Hiring your first employee is an exciting step, but it also brings new responsibilities. This guide explains the main payroll and employment points to think about when you hire someone for the first time, and each time after that.
This is a general introduction and is not legal advice. For free, impartial employment advice, you can contact Acas on 0300 123 1100.
What will an employee really cost?
When you agree a salary or hourly rate, the employee's gross pay is only part of the cost. You may also need to pay employer National Insurance and make employer pension contributions.
For example, in the 2026–27 tax year you may want to employ someone aged 21 or over for 40 hours a week at the National Living Wage. An illustrative annual salary is:
£12.71 per hour × 40 hours per week × 52.18 weeks = £26,528.31 per year.
On this salary, standard employer National Insurance would be about £3,229.25 and the minimum employer pension contribution on qualifying earnings would be about £608.65. This gives an estimated annual employment cost of £30,366.21 before any other costs. The exact figures can vary with the employee's circumstances, pension scheme and pay pattern.
The National Minimum Wage rates from 1 April 2026 are:
- Apprentices: £8.00 per hour.
- Workers aged 16 or 17: £8.00 per hour.
- Workers aged 18 to 20: £10.85 per hour.
- Workers aged 21 and over: £12.71 per hour.
The apprentice rate applies to apprentices under 19, or those aged 19 and over who are still in the first year of their apprenticeship. After that, the rate for their age applies.
How much annual leave should employees receive?
Most workers are entitled to 5.6 weeks of paid annual leave each leave year. Bank holidays can be included within this entitlement, although an employment contract may provide more leave.
Holiday entitlement and holiday pay can become more complicated for irregular-hours and part-year workers, or where pay varies. Our separate holiday pay article explains these areas in more detail and our Holiday Pay Calculator hepls you calculate holidays and keep track of employees' 52-week average earnings where necessary.
What statutory payments might apply?
Employees may qualify for different statutory payments when they are sick or take family-related leave. The most common examples are below. You can use our Statutory Pay Calculator tool to assist you in your calculations.
Statutory Sick Pay
From 6 April 2026, eligible employees can receive Statutory Sick Pay from the first qualifying day of sickness. It is paid at £123.25 per week or 80% of average weekly earnings, whichever is lower. The weekly amount is divided by the employee's qualifying days to work out a daily rate.
Statutory Maternity Pay
An employee will usually need 26 weeks of continuous employment up to and including the qualifying week, which is the 15th week before the baby is due. Their average weekly earnings must also be at least £129.
The first 6 weeks are paid at 90% of average weekly earnings. The following 33 weeks are paid at £194.32 per week or 90% of average weekly earnings, whichever is lower.
Statutory Paternity Pay
An employee will usually need 26 weeks of continuous employment up to the relevant qualifying week and average weekly earnings of at least £129.
Eligible employees can receive 1 or 2 weeks at £194.32 per week or 90% of average weekly earnings, whichever is lower. Other eligibility and notice conditions also apply.
What are my automatic enrolment duties?
Automatic enrolment is the process of assessing your staff and, where required, putting them into a workplace pension. These duties apply even if an employee says they do not want a pension, although they may be able to opt out after enrolment.
The main employer duties are to:
- Write to all staff with the information that applies to them.
- Assess staff and enrol anyone who is eligible.
- Choose a suitable pension scheme and pay contributions when required.
- Submit a declaration of compliance to The Pensions Regulator.
- Continue assessing staff and complete re-enrolment duties every three years.
You can read our Automatic Enrolment article here which explains each step in more detail.
Why does the pay date matter?
You need to choose a usual pay date before processing payroll. Your Real Time Information submission, normally a Full Payment Submission, must reach HMRC on or before the date employees are paid.
The submission tells HMRC about the employees being paid, their pay and deductions, and the payment date. If the normal pay date changes, tell your payroll provider before the payroll is processed.
When do I pay PAYE to HMRC?
As well as paying your staff, you must pay HMRC the PAYE due for the tax period. The bill can include Income Tax, employee National Insurance and employer National Insurance.
Income Tax and employee National Insurance are deducted from the gross pay agreed with the employee. Employer National Insurance is normally an additional business cost.
If you pay electronically, PAYE is generally due by the 22nd of the following tax month. You can pay by Direct Debit through your HMRC online account or by bank transfer using your 13-character Accounts Office reference.
For a transfer from a UK bank account, HMRC's current PAYE account details are:
- Account name: HMRC Cumbernauld.
- Sort code: 08-32-10.
- Account number: 12001039.
Always check the current methods, payment details and reference rules on Pay employers' PAYE before making a payment, especially if you are paying early or late.
Is financial support available?
The Employment Allowance can reduce an eligible employer's Class 1 National Insurance bill by up to £10,500 for the 2026–27 tax year. Eligibility restrictions still apply, including rules for some public-sector work, connected companies and companies where the only employee liable for employer National Insurance is also the sole director.
Employers can normally recover 92% of qualifying statutory parental payments. Small Employers' Relief allows eligible employers whose total Class 1 National Insurance was £45,000 or less in the relevant tax year to recover 109%.
Is the person employed or self-employed?
Employment status is not simply a choice between the option that costs less. It depends on how the working relationship operates in practice.
Getting this wrong can affect PAYE, National Insurance and employment rights. HMRC's Check Employment Status for Tax tool can help you review the tax position, although employment-rights status may need separate advice.
What else should I arrange?
Payroll is only one part of becoming an employer. You should also consider:
- A written statement of employment particulars and any wider employment contract.
- Right to work checks.
- Employers' liability insurance.
- Working time and rest-break rules.
- Health and safety responsibilities.
- Secure employee records and data protection.
Ready to employ someone?
There is a lot to organise, but getting the basics in place before the first pay day makes the process much easier. If you would like help setting up payroll or checking the figures for a new employee, get in touch with us or start with our Payroll Helper.