Taking on people

Taking on your first employee is exciting — and it comes with clear duties. The good news: employment law is set for the whole UK, so these rules are the same in Scotland as in England. There is one Scottish difference, and we flag it below.

Before your first hire

Work through these in order. Give yourself a few weeks — some steps need lead time.

1. Decide the pay. It must be at least the National Minimum Wage or National Living Wage. These rates change every April, so check the current figure on GOV.UK.
2. Check they can work in the UK. You must see the right documents, or do an online check with a share code. Getting this wrong brings heavy fines.
3. Do a criminal record check if the job needs one. See the Scotland note below.
4. Get employers' liability insurance in place before they start.
5. Write a "statement of employment particulars" — the key terms of the job — and give it on or before day one.
6. Register as an employer with HMRC to set up a PAYE scheme. You can do this up to 2 months before the first payday.
7. Get ready for pensions (see auto-enrolment below).

Paying staff: PAYE

PAYE is how you take Income Tax and National Insurance out of wages and send it to HMRC.

• You run payroll each payday and report it to HMRC on or before that day. This is called RTI — Real Time Information.
• You take off Income Tax and the employee’s National Insurance, and you pay employer’s National Insurance on top.
• Pay what you owe HMRC by the 22nd of the following month.

You will also need to handle statutory payments — sick pay, and maternity, paternity and adoption pay — and holiday pay.

Pensions: auto-enrolment

Every employer has pension duties. This surprises people, so read this carefully.

Who must you put into a pension?

• You must enrol anyone aged 22 to State Pension age who earns over £10,000 a year, and pay into their pension. They can choose to opt out afterwards (and get their money back), but you must enrol them first.
• People who earn less can ask to join. If they earn over £6,240 and ask, you must pay in too.

The key numbers for 2026–27:

• Minimum total contribution: 8% of qualifying earnings, of which at least 3% comes from you, the employer. A common split is 3% employer and 5% employee.
• Qualifying earnings band: £6,240 to £50,270.

What you must do:

• Choose a pension scheme (like NEST, The People’s Pension or Smart Pension).
• Write to every member of staff within 6 weeks explaining how it affects them — including those you do not enrol.
• Send a declaration of compliance to The Pensions Regulator within 5 months of your duties start date. Every employer must do this, even if there was nobody to enrol.
• Pay contributions to the provider by the 22nd of the following month.
• Keep records, and repeat the whole check (re-enrolment) every 3 years.

Employees, workers and the self-employed

Not everyone who does work for you is an “employee”. Someone can be an employee, a worker, or self-employed — and it changes their rights, their tax, and your pension duties. Getting this wrong (calling a real employee “self-employed”) can land you in trouble. If you use freelancers or agency staff, you still have duties towards them — health and safety, for example. If an agency pays a worker’s National Insurance, the agency is their employer.