce pay below the minimum rate, you could create a compliance issue without realising it.
Do Not Overlook Workplace Pension Duties
Many first-time employers focus so much on tax that they forget about pensions. But workplace pension duties can start from the day your first member of staff starts work.
The Pensions Regulator says your legal duties begin on the day your first member of staff starts work, known as your duties start date. On that date, you must assess your staff to see whether they meet the age and earnings criteria for automatic enrolment. Even if you believe no one needs to be enrolled, you still have duties.
This means you should not wait until months later to think about pensions. You need to understand whether your employee qualifies, what communications need to be sent, and whether a pension scheme needs to be in place.
Send Payroll Information On Time
One of the easiest ways to run into payroll problems is to miss deadlines. Payroll is not just about paying someone. It is also about reporting accurately and on time.
Under Real Time Information, employers normally send a Full Payment Submission to HMRC on or before paying employees. HMRC’s April 2026 Employer Bulletin also reminded employers that genuine new employments must include a start date, and that incorrect submissions can cause reconciliation problems.
That is why you should treat each payroll run as a structured process. Check the hours, confirm the gross pay, review the deductions, issue the payslip and make the submission at the right time.
Keep Payroll Records Properly
Good record-keeping makes payroll easier and safer. You should keep records of pay, deductions, pension contributions, tax codes, employee details and the submissions you make.
This is helpful for several reasons. It supports compliance, gives you evidence if anything is queried and makes year-end reporting much easier. It also helps if an employee asks about their pay or if you need to correct a mistake later.
A lot of small businesses come unstuck because they rely on memory, handwritten notes or scattered emails. That may seem manageable at first, but it becomes a problem as soon as something needs checking.
Be Careful With Extras Like Benefits And Expenses
Once you move beyond basic wages, payroll can become more complex. Reimbursed expenses, benefits in kind and company perks may all affect how payroll and reporting should be handled.
For example, HMRC says benefits can only be payrolled if you registered them in time, and some benefits still need separate reporting.
You may not need to deal with this straight away if your first employee is simply being paid a salary or hourly wage. But it is worth knowing that payroll can become more detailed as your business grows.
Think About The Employee Experience Too
Payroll is a compliance task, but it also affects trust. Your first employee will expect to be paid the right amount, on time, with a clear payslip and no confusion.
If payroll is late or inconsistent, it can damage confidence quickly. That is why a dependable payroll routine matters so much. Even if your business is small, professional payroll helps you look organised and reliable.
A smooth payroll process also takes pressure off you. Instead of worrying every payday, you know the figures have been checked and handled properly.
Final Thoughts
Taking on your first employee is a major milestone, but it comes with real responsibilities. You need to register correctly, collect the right details, run PAYE, meet minimum wage rules, understand pension duties and report to HMRC on time.
The best approach is to keep things simple, accurate and consistent from day 1. A proper payroll setup saves time, reduces mistakes and gives both you and your employee more confidence.
If you are about to hire your first employee and want help with payroll setup, monthly processing and ongoing compliance, speak to Asmat Accountants today and get the support you need to pay your staff correctly and keep your business on track.
