Taking on a new employee can be an exciting step for any business, marking the start of a new chapter or expanding an existing team.

However, with this comes a multitude of responsibilities, many of which are legal requirements that aren’t to be neglected.

Read on to discover the steps you must take when hiring an employee, from providing the necessary paperwork to meeting legal requirements.


Initial steps

After you’ve found the perfect candidate, the first step is to make a formal job offer.

This can be verbal initially but should be followed by a written statement outlining the main terms of employment.

These include job title, salary, working hours, and holiday entitlement. This written statement should be provided within two months of the employee starting.

In addition, you’ll need to carry out a ‘right to work’ check to ensure your new hire is legally allowed to work in the UK.

This usually involves checking and making copies of the individual’s passport or other official documentation.


Setting up payroll

As an employer, you must pay your employees correctly and on time.

To do this, you’ll need to set up a payroll system, which will allow you to calculate how much Income Tax and National Insurance to deduct from your employees’ wages.

This information needs to be reported to HMRC via the PAYE (Pay As You Earn) system.

If you’re hiring your first employee, you’ll need to register as an employer with HMRC.


Pension enrolment 

Under the auto-enrolment scheme, most employers are obliged to enrol employees that meet the following criteria into a pension scheme:

  • Aged between 22 and the State Pension age
  • Earning at least £10,000 a year
  • Working in the UK

Once an employee is enrolled, the employer is responsible for contributing to their pension. As of the current legislation, the total minimum contribution is set at 8% of the employee’s qualifying earnings, of which at least 3% must come from the employer.

Setting up, administering, and contributing to the pension scheme are key responsibilities unless the employee opts out voluntarily.

However, it’s essential to note that if an employee opts out, they must be re-enrolled every three years (as long as they still meet the eligibility criteria), although they can opt out again if they wish.

Your pension enrolment duties come into effect from the day your first employee starts work, and you’re expected to complete the declaration of compliance within five months of that date.

Ignoring these duties can lead to legal action, including fines or even court proceedings in some cases.



Taking out Employers’ Liability Insurance is a critical legal requirement for almost all UK employers.

This insurance protects you if an employee becomes ill or is injured due to their work. It essentially provides a financial buffer for potential compensation claims, which can be hefty and seriously affect your business.

From the moment your new employee starts, having this cover in place is crucial. Remember, it is not just about fulfilling legal obligations but also about demonstrating to your employees that their safety and well-being matter to you.

In the event of an accident, illness or injury, your employees are financially protected, and your business can cope with any resulting claims.

It is not sufficient to just take out the insurance – you must also display your Employers’ Liability Insurance certificate where your employees can easily see it, and failure to do so can result in fines.

Your Employers’ Liability Insurance should cover you for at least £5 million, but most insurers automatically provide cover of £10 million.

The cost of this insurance will depend on factors such as the nature of your business and the number of employees you have but is typically just £75 to £150 a year for start-ups with small teams.


Health and safety 

Health and safety regulations stipulate that you have a duty of care towards your employees.

This responsibility involves conducting a thorough workplace risk assessment and identifying potential hazards. Once identified, you should take steps to reduce or remove these risks.

These risk assessments must be documented and updated for businesses with five or more employees.

There are various laws in place to protect workers from such issues and failing to uphold these standards can lead to legal implications.


Hiring a new employee is an exciting step but comes with numerous responsibilities.

From setting up payroll to ensuring a safe working environment, getting these elements right is crucial.

Many of these tasks require specialist knowledge, and that’s where an accountancy firm can be invaluable.

With assistance, you can focus on what you do best: running your business and building a successful team.


If you’re about to take on your first employee or expand your existing team, don’t hesitate to reach out for the expert guidance you need.