Setting up as an employer for the first time

First-time employers must register as an employer with HM Revenue and Customs (HMRC) before they can pay staff through PAYE. You must also register if you work in the construction industry and use subcontractors.

HMRC will send you a PAYE reference number and this allows you to set up payroll for your business. GOV.UK's advice on registering as an employer explains what to do if you do not get your PAYE reference in time for your first payday.

Decide if you want to manage payroll yourself or have an accountant or payroll provider do it for you.

If you run payroll yourself, you will need to use HMRC-approved software.

Your business must have a workplace pension, and you must automatically enrol certain employees into that scheme.

You must pay at least 3% of an employee's eligible earnings into the scheme.

You must enrol any employees who:

• are aged between 22 and the state pension age
• earn at least £10,000 a year
• normally work in the UK

Even if none of your employees meet these criteria, you must still provide access to a pension scheme if employees ask to join one and you may need to make employer contributions.

Choosing a scheme

You must use a pension scheme that complies with the government rules.

Nest Pensions is a government-backed scheme that you can use to meet your obligations, but you can also choose a different scheme if this meets the legal requirements.

The Pensions Regulator keeps a list of master trust pensions. These are trusts that provide a workplace pension scheme for multiple employers.

You must have employer’s liability insurance if you employ anyone in your business, unless your only employees are:

• your family members
• working outside the United Kingdom

Your policy must be provided by an authorised insurer and you must display your insurance certificate where employees can access it.

Right to work checks

You must make sure that anyone you hire has the legal right to work in the UK.

Do this by asking the person for their share code, which is a code issued by the Home Office to prove someone’s immigration status.

If the person does not have a share code, ask them to show you an original birth certificate, passport or other official documents that prove their immigration status.

Other checks to make

You may also need to check if the person has:

• disclosure and barring service (DBS) clearance if they are going to be working with children, vulnerable adults or in sensitive settings
• a driving licence if you need them to use company vehicles
• proof of licences, qualifications or certifications if these are necessary for the role

You have a legal duty to protect your employees, and any other workers, from harm. You must carry out risk assessments and have a health and safety policy.

Risk assessments

You must do a risk assessment for any place where people do work for your business. That includes an office, warehouse, stall, delivery vehicle or the worker’s home.

Your risk assessment should:

• identify any potential hazards or risks
• assess how likely those risks are to harm someone and how severe an injury could be
• set out actions you, or workers, must take to eliminate hazards or reduce and control risks

Health and safety policy

Every business must have a policy for managing health and safety.

The policy must only be in writing if you have 5 or more employees, but it is best practice to have a written policy whether it’s legally required or not.

An employment contract is a legally binding agreement that explains you and your employee’s rights and responsibilities.

The contract is formed when you offer a role and the person accepts this offer. It does not need to be written down.

Most businesses will create an employment contract for employees. This document defines your working relationship and sets standards for managing performance.

Written statement of employment particulars

You are legally required to give a written statement of employment particulars to all workers in your business, including people who are not employees. This is not usually as detailed as an employment contract.

The law sets out different information that must be given in a statement:

• on or before the person’s first day of work
• by the end of the person’s first 2 months of work

You must tell HMRC about your new employee on or before their first payday. You do this by:

• registering as an employer if this is your first employee
• submitting a full payment submission to add a new employee to your existing payroll