Hiring Your First Employee in the UK: What Small Businesses Need to Know

Hiring your first employee is a major step in the growth of your business, and a big responsibility. Whether you're a startup or a growing SME, getting the process right from the beginning can save you time, money, and stress down the line. At Home of HR, we provide expert HR support for small businesses to ensure every hire is compliant and set up for success. Here’s what you’ll need to know:

Define the Role Clearly

Before advertising the position, take the time to define exactly what the role involves. This ensures you attract the right candidates and are clear about expectations.

Ask yourself:

  • What tasks will they be responsible for?

  • What skills and qualifications are essential?

  • Is the role full-time, part-time, or temporary?

  • Will they work remotely, on-site, or hybrid?

A detailed job description forms the foundation of a fair and effective recruitment process.

Register as an Employer with HMRC

To legally employ someone, you must register with HMRC and operate a PAYE (Pay As You Earn) system.

Checklist:

  • Register as an employer with HMRC (at least 4 weeks before the first payday)

  • Set up payroll software or choose a provider

  • Understand your responsibilities for tax and National Insurance

Many small business owners choose to outsource payroll to avoid costly mistakes—and we can help with that.

Complete Right to Work Checks

All UK employers are legally required to confirm a new hire’s right to work in the UK.

You’ll need to:

  • Check original documents (e.g. passport, visa, settled status proof)

  • Use the government’s online checking service if applicable

  • Keep a dated copy of the documents securely

Failing to complete these checks correctly can result in fines, even if the employee has the right to work.

Issue a Written Statement of Employment

Your new employee must receive a written statement of employment particulars by their first working day. This is the legal minimum and usually forms part of their contract.

It should include:

  • Job title and start date

  • Salary and payment frequency

  • Hours of work and holiday entitlement

  • Notice period

  • Workplace location

Home of HR can create custom employment contracts and onboarding packs tailored to your business.

Understand Your Legal Responsibilities

Employing staff means complying with a wide range of UK employment laws. Getting this right protects both your employee and your business.

Key employer responsibilities include:

  • Paying at least the National Minimum or Living Wage

  • Complying with Working Time Regulations (maximum hours, rest breaks, etc.)

  • Providing statutory holiday entitlement (at least 28 days including bank holidays for full-time staff)

  • Avoiding discrimination in recruitment and employment practices

  • Maintaining health and safety standards

Set Up a Workplace Pension

Under auto-enrolment rules, you must enrol eligible employees into a workplace pension and contribute to it.

What you need to do:

  • Choose a pension provider (e.g. NEST or The People’s Pension)

  • Enrol all eligible staff

  • Make employer contributions (minimum 3% of qualifying earnings)

  • Communicate the scheme details to your employee

This applies even if you’re only hiring one person.

Arrange Employer’s Liability Insurance

You are legally required to have Employer’s Liability Insurance in place from the day your employee starts work.

Legal requirement:

  • Must be at least £5 million in cover

  • Must come from an authorised insurer

  • Fines of up to £2,500 per day apply if you don’t have it

Create Workplace Policies and a Basic Employee Handbook

Even with a small team, having clear workplace policies protects your business and helps manage employee expectations.

Consider including policies on:

  • Sickness and absence reporting

  • Disciplinary and grievance procedures

  • Health and safety

  • Data protection and confidentiality

  • Remote or hybrid working (if relevant)

Our HR consultancy for SMEs offers affordable policy and handbook creation services designed for small teams.

Onboard Your Employee Properly

A smooth onboarding process sets the tone for a great working relationship and improves retention.

Successful onboarding includes:

  • Introducing them to your business, team, and values

  • Providing any necessary training or equipment

  • Clarifying key expectations for the first few weeks

  • Setting goals and check-ins to monitor progress

Final Thoughts

Hiring your first employee is an exciting milestone and with the right support, it doesn’t have to be stressful. By following these steps and staying legally compliant, you’ll set your business up for long-term success and create a great foundation for your team to grow.

At Home of HR, we can help with recruitment, staying compliant, formal meeting support, or just some adhoc HR advice - we’re here to help. Get in touch to find out what packages we have to support you and your business with this.

Alice Hosker