Payroll
Hiring your first employee: the real costs and the checklist
Your first hire is the moment a business stops being just you — and the moment a stack of employer obligations switches on, all at once, whether you know about them or not. Here's the honest picture: what it really costs, and what has to be in place before day one.
The real cost of a salary
The advertised salary is the floor, not the number. On top: employer National Insurance at 15% on earnings above the £5,000 threshold — though many first hires cost less here, because the Employment Allowance can wipe out a chunk of employer NI for eligible businesses entirely. Then the pension: auto enrolment means at least 3% of qualifying earnings from you. Then the quieter costs — equipment, software seats, insurance, training, and the fact that holiday means paying for weeks nobody's working. A working rule: budget 12–18% on top of salary before the extras, then check the Employment Allowance position, which often brings it back down.
The before-day-one checklist
Register as an employer with HMRC (do it before the first payday; it can take time to process). Employers' liability insurance — legally required, minimum £5m cover. Right-to-work checks — documented, before they start. A written statement of employment particulars — a legal right from day one, not something to get round to. Payroll ready to run RTI submissions to HMRC every payday. And auto enrolment: assess the employee, enrol them if eligible, and declare your compliance to The Pensions Regulator within five months — the full duties are here, and they apply even with one member of staff.
The bit nobody budgets: your time
Payroll isn't hard, but it's unforgiving — it happens every single pay period, with statutory deadlines, forever. Most first-time employers either under-pay attention (and meet penalties) or over-pay attention (and lose evenings). This is why outsourcing payroll is usually the first thing growing businesses hand over: for a modest monthly cost, the whole cycle — payslips, RTI, pension submissions, starters and leavers — just happens.
The honest encouragement
None of this should put you off hiring — a good first employee is usually the highest-return investment a small business makes. It just rewards being set up properly before they walk in. If your first hire is on the horizon, a short conversation now means their first payday is a non-event.
This is general information, not advice for your circumstances. If you'd like it applied to your situation, get in touch — the first chat is free.
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