Taking on an employee for the first time is a big deal for business owners.

Not only are you worrying about attracting the best person for the job, you want to ensure they fit your business’ culture and will stick around to repay the faith you’ve put in them.

Then there’s deciding how much to pay them, whether or not they have the legal right to work in the UK and setting them up on your payroll.

Your payroll duties include needing to ensure your new member of staff:

  • is paid fully and on time
  • has the correct amount of income tax and national insurance contributions deducted
  • contributes into their workplace pension (if applicable and eligible).

Throw in the added worry of reporting employee benefits and staying on the right side of GDPR, and it would understandable if you were to reach for your stress ball.

Take a deep breath as we walk you through the most common payroll issues involved with taking on an employee for the first time.

Deductions from gross salary

Regardless of how frequently you pay your new member of staff, you’ll need to make deductions from their gross pay.

This is the term for their total earnings before any deductions are made for income tax, national insurance contributions (NICs), auto-enrolment and (if applicable) student loans.

What’s left after these deductions have been made is what your employee will receive as their take-home pay.

You must pay your new employee at least the national minimum wage, which stands at £7.83 an hour in 2018/19 if they are over 25.

Tips don’t count towards the national minimum wage so you can’t include them when calculating hourly rates.

Then there’s paying income tax and NICs to HMRC, which you must do by the 22nd of each month or 19th if paying by post.


You’re required by law to operate a workplace pension scheme for most of your employees who earn at least £10,000 a year and are aged between 22 and their state pension age.

If they meet this criteria and they opt in, a minimum 3% of their pay packet will go to your workplace pension provider – and you must contribute a minimum of 2%.

These rates will increase from 6 April 2019 when you will need to put in 3% of every eligible employees’ salary and they will contribute a minimum of 5% – unless they opt out.

Reporting employee benefits

There are scores of employee benefits you can provide to members of staff and these must be reported to HMRC by 6 July each year.

This is unlikely to be a concern as you prepare to take on your first employee, but you will need to report any employee benefits relating to 2018/19 by 6 July 2019.

Sound too much?

Hiring an employee for the first time and running payroll is a tricky task for any business owner.

If this fills you with dread or you simply lack the time, take advantage of our Real-Time Accounting service and let us take the strain while you concentrate on your business.

Get in touch for more information.