If you plan on hiring new employees, you need several pieces of information from them for your records. Whether you’re about to hire your first ever employee, your hundredth employee, or maybe just some temporary help over the holidays, there is quite a lot that you, as the employer, have to bear in mind.

Before hiring your first employee, you must register as an employer with HM Revenue and Customs (HMRC), which should be done up to four weeks before making your first payment. Once registered, you’re also legally required to obtain employers’ liability insurance. This ensures your business is protected in case an employee is injured or becomes ill due to their work.

How to report a new hire quick guide

  • Verify the employee’s right to work in the UK
  • Provide a written statement of employment
  • Determine if they need pension enrollment
  • Ensure compliance with GDPR
  • Check if they need to be paid through PAYE
  • Gather all necessary employee information
  • Confirm student loan repayment obligations
  • Check if a DBS check is required
  • Register the employee with HMRC
  • Assign a payroll ID (optional)
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Check their right to work in the UK

You could face a penalty of up to £60,000 and a prison sentence of up to five years if you hire someone who isn’t allowed to work in the UK (e.g., visitors on a tourist visa or students with expired visas). You can either check documents yourself to ensure they’re genuine and valid or use the UK government’s online right-to-work checking service if the potential employee has provided a share code.

Provide a written statement of employment

When someone accepts a job offer, they automatically enter into a contract with you. If they will be employed for more than one month, you must provide them with a written statement of employment particulars.

Check if you need to enroll staff into a pension scheme

You must assess whether your employee is eligible for automatic enrollment in a workplace pension scheme. If they qualify, you need to ensure compliance.

Ensure compliance with data protection regulations

Collecting and storing employee information must comply with the General Data Protection Regulation (GDPR). Ensure personal data is securely stored and used appropriately.

Check if they need to be paid through PAYE

If the employee earns over the annual tax-free allowance (£12,570 for the 2025/26 tax year), they must be paid through PAYE (Pay As You Earn). However, self-employed workers don’t require PAYE. Determining employment status correctly is crucial, as errors may result in tax, National Insurance, interest, and penalties.

PAYE rules differ for certain employment types:

  • Temporary or agency workers: You must operate PAYE for temporary workers you pay directly if they are classified as employees. However, for agency workers, the PAYE obligation usually lies with the agency (unless it is based abroad).
  • Employees paid only once: You must create a payroll record with the employee’s full name and address, assign a payroll ID (optional), and use tax code 0T on a Week 1 or Month 1 basis when submitting the Full Payment Submission (FPS).
  • Students: PAYE applies to students in the same way as other employees.
  • Volunteers: PAYE isn’t required if they only receive expenses that are not subject to tax or National Insurance.
Note

PAYE refers to income tax that is deducted from a salary before the employee receives it. HMRC receives the money from the employer so it never actually reaches the employee’s account.

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Gather employee information

To set up payroll properly, you need to collect information from them:

From the employee:

  • Date of birth
  • Gender
  • Full address
  • Start date

From their P45 (or Starter Checklist if no P45 is available):

  • Full name
  • Date they left their last job
  • Total pay and tax paid in the current tax year
  • Student loan deduction status
  • National Insurance number
  • Current tax code

You must keep this information in your payroll records for the current tax year and the following three years.

Determine if they need to repay a student loan

Employers must make student loan deductions if:

  • The employee’s P45 indicates ongoing student loan repayments.
  • The employee confirms they are repaying a student loan.
  • HMRC issues form SL1, and the employee’s earnings exceed the repayment threshold.

Your payroll software will automatically calculate the deduction, and HMRC will notify you with form SL2 when to stop.

Check if a DBS check is required

Certain roles, especially those involving work with children or vulnerable people, require a Disclosure and Barring Service (DBS) check. Ensure compliance if applicable.

Register the employee with HMRC

Once all details are collected, register the new employee with HMRC by submitting a Full Payment Submission (FPS) the first time you pay them. The FPS should include:

  • Collected employee information.
  • The correct tax code and starter declaration.
  • Pay and deductions (e.g., National Insurance, tax, student loan repayments).

Assign a payroll ID (optional)

Assigning a unique payroll ID simplifies payroll management. Rehired employees must be given a new payroll ID to avoid system duplication.

By following these steps, you can ensure full compliance with UK employment laws and create a smooth onboarding process.

Please refer to the legal notice for this article.

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