Hiring your first employee is the moment your business stops being just you. It changes the legal obligations, the cash flow, the rhythm of the week, and (in good ways) the limit on what you can take on. Most first-time hirers underestimate the admin and overestimate the difficulty. This guide walks through the actual steps in 2026 – what’s compulsory, what’s optional, and what to budget for.
Before you hire — three questions
Three honest questions before you write the job description. Do you genuinely have 6+ months of work for them? Can the business afford the fully-loaded cost (not just headline salary)? Is hiring an employee right, or would a contractor be better? See our contractor vs employee guide for that distinction. If any answer is “not really”, hold off – first hires you regret are expensive in morale as well as money.
The full cost of an employee
Headline salary plus several layers. Employer NIC at 15% on earnings above the £5,000 Secondary Threshold. Pension contributions of at least 3% (auto-enrolment minimum). Holiday of 5.6 weeks/year paid. Equipment, software licences, training. Office space if applicable. Worked example: a £35,000 salary fully loaded comes out at roughly £45,000–£48,000/year. Budget the full number, not just the headline.
Decide on contract type
Permanent full-time or part-time. Fixed-term contract. Zero-hours contract (legal but with new rules from October 2024 limiting use). Apprenticeship – worth considering for entry-level roles, with government support. For most first-employee hires, a permanent contract is the most credible signal to candidates and the cleanest legal structure.
Writing a job description that attracts the right person
A good job description does two jobs: it filters out applicants who’d be a bad fit, and it makes the right ones lean in. A useful structure: a one-paragraph summary of the company in plain language; what the person will actually do, in concrete tasks rather than buzzwords; what success looks like at 3, 6 and 12 months; what experience genuinely matters versus what’s nice-to-have; salary range; benefits; and the location/working pattern (in-person, hybrid, remote – be explicit).
Two anti-patterns to avoid. The shopping-list job description with 15 must-haves filters out everyone you’d actually want – it’s a sign the role hasn’t been thought through. “Salary: competitive” is read by candidates as “low”; publish a real range. Including a range usually doubles your application volume and disproportionately attracts the underrepresented candidates who self-screen out of unposted-salary listings.
Running a fair, useful interview
For a first employee, three rounds is usually right: a 30-minute screening call, a 60-90 minute deeper interview with a real work sample, and a final culture-and-context conversation. Use the same structured questions for every candidate – it makes comparison possible and reduces the bias that sneaks into freestyle chats.
The work sample matters more than the CV. For a marketing hire, a short briefing exercise: “here’s our top three competitors, here’s our positioning, what would you change in the first 30 days?” For an operations hire: “walk me through how you’d set up our first new-client onboarding process.” Pay for substantial take-home tests (a couple of hours of paid time is fair); never ask candidates to do free billable work as “a test”. Keep notes immediately after each interview – memory blurs across candidates faster than you think. Reference checks at the end, with two referees, and actually phone them – the things people are willing to say on a call rarely make it onto a written reference.
Step-by-step employer setup
- Register as an employer with HMRC (free, takes 2–5 working days).
- Choose payroll software (Moneysoft, BrightPay, Sage Payroll, FasCash payroll module).
- Set up a workplace pension scheme (NEST is the free default).
- Get Employer’s Liability Insurance (legally required, ~£100–£300/year).
- Write a written statement of employment (legally required from day one).
- Run a DBS check if the role requires one.
- Right-to-work check (legally required before first day).
- Onboard properly (kit, system access, induction).
- Run first payroll on or before the first pay date.
The written statement of employment (Section 1 statement)
Legally required from day one (since April 2020). It must include: pay, working hours, holiday entitlement, notice period, place of work, sick pay, pension, training, probation period. ACAS publishes free templates that cover the requirements. Issue before or on the first day; failure to provide carries an Employment Tribunal award of 2–4 weeks’ pay if combined with another successful claim.
