Taking on your first employee: registering as an employer and what payroll involves

acrenvo.com/guides/taking-on-your-first-employee, last reviewed 21 October 2026

Nia is fictional. Nia lets a handful of flats as a sole trader and has decided to take on a part-time assistant to deal with repairs and viewings. Nia has never employed anyone before and wants to know what changes on the day the assistant starts: what HMRC needs, when, and whether there is anything else to set up. This guide follows those questions through GOV.UK’s own guidance.

First, check the person is an employee

GOV.UK’s step by step guide to employing someone for the first time begins with employment status, because the payroll rules in this guide are for employees. The rules are different if you want to take on someone with another type of employment status, such as agency staff, freelancers, consultants and contractors.

Nia’s assistant will work set hours each week on a contract, so Nia treats the role as employment and reads on.

What payroll means

Payroll is how an employer pays staff and accounts to HMRC for the tax taken from their pay, through the system known as Pay As You Earn. As an employer, you normally have to operate PAYE as part of your payroll. PAYE is HM Revenue and Customs’ (HMRC) system to collect Income Tax and National Insurance from employment.

Payments to your employees include their salary or wages, as well as things like any tips or bonuses, or statutory sick or maternity pay. From these payments, you’ll need to deduct tax and National Insurance for most employees. Other deductions you may need to make include student loan repayments or pension contributions.

Registering as an employer

The first job is to register with HMRC. You normally need to register as an employer with HM Revenue and Customs (HMRC) when you start employing staff, or using subcontractors for construction work. You must register even if you’re only employing yourself, for example as the only director of a limited company.

GOV.UK also lists the situations in which registering for PAYE is required. When we read the page in the 2026 to 2027 tax year, it set them out like this. You must register for PAYE if any of the following applies to an employee in the current tax year (since 6 April):

• they’re paid £96 or more a week
• they get expenses and company benefits
• they’re getting a pension
• they’ve had another job
• they’ve received Jobseeker’s Allowance, Employment and Support Allowance or Incapacity Benefit

Registering is not the only duty, because the records still matter. If you do not need to register, you’ll still need to keep payroll records.

Timing: before the first payday

Registration has to fit a window before the assistant is first paid. You must register before the first payday to get your employer PAYE reference number. This will be sent to you in a letter. You cannot register more than 2 months before you start paying people.

HMRC’s page on registering as an employer is where registration starts. For Nia, that means registering a few weeks before the assistant’s first payday, and not earlier than the window allows.

One email a month lists the MTD software price changes we have checked and any changes to HMRC’s list of software. If that would be useful, you can sign up for the monthly price-changes email at the end of this page.

Running payroll yourself or paying someone

Once registered, an employer chooses how payroll will run. GOV.UK says that you can operate PAYE by either paying a payroll provider to do it for you or doing it yourself using payroll software.

Paying someone does not hand over the responsibility. If you decide to pay a payroll provider (for example, a bureau or accountant) to run your payroll, you’ll need to consider how much support you’ll need. You’re responsible for collecting and keeping records of your employee’s details. Your payroll provider will need these to run payroll for you.

If Nia runs payroll alone, GOV.UK sets out the tasks for the first payday. If you decide to run payroll yourself, you need to complete certain tasks to pay your employees for the first time. You can choose when and how often to pay your employees.

1. Register as an employer with HM Revenue and Customs (HMRC) and get a login for PAYE Online.
2. Choose payroll software to record employee’s details, calculate pay and deductions, and report to HMRC.
3. Collect and keep records.
4. Tell HMRC about your employees.
5. Record pay, make deductions and report to HMRC on or before the first payday.
6. Pay HMRC the tax and National Insurance you owe.

You’ll also need to complete certain annual reports and tasks to prepare for the next tax year, which starts on 6 April.

The guide to free payroll software covers choosing the software, and the guide to reporting payroll in real time covers what it sends to HMRC.

Employer’s National Insurance in 2026 to 2027

Taking someone on can add a cost beyond their wages, which is employer’s National Insurance. You pay secondary contributions (employer’s National Insurance) to HMRC as part of your PAYE bill. Your payroll software will work out how much tax and National Insurance to deduct from your employees’ pay. If you decide to run payroll yourself, you need to find payroll software to do this.

The figures change each tax year, and HMRC publishes a page of rates and thresholds for employers for each one. Unless otherwise stated, the following figures apply from 6 April 2026 to 5 April 2027. For employees with category letter A, GOV.UK’s table shows employer’s National Insurance of 15% on earnings above the secondary threshold, which is £96 a week, £417 a month or £5,000 a year in 2026 to 2027. Other category letters have different rates, which is one of the things the payroll software works out for each employee.

Some employers can reduce the bill. Employment Allowance allows eligible employers to reduce their annual National Insurance liability by up to the annual allowance amount. Employment Allowance for 2026 to 2027 is £10,500. Not every employer is eligible, so it is worth checking GOV.UK’s guidance on the allowance before counting on it.

Pensions from the first day

One more duty begins with the first employee, whatever they earn. Employers have to provide a workplace pension scheme for eligible staff as soon as their first member of staff starts working for them (known as your ‘duties start date’).

Whether Nia must enrol the assistant depends on their age and earnings, but some duties apply either way. The guide to workplace pensions and payroll sets out what GOV.UK and The Pensions Regulator say an employer must do.

Questions about taking on a first employee