Hiring your first employee is exciting, but it changes the financial admin of the business. Payroll, pensions, employer costs and regular record keeping need to be ready before payday arrives.
Register as an employer if needed
Most businesses taking on staff need to register for PAYE and run payroll properly. Do this before the first payday where required.
- Check HMRC employer registration
- Choose payroll software or provider
- Collect employee starter information
Understand the full cost
The cost of an employee is more than take-home pay. Employer National Insurance, pension contributions, holiday pay and software or payroll support may also apply.
- Budget for gross pay
- Allow for employer costs
- Review cash flow before hiring
Set up payroll routines
Payroll needs deadlines and checks. Late or inaccurate payroll creates stress for both the owner and employee.
- Agree pay dates
- Submit RTI on time
- Keep payslips and reports
Connect payroll to bookkeeping
Payroll reports should be posted into the accounts so profit and cash flow are accurate.
- Record wage costs
- Match net pay to bank payments
- Track HMRC and pension liabilities
Keep employee records secure
Payroll records contain sensitive personal information and should be stored carefully.
- Use secure systems
- Limit access
- Keep records organised for future queries
Key takeaway
Before hiring, make sure the business can afford the full monthly cost and run payroll cleanly.