Right-to-work checks
Mandatory under the Immigration, Asylum and Nationality Act 2006. Use the Home Office’s online right-to-work check (free, uses a share code from the worker) for most candidates. For some applicants a manual document check and a record kept is still acceptable. Failure to check correctly carries a civil penalty of up to £45,000 per illegal worker. The compliance regime tightened in April 2025 – verify current process before each hire.
Pensions and auto-enrolment
Mandatory for any employee aged 22 to State Pension Age earning over £10,000/year. Minimum employer contribution is 3% of qualifying earnings; minimum employee contribution is 5% (including tax relief). Re-enrol every 3 years. The Pensions Regulator audits compliance and issues fixed and escalating penalties for non-compliance. NEST is the default free scheme; private providers offer more features for £20–£50/ month.
Day-one checklist
PAYE registered. Pension scheme set up. Employer’s Liability Insurance live. Written statement issued. Right-to-work checked. Workspace, kit and access ready. First payroll run scheduled. Welcome plan for the first week prepared. Tick all eight before they walk in – the day-one experience predicts retention more than almost anything else.
Common mistakes
Hiring before you can afford it (the fully loaded cost catches founders out). Skipping the written statement. Misclassifying an employee as a contractor (massive HMRC risk – see contractor vs employee guide). Using a friend-of-a-friend as an unpaid intern (illegal in most contexts under National Minimum Wage rules). Not reading up on current right-to-work rules before each new hire.
Frequently asked questions
The questions UK founders ask most often when hiring their first employee.
How much does it really cost to hire someone on £35,000?
Fully loaded, around £45,000-£48,000/year. That includes employer NIC at 15% on earnings above £5,000 (£4,500), pension at 3% (£1,050), holiday cost at 5.6 weeks paid, equipment and software, training, and any office space. Budget the full number, not just the headline salary.
When do I have to set up a workplace pension?
As soon as you employ someone. Auto-enrolment is automatic — every eligible employee must be enrolled within 6 weeks of starting. NEST is the free default scheme; private providers (The People's Pension, Smart Pension, etc.) offer more features for typically £20-£50/month per scheme.
Do I have to give my employee a written contract on day one?
Yes, since April 2020 the written statement of employment is required from day one (previously day 60). It must cover pay, hours, holidays, notice, place of work, and the other items listed in the Employment Rights Act. ACAS has a free template; tailor to your role.
Can I hire someone as a contractor to avoid employer NI and admin?
Only if the working relationship is genuinely contractor-style: substitution rights, control over how work is done, no mutuality of obligation, working for multiple clients. HMRC routinely re-classifies 'contractors' who fail this test, with significant back-tax liabilities for the engaging business. Read the contractor vs employee guide before assuming you can do this.
How long should the probation period be?
3-6 months is standard. Some employers use 12-month probation for senior roles. Probation reduces notice periods (usually 1 week during probation, longer afterwards). Statutory minimum notice = 1 week after 1 month of employment, increasing with service.
What's Employer's Liability Insurance?
Legally required cover for employee injury or illness caused by their work. Minimum £5m cover; most policies are higher. Costs £100-£300/year for most small employers. Failure to have it = £2,500/day fine. Buy from a broker or comparison site; many bundle it with other small business insurances.
Can I hire a remote-only employee living abroad?
It's legally complex. The employee's 'country of habitual work' determines which employment law applies, plus tax and social security rules vary by country. For a UK-based business hiring a fully remote worker abroad, options include: hiring through an Employer of Record (EOR) like Deel, hiring as a self-employed contractor (with the IR35 caveats above), or setting up a local entity. Get specialist advice.
What's the minimum wage I have to pay?
National Living Wage from April 2026 is £12.71/hour for those aged 21+. £10.85/hour for 18-20. £8.00/hour for under-18 and apprentices in their first year. Apprentices in their second year onwards get the rate for their age band. Pay below NMW = significant fines + naming and shaming.
