Guide 8 min read
1. Check if you need to employ staff
You don’t need to employ anyone if your business is only you, but if you plan to hire:
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- Employees are those who work under a contract of employment.
- Contractors or freelancers are different and have separate rules.
- Employees are those who work under a contract of employment.
2. Register as an employer
- Register with HMRC before the first payday.
- You’ll get a PAYE (Pay As You Earn) reference for tax and National Insurance purposes.
More information can be found on the Government website: Employing someone: Step by Step
3. Understand your legal repsonibilities
- Right to work checks: Verify each employee has the legal right to work in the UK, more information on what is required can be found by visiting https://www.gov.uk/check-job-applicant-right-to-work
- Disclosure Scotland checks: helps employers make safer decisions when recruiting people and also ensuring that unsuitable people do not work with vulnerable groups including children. More information can be found at Disclosure Scotland
- Employment contracts: Provide a written statement of employment (must include job title, pay, hours, holiday entitlement, notice period, etc.). Please see our separate fact sheet on Terms and Conditions of Employment.
- Minimum wage: Pay at least the National Minimum Wage or National Living Wage depending on age, depending on industry sector rates may be set by another governing body, e.g. Agricultural Workers in Scotland, rates are set by the Scottish Agricultural Wages Board, rates for Electricians are set by the Scottish Joint Industry Board.
- Working hours: Comply with Working Time Regulations (maximum weekly hours, rest breaks, paid annual leave).
- Pension obligations: Auto-enrol eligible staff into a workplace pension. More information can be found at The Pension Regulator
- Health and safety: Ensure a safe working environment and comply with Health and Safety at Work legislation.
- Insurance: You must have employer’s liability insurance before employees start work. More information can be found on the government website including information on penalties if you do not comply https://www.gov.uk/employers-liability-insurance.
4. Recruitment and hiring
- Create a clear job description and person specification.
- Advertise the role fairly (avoid discrimination based on age, sex, race, disability, religion, or sexual orientation).
- Interview and select the right candidate, checking references if appropriate.
- Give offer letters once the candidate is selected, think whether offer should be conditional (Right to Work check completed, reference sought) or Unconditional as this will impact your ability to withdraw offer made.
5. Payroll and tax
- Set up a payroll system (in-house or via software/outsourced provider).
- Deduct income tax and National Insurance contributions (NICs) from employee pay.
- Pay employer NICs.
- Submit real-time information (RTI) reports to HMRC each payday.
6. Policies and procedures
Even for a small team, it’s good to have:
- Disciplinary and grievance procedures
- Sick leave and pay policies
- Holiday and leave policies
- Equality and diversity policy
- Flexible working
Training and onboarding
- Provide induction to introduce your company, culture, health and safety, and job responsibilities.
- Train staff as required for their role and legal obligations (e.g., safeguarding, food safety, manual handling).
8. Record-keeping
Keep accurate records for:
- Payroll and taxes
- Working hours, leave, and absences
- Employment contracts and correspondence
9. Ongoing compliance
- Keep up with changes to employment law, National Minimum/Living Wage, pension regulations, and workplace safety requirements.
- Conduct regular staff reviews to support retention and engagement.
As mentioned above with the upcoming changes to Employment Law it is vital to keep up with the changes that are being implemented.