Register before the first payday
You need to register with HMRC as an employer before the first payment, not after it. Registering is quick, but the employer reference you need in order to file can take up to two weeks to arrive. Start it the day you agree a start date.
If the reference has not arrived by payday, you still pay your employee on time. You file late with a reason, which is fine once and awkward twice.
The four dates in month one
Payday is the one everyone remembers. The other three are the submission on or before payday, paying the tax and National Insurance by the 22nd of the following month, and the pension assessment in the first pay period. None of them are difficult. They are just easy to forget while you are busy settling someone in.
“Nobody has ever been fined for hiring someone. They get fined for telling HMRC after they paid them.”
Pensions, sooner than you think
Automatic enrolment duties start with your very first employee, not once you have a few. You assess whether they qualify, enrol them if they do, write to them either way, and set up contributions from the first pay period.
- Duties begin on the employee’s first day, not later
- You must write to them within six weeks, even if they do not qualify
- You cannot nudge anyone to opt out, in writing or otherwise
- A declaration of compliance is due within five months
Contracts and the paperwork
A written statement of terms is due on or before day one. Keep a copy of their right to work check, their start date and their National Insurance number, and give them a payslip every time you pay them, including the very first.
A payslip is not optional, and a bank transfer reference does not count as one.
Employee or contractor
If someone works set hours, uses your equipment and cannot send a substitute, they are almost certainly an employee, whatever the invoice says. Getting this wrong is the costly version of the mistake, because HMRC reclaims the tax and National Insurance from you, not from them.
If you are unsure, ask before the first payment rather than after the first year. It is a ten-minute conversation, and far cheaper than the alternative.
