Hiring your first employee and getting payroll right
Hiring your first employee changes the way you run the business. Alongside choosing the right person, you need a dependable process for paying them, reporting the relevant information and meeting your responsibilities as an employer. Preparing before the first payday makes that process easier to manage.
Allow for the full employment cost
The salary is only one part of the budget. Depending on the circumstances, employer National Insurance, pension contributions, leave, equipment and training can add to the commitment. Check the applicable requirements and costs before agreeing the role.
Think about the time required to manage the new employee as well. Who will approve hours, answer questions and cover the work while training takes place? Include those practical demands in the plan, particularly if you will be supervising someone for the first time.
Keep the hiring decision separate from assumptions about how someone should be paid. Employment status needs to reflect the actual arrangement; describing a person as a contractor does not settle that question.
Prepare the employer arrangements early
Before the employee starts, check right-to-work requirements, the employment terms and the written information you must provide. Check your employers’ liability insurance position and workplace pension duties too. Payroll is one part of the wider preparation.
Establish whether you need to register as an employer with HMRC and allow time for the process before the first payment. Choose suitable payroll software or agree an outsourced service, and make sure everyone knows who is responsible for reporting and payment.
Butler Cook’s payroll service covers processing employee payments and taxes. Agree the information required, the monthly cut-off and the approval process before the first payroll run.
Collect accurate starter information
Obtain the employee’s details and P45 where available. Where there is no P45, use HMRC’s starter checklist to establish the relevant information. Store personal and payment details securely, with access limited to those who need them.
Confirm the agreed pay, hours and payday. Clarify how overtime, expenses, leave and any variable payments will be approved and communicated to whoever runs payroll. A clear instruction is easier to process than a last-minute collection of messages.
- Check the employee’s details before the first run
- Agree who authorises changes to pay
- Record the deadline for submitting hours and other changes
- Confirm how payslips will be provided securely
- Keep a record of approvals and corrections
Build a routine around every payday
When operating PAYE, report pay and deductions through a Full Payment Submission on or before payday, unless a permitted exception applies. Schedule approval early enough for the report and payment arrangements to be completed.
Check the payroll output before authorising it. Compare the employee’s gross pay, deductions and net pay with what you expect, and ask about unexplained differences. Keep payments to the employee, HMRC and the pension provider clearly distinguished in your timetable.
Review the routine after the first few pay cycles. Note where information arrived late or responsibilities were unclear, then agree a simpler process. As the team grows, update the arrangements for starters, leavers and changes in pay or circumstances.
If you are preparing to hire your first employee, send Butler Cook an enquiry using the form alongside this article to discuss the payroll arrangements your business needs.
