Before you hire: the groundwork
Before you post that first job advert, there are legal obligations you need to have in place.
1. Register as an employer with HMRC
You must register as an employer with HMRC before their first payday. HMRC will give you a PAYE reference number. Allow 5 working days — don't leave this to the last minute.
2. Employers' liability insurance
This is a statutory requirement from day one of employment. You must have at least £5 million of cover and display your certificate visibly (physically or digitally). There are significant statutory penalties for failing to have appropriate cover in place.
3. Right to work checks
You must check that every employee has the legal right to work in the UK before they start. Keep a copy of the documents you check. Failing to do this can result in severe civil penalties.
The employment contract
From day one of employment, your employee has the right to a written statement of particulars. This is commonly called an employment contract, and it must include:
- Name of employer and employee
- Start date and whether any previous employment counts
- Pay, pay frequency, and when they'll be paid
- Hours of work
- Holiday entitlement (minimum 5.6 weeks including bank holidays)
- Sick pay arrangements
- Notice periods
- Job title and brief description
- Place of work
- Probation period details
Don't use a free template from the internet without having it reviewed. Generic contracts often miss sector-specific clauses or contain outdated terms that could be unenforceable.
Setting up payroll
You must run payroll through an RTI (Real Time Information) system and submit information to HMRC on or before every payday. You'll need to:
- Set up payroll software (or use a payroll provider)
- Enrol your employee in a workplace pension if they're eligible (over 22, earning above £10,000/year)
- Provide payslips on or before every payday
- Calculate and pay employer National Insurance contributions
Policies you need from day one
Some HR policies are statutory requirements; others are strongly recommended:
Statutory requirements:
- Health and safety policy (if you have 5+ employees, this must be written)
- Disciplinary and grievance procedure
Strongly recommended:
- Sickness absence policy
- Equal opportunities policy
- Anti-harassment and bullying policy
- Data protection/privacy notice for employees
- Flexible working policy (now more important than ever)
Onboarding: setting them up for success
Poor onboarding is one of the primary causes of early attrition. New employees who have a great onboarding experience are 58% more likely to still be with you after three years. At a minimum, plan:
- A clear first-day agenda so they don't sit around feeling lost
- An introduction to the team and their role in it
- Clear 30/60/90-day expectations
- Regular check-ins during the probation period
- A named person they can ask "stupid questions"
Get help before you hire, not after
Most small business owners only realise they need HR support when something goes wrong. By then, it's more expensive and more stressful. If you're planning your first hire, talk to us first — we can have everything set up and compliant before day one, for a fraction of the cost of fixing problems later.