# Employing Your First Member of Staff: A UK Small Business Guide for 2026/27 > What a UK small business actually needs to set up before hiring its first employee: PAYE, minimum wage, employer National Insurance and auto-enrolment. Last updated: 2026-11-08 *Blog | by Rob Young | November 2026* # Employing Your First Member of Staff: A UK Small Business Guide for 2026/27 ### Rob Young Taking on your first employee changes what your business has to do administratively and they usually don’t just cost you money but usually also cost you your time in the initial phase. The costs themselves are fairly well known: wages, employer National Insurance, and pension contributions, but the list of things that have to be set up correctly from the first date of employment catches a lot of first-time employers out. Here's what actually needs to happen before and on someone's first day. ## What do I need to set up before someone's first day? You need to register as an employer with HMRC, which can take up to two weeks to come through, so it's worth doing as soon as you know you're hiring rather than the week before. You'll also need a payroll software that can report to HMRC in real time (Real Time Information, or RTI), employers' liability insurance, which is a legal requirement the moment you employ anyone, and a written statement of employment particulars, which now has to be given on or before someone's first day rather than within the first two months as it used to be (it is also good practice to have an office manual). It's worth doing a basic right-to-work check before the first day too since the consequences of not checking fall on the employer, not the employee, and can't really be fixed retrospectively once someone's already started. ## What does an employee actually cost beyond their wages? From April 2026 the National Living Wage is £12.71 an hour for anyone 21 or over, £10.85 for 18 to 20 year olds and £8.00 for under 18s and apprentices in their first year. From 1 April 2027 these rise to £13.21, £11.27 and £8.31 respectively, as confirmed on 28 October 2026. On top of that, employer National Insurance is charged at 15% on earnings above £5,000 a year per employee which is a real cost most first-time employers underestimate when they're budgeting purely off the hourly rate. The Employment Allowance takes some of the sting out of that. Most small employers can claim £10,500 off their employer National Insurance bill for 2026/27, which for a single employee on a modest salary can wipe out most or all of the employer NIC due. However it’s worth considering who the employee is because a company where the director is the only employee paid above the secondary threshold generally can't claim the employer National Insurance, so it only really applies once you're taking on non-director staff. ## Do I have to set up a pension straight away? Almost always yes. Your duties as an employer start from the day your first member of staff begins working, there's no grace period to delay it. If they're aged between 22 and State Pension age and earn over £10,000 a year, you generally have to automatically enrol them into a workplace pension, with a minimum combined contribution of 8% of qualifying earnings, of which at least 3% has to come from you as the employer (which is why most employees deposit 5% to their pension). Even staff who don't meet the automatic enrolment criteria, because they're younger, older or earn less, usually still have the right to opt in and ask you to set up a pension for them, so it's worth having the scheme ready rather than scrambling to set one up the first time someone asks. ## What ongoing admin does this create? Payroll has to be run and reported to HMRC every time you pay someone and that includes correctly calculating and deducting tax, National Insurance and any student loan repayments through PAYE. Payslips need to be issued each pay period, and P60s at the end of the tax year, P45s if someone leaves partway through it. The use of payroll software usually automates the production of these documents and some softwares like PayCircle can even automate the most basic payrolls. ## Before your first employee starts A practical checklist for the weeks before someone's first day: 1. Registered as an employer with HMRC, ideally at least two weeks before the start date 2. Register with a payroll software provider that can report to HMRC in real time 3. Employers' liability insurance arranged, it's a legal requirement from day one 4. A written statement of employment particulars ready to give on or before their first day 5. A workplace pension scheme set up, even if nobody qualifies for auto-enrolment immediately ## Frequently Asked Questions. ### How much does an employee cost beyond their salary? Employer National Insurance at 15% on earnings above £5,000 a year is the main additional cost, though the £10,500 Employment Allowance covers most or all of this for a typical first hire. On top of that, budget for at least 3% employer pension contributions once auto-enrolment applies, and employers' liability insurance. ### Do I need a pension scheme for just one employee? Yes, if they meet the auto-enrolment criteria (aged 22 to State Pension age, earning over £10,000 a year), your duties apply from their very first day regardless of how many staff you have. ### How long does it take to register as an employer with HMRC? It can take up to two weeks for your PAYE reference to come through, so it's worth registering as soon as you've made a firm decision to hire rather than waiting until the start date is imminent. ### Can I run payroll myself, or do I need an accountant? You can run it yourself with the right software, but a lot of first-time employers underestimate the ongoing admin, correct RTI submissions, payslips, year end reporting, and it's an easy place for errors to creep in that HMRC or an employee will eventually query. Need help? If you're weighing up your first hire and want to know what it will actually cost, or you'd simply rather someone else ran payroll correctly from day one, get in touch through our website. We run payroll for clients of all sizes, from a single first employee upwards, with payslips, P60s and P45s handled automatically so nothing gets missed. Book a free consultation: https://loveyouraccountants.com/contact. Tags: employers, employment, payroll, small business, startups ![Rob Young, author at Love Your Accountants](https://loveyouraccountants.com/asset/2401/175-175-def/author-rob_young.png) **Author** ###### **Rob Young** Rob is Managing Director at LYA, supporting ambitious businesses to scale with confidence through clear planning and proactive financial insight. 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