Payroll · 5 min read
Hiring your first UK employee: PAYE, pensions and contracts
The registrations you need before the first payslip, what workplace pension auto-enrolment means for a two-person company, and what a UK employment contract must contain.
Key points
- Register as an employer with HMRC before the first payday — allow up to 15 working days for your PAYE reference to arrive.
- Every payday you report to HMRC in real time (RTI) on or before the payment date.
- Auto-enrolment applies from your first employee, including if that employee is you as a director drawing a salary alongside other staff.
- A written statement of employment particulars must be given on or before day one.
Before the first payday
Register as an employer with HMRC to get a PAYE reference and an Accounts Office reference. Do this at least two to three weeks before you intend to pay anyone; HMRC can take up to 15 working days to issue the references, and you cannot report a payroll without them.
Every payday
UK payroll runs on Real Time Information. Each time you pay staff, a Full Payment Submission goes to HMRC on or before the payment date, showing pay, tax and National Insurance. Employer National Insurance and any tax deducted are paid to HMRC monthly. Employees receive a payslip showing gross pay, deductions and net pay.
Workplace pensions
Auto-enrolment applies to any employee aged 22 to State Pension age earning above the earnings trigger (£10,000 a year at the time of writing). You must put them into a qualifying pension scheme and contribute a minimum of 3% of qualifying earnings; the employee contributes at least 5%, including tax relief. You must also declare compliance to The Pensions Regulator within five months of your duties start date, even if nobody qualified.
Contracts and statutory rights
Every employee and worker is entitled to a written statement of particulars on or before their first day: pay, hours, holiday, notice, job title, place of work and more. Statutory entitlements include 5.6 weeks of paid holiday a year, statutory sick pay, and family leave. The National Living Wage applies to workers aged 21 and over and changes every April.
Paying yourself as a director
Non-resident directors are usually paid by the parent company at home. If your UK company pays a director a salary, that is UK payroll like any other. Whether a UK salary or dividends is more efficient depends on your personal tax position in both countries — worth a conversation before you set it up.
What we do
We register the PAYE scheme, set up the pension, run payroll every month, file the RTI submissions and year-end forms, and provide contract templates. See Payroll and PAYE set-up.
This guide is general information for overseas businesses considering the UK, correct to the best of our knowledge at the date shown. It is not advice for your specific circumstances — rules and thresholds change. Check with us or HMRC before acting on it.