Hiring Your First Employee? Here’s What You Need to Have in Place

24th April 2026

By Lisa Murphy FCIPD  |  7 minute 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.

Key facts at a glance

  • Every new employer must register with HMRC before the first payday, provide a written contract from day one, and carry out a right to work check.
  • Employer’s liability insurance is a legal requirement from day one, with fines of £2,500 per day for non-compliance.
  • From April 2026, statutory sick pay, paternity leave and unpaid parental leave are all day-one rights under the Employment Rights Act 2025.
  • Failing to have a disciplinary and grievance procedure in line with the ACAS Code can increase tribunal compensation by up to 25%.

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 key is to start early, because some steps like HMRC registration can take up to two weeks to process.

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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. You register online through HMRC and will need your business details to hand. Once registered, you’ll need to run payroll through HMRC-compatible software and report in real time.

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 on file. 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. 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. From April 2026, it must also reflect the new day-one SSP and parental leave rights.

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. Arrange it before the person’s first day and keep the certificate accessible.

Set up payroll

You need to operate PAYE and report to HMRC in real time. If you’re not sure how to set this up, your accountant or a payroll provider can help. Make sure you have the employee’s National Insurance number and P45 before their first payday.

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 within the required timeframe.

Put core HR policies in place

You are legally required to have 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 a sickness absence policy, a data protection policy, and a health and safety policy. Our HR support packages include all of these as standard for new employers.

What happened when Lets Kollab got it right

Lets Kollab is a creative business that was planning its first ever hire. Their Creative Director had a clear vision for the business but had never been an employer before, and the legal side felt daunting.

Through Worcestershire County Council’s workforce planning funding, they came to us for support. We created a suite of core HR policies, a tailored employment contract, and a full guide to the hiring process from writing the job description through to the first day experience.

“The WCC’s Workforce Planning tool has been incremental to the growth of my business. It has enabled me to start recruitment for my first in-house hire, which may have taken me longer to get to if I had self-funded the HR support myself.”

Creative Director, Lets Kollab

That’s exactly what getting the foundations right looks like. Less stress, more confidence, and a better start for everyone involved.

Could you access funded support in Worcestershire?

Lets Kollab accessed this work through Worcestershire County Council’s workforce planning programme. If you’re based in Worcestershire, it’s worth finding out whether similar funded support is available. We work closely with the Council and can advise on eligibility.

If you’re preparing to hire and want to make sure you’ve got everything in place, get in touch with the team.

Book a free 30-minute discovery call

About the author

Lisa Murphy FCIPD, CEO and Founder of Limelite HR & Learning. Lisa is a multi-award winning HR and leadership expert and Fellow of the CIPD, specialising in strategic HR, inclusion and organisational development. Connect with Lisa on LinkedIn.

FAQS

  • When do I need to register with HMRC as an employer?

    You should register as an employer with HMRC before your first payday. Registration can take up to two weeks, so start as soon as you know you are going to hire. You register online through HMRC’s website. Once registered, you will receive an employer PAYE reference which you need to run payroll.

  • What must be included in an employment contract?

    A written statement of employment must include the employee’s name and start date, job title and description, pay and how often it is paid, hours of work, holiday entitlement, notice periods, probation terms, and the place of work. It must be provided on day one. Additional clauses around confidentiality, intellectual property, and other specifics are also recommended depending on the nature of the role.

  • What HR policies do I need as a new employer?

    At a minimum, you need disciplinary and grievance procedures that follow the ACAS Code of Practice, a health and safety policy, a sickness absence policy that reflects day-one SSP entitlement from April 2026, and a data protection policy. Other useful policies include recruitment, expenses, and anti-harassment. All of these should be in place before your first employee starts.

  • Do I need HR software as a small employer?

    Not necessarily. Many small businesses manage HR admin effectively with well-organised documentation and simple tracking tools. As you grow, HR software becomes more useful for managing leave, performance, and compliance. What matters most at the first-hire stage is having the right documents in place, not the most sophisticated system to store them.

  • What changes for employers from April 2026?

    From April 2026, statutory sick pay became a day-one right for all employees, removing the previous three-day waiting period and earnings threshold. Paternity leave and unpaid parental leave also became day-one rights. The unfair dismissal qualifying period is being reduced from two years to six months. Review your policies and contracts to make sure they reflect these changes before your first hire.

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