By Helen Scullion Assoc. CIPD | 6 min read
The decision to take on your first employee is one of the biggest steps you’ll make as a business owner. It means more capacity, more momentum, and the start of being a team rather than just you.
It also means becoming an employer. And that comes with a set of legal responsibilities that catch a lot of first-time hirers off guard.
This isn’t meant to put you off. It’s meant to help you get it right, so you can hire with confidence rather than hoping for the best.
What are your legal obligations as a new employer?
When you hire your first employee in the UK, you take on a range of legal duties. These include registering as an employer with HMRC, providing a written contract of employment from day one, checking the employee’s right to work, obtaining employer’s liability insurance, and setting up payroll. From April 2026, several new rights also apply from day one, including statutory sick pay and paternity leave.
The list can feel overwhelming at first glance. In practice, most of it involves putting the right documents in place before the person starts. Get those foundations right and the ongoing management becomes much simpler.
The essential checklist
Register with HMRC as an employer
You need to register before your first payday. It can take up to two weeks to receive your employer PAYE reference, so do this as early as possible once you know you’re hiring.
Carry out a right to work check
Before anyone starts, you must verify they have the legal right to work in the UK. This means physically inspecting original documents or using the Government’s online share code checking service. Keep dated copies. Fines for non-compliance start at £45,000 per worker.
Provide a written statement of employment
Every employee must receive a written contract from day one of employment. This is a legal requirement, not just good practice. It should cover pay, hours, holiday entitlement, notice periods, job title, and probation terms. A poorly drafted or missing contract is one of the most common sources of employment disputes.
Get employer’s liability insurance
This is a legal requirement for virtually all employers with at least one employee. The minimum cover is £5 million. Not having it in place carries a fine of £2,500 per day. Don’t skip this.
Set up payroll
You need to operate PAYE and report to HMRC in real time via the Government Gateway. If you’re not sure how to do this, your accountant or a payroll provider can help.
Enrol eligible employees in a pension
Auto-enrolment applies from the first day of employment for eligible employees. Check whether your new hire meets the age and earnings criteria and enrol them in a compliant pension scheme.
Put core HR policies in place
You are legally required to have, at minimum, a disciplinary and grievance procedure in line with the ACAS Code of Practice. Getting this wrong can increase tribunal compensation by up to 25%. You should also have policies on health and safety, data protection, and sickness absence.
