Taking on that first employee is a big step for any business. Not only trusting someone else to come into your business and help out, but also being responsible for keeping them focused on what’s important, takes work. Nevertheless, it’s an enormous opportunity to help you grow your business.

This will provide guidance on the practical things you need to put in place, to ensure that you don’t come a cropper of HMRC and the law, and that you can confidently take on your first employee.

Essential things you need to consider:

Hire slowly, fire fast

Take your time when employing people. If you get the right people in the right positions, your life will become easier, and things will be good. Get the wrong person, and your life will be hell.

Spend as much time as possible with a person before letting them into your life and business. And never take on an employee unless you are willing to let them go. If you are unwilling to have that awkward conversation where you let people go, then you shouldn’t be employing them in the first place.


Contrary to popular belief you don’t need a contract with your employees, but to protect yourself, it’s a good idea to set out the terms and conditions of employment before they start. Identifying things such as rate of pay, hours of working, holiday, notice period, etc. Will save you problems in the long run.

Incidentally, try to avoid paying anyone per week – employees want this, but it creates more work and admin and will cost you more. Pay them monthly.

Tried to avoid agreeing a Net Pay amount – always agree their gross earnings (see below.)


You will need a PAYE scheme, and you will need to run a payroll each week or month. Do not run the payroll yourself, consider outsourcing for as little as £20 a month – we can run your payroll for up to 4 employees. Whoever runs your payroll will tell you how much to pay your employees and HMRC.

The pay you agree with your employee – let’s say £10,000 per annum – is their Gross Pay. From this they have PAYE (Tax) and National Insurance deducted, which you pay over to HMRC each month. On top of this you will pay Employers National Insurance.


You have to set up a workplace pension if your employee is over the age of 22 and earns more than £10,000. Employees contribute 5% of their pay and you contribute 3%, although employees can opt-out of this. Most pension providers do not charge you for these schemes and your payroll provider can provide you with the admin.

Check your insurance

You now need employer’s liability insurance to ensure your employees are covered for accidents at work. Hand in hand with this, is providing a safe working environment.

Employee Handbook and Policies

This is not essential for your first employee but its worth spending a bit of time when you take on a few more employees. This sets out the rules and policies you envisage your employees following such as dress code, internet usage policy etc. This can also include your health and safety policy.

Invest in your people

There is a school of thought that says why train people when they will only leave anyway. This is a rather negative view of employees – we prefer to invest in people as much as possible – give them every opportunity to grow and adapt, and your business will gain from it. Occasionally this will backfire, someone will leave taking their knowledge with them, but that’s just the chance you take. Spend time and money on your people and you will benefit.


Start writing down the processes of the tasks that you want done and how you want them done. If you write process and systems for your business, it will be easier for subsequent employees to pick up tasks and roles.

Fire them

This sounds harsh but if your employee is not working out let them go – its better for you in the long run. Depending on the terms you set out above, you can let people go with minimal notice if they have worked with you for less than 2 years. After 2 years, employees will be able to challenge your dismissal, so you need to take HR advice if you plan on letting someone go and they have worked for you more than two years.

Go for it!

Taking on your first employee is one of the most exciting times in a business – it can really help you to grow. It should not be an admin minefield, so go for it! If you need help with any of this, then contact us for advice.