When you take on your first employee, you become legally responsible for running payroll correctly and on time. The figures below use the 2026/27 rates.
Your obligations as a new employer
Once someone else is on the payroll, a set of ongoing obligations starts: registering as an employer, running payroll correctly each pay period, reporting to HMRC in real time, and making sure the right deductions and contributions happen automatically in the background rather than being worked out after the fact.
Someone else's pay now depends on these deadlines being met, so set payroll up properly before the first payslip.
What you need in place before day one
Register as an employer with HMRC before the first payday. There's a window either side of that: you can't register more than two months before you start paying anyone, and you can't leave it until after the first payslip. Registration gives you the employer PAYE reference your payroll software needs, so leaving it late blocks everything downstream.
You then need payroll software that reports Pay As You Earn information in real time. A Full Payment Submission has to reach HMRC on or before the day you pay someone, every time. You'll also need the employee's starter details and tax code set correctly from payslip one, because an incorrect code takes far longer to correct three months later.
The minimum pay rate
Before you agree a salary, check it clears the minimum. From 1 April 2026 the National Living Wage for workers aged 21 and over is £12.71 an hour. For 18 to 20-year-olds it's £10.85, and for under-18s and apprentices in the first year it's £8.00.
Convert it to an annual figure for budgeting. A full-time role at 37.5 hours a week is 1,950 hours a year. At £12.71 that's a floor of £24,784 for anyone aged 21 or over. Offer £23,000 for a full-time role and you are non-compliant, and HMRC names employers who underpay.
What a £30,000 hire costs
Do this calculation before you agree a salary. Say you agree a salary of £30,000.
Employer's National Insurance. You pay 15% on everything above the secondary threshold of £5,000 a year. So (£30,000 − £5,000) × 15% = £3,750.
Pension. Auto-enrolment contributions are worked out on qualifying earnings — the slice between £6,240 and £50,270. That's £30,000 − £6,240 = £23,760. The minimum total contribution is 8%, of which at least 3% must come from you: £23,760 × 3% = £713.
The gross cost is therefore £30,000 + £3,750 + £713 = £34,463 — around 15% more than the headline figure.
The Employment Allowance is worth up to £10,500 a year against your employer's NI bill. A one-person limited company usually can't claim it, because it's unavailable where the only employee paid above the secondary threshold is a director. When you take on a first non-director employee that restriction no longer applies, so the allowance typically covers the full £3,750 of employer's NI.
That leaves a cash cost of roughly £30,713, plus equipment, software licences and the period before the person is fully productive. Budget for three months of partial output.
Running payroll each pay period
Once someone is employed, you run payroll weekly, fortnightly or monthly. Each run has to calculate gross pay, deductions and net pay correctly, and report to HMRC on or before payday. The PAYE and NI you've deducted then go to HMRC by the 22nd of the following month if you pay electronically, or the 19th if you pay by post.
Miss the reporting deadline and there's a penalty. For an employer with 1 to 9 employees it's £100 a month, rising to £200 for 10 to 49, £300 for 50 to 249 and £400 for 250 or more. HMRC does let the first late submission in a tax year go without a penalty, and every late month after that costs.
Wrong figures affect your employee's tax position and can affect their entitlement to state benefits, so use proper payroll software rather than a spreadsheet.
Workplace pensions
Your automatic enrolment duties start on the day your first employee starts — there's no grace period and no separate registration you can put off. You assess each member of staff, and anyone aged between 22 and State Pension age earning over the £10,000 earnings trigger must be enrolled into a qualifying workplace pension, with contributions running alongside payroll.
You then have to complete a declaration of compliance with The Pensions Regulator within five months of your duties start date. It takes about fifteen minutes if your records are in order. First-time employers often miss it, because nothing prompts you before the deadline.
Staff below the trigger aren't automatically enrolled, but they can ask to join, and depending on what they earn you may still have to contribute. Assess every member of staff, including part-timers.
Your before-payday checklist
- Register as an employer with HMRC — before the first payday, and no more than two months ahead of it.
- Check the agreed rate clears the legal minimum for the employee's age. Annualise it: hours × 52 × the rate.
- Set up RTI-capable payroll software and enter the starter details and tax code.
- Choose a pension scheme and confirm it qualifies for automatic enrolment, before day one rather than after.
- Diarise two recurring dates: payday (FPS due on or before) and the 22nd (payment due).
- Put the declaration of compliance in the calendar for four months after the start date, so you're not relying on remembering it in month five.
- Issue a written statement of employment particulars — it's due on or before the first day.
- Add the fully-loaded cost to your cashflow forecast.
Common mistakes
The common mistakes are registering as an employer too late and having no PAYE reference on payday, missing the auto-enrolment declaration, getting a starter's tax code wrong on the first payslip, budgeting on the salary alone without £4,500 of on-costs, and not claiming the Employment Allowance once you have hired someone.
Each of these is much harder to correct afterwards, particularly once HMRC or The Pensions Regulator is involved.
How Buzz can help
Our payroll and pensions service runs your payroll, paying your people correctly and on time every pay period. If you want to go deeper on the numbers first, what a new hire actually costs breaks the full arithmetic down, and if you're approaching your first hire, get in touch and we'll walk you through what needs to be in place before payday.
