How to Pay Your first employee in the UK – PAYE, NI and What HMRC Expects

Hiring your first employee means taking on a set of payroll responsibilities. Before you make that first salary payment, you need to register as an employer, set up PAYE, collect your employee's details, calculate deductions, report payroll information to HMRC and pay the amounts due.

For a first-time employer, understanding what HMRC expects can help you avoid incorrect deductions, missed submissions and late payments.


 

Step 1: Register as an employer

If you employ someone and need to operate PAYE, you must register as an employer with HMRC. You should do this before the first payday.

HMRC will provide an employer PAYE reference number and other details you need to run payroll. You can register up to two months before you start paying employees. (GOV.UK)

You may need to register if your employee:

• Is paid £129 or more a week

• Receives expenses or benefits

• Receives a pension

• Has another job

• Receives certain state benefits

Even where PAYE registration is not required, you may still have employer and record-keeping responsibilities.

Step 2: Collect your employee's information

Before processing the first payment, collect the information needed to set up the employee in your payroll.

This includes:

• Full name and address

• Date of birth

• National Insurance number

• Start date

• Salary or hourly rate

• Pay frequency

• P45, if available

• Starter information if they do not have a P45

If the employee does not have a P45, use HMRC's starter checklist to establish the appropriate starter declaration and tax treatment.

Step 4: Calculate National Insurance

National Insurance has two parts to consider.

Employee National Insurance is deducted from the employee's pay when applicable.

Employer National Insurance is paid by the employer and is an additional cost on top of the employee's salary.

The amount depends on the employee's earnings and National Insurance category. Your payroll system should apply the appropriate thresholds and rates for the relevant tax year.

Step 5: Check pension contributions

When you hire an employee, you also need to assess your workplace pension duties.

If the employee meets the automatic enrolment criteria, you must enroll them into a qualifying workplace pension and make the required employer contributions.

Pension deductions should be included in the payroll calculation and reported to the pension provider according to the scheme's requirements.

Step 6: Run your first payroll

Once the employee's details, tax code and pay information are set up, you can process the first pay run.

Your payroll calculation should determine:

Gross pay − Income Tax − employee National Insurance − other applicable deductions = Net pay

Employer National Insurance and employer pension contributions are additional costs to the business and are not deducted from the employee's net salary.

Step 7: Submit your Full Payment Submission to HMRC

Every time you pay your employee, you normally need to send a Full Payment Submission (FPS) to HMRC.

The FPS tells HMRC:

• Who you paid

• How much you paid

• How much Income Tax you deducted

• How much National Insurance was deducted

• Relevant pension and loan deductions

• Other required payroll information

Your FPS must normally be submitted on or before the employee's payday. (GOV.UK)

This is one of the most important deadlines to get right when paying your first employee.

Step 8: Give your employee a payslip

You must provide your employee with a payslip on or before payday.

The payslip should show their earnings and deductions, including:

• Gross pay

• Income Tax

• National Insurance

• Pension contributions, where applicable

• Other deductions

• Net pay

A clear payslip allows your employee to see exactly how their salary was calculated.

Step 9: Pay HMRC

After processing payroll, you need to pay the amounts you owe to HMRC.

This can include:

• PAYE Income Tax

• Employee National Insurance deducted from pay

• Employer National Insurance

• Student loan deductions

• Other amounts reported through payroll

You normally pay HMRC monthly. If you are a small employer and expect your average monthly PAYE bill to be less than £1,500, you may be able to arrange quarterly payments.

Make sure HMRC receives the payment by the relevant deadline.

What HMRC expects from you

Once your first employee is on payroll, the basic cycle is straightforward:

Collect employee information → Calculate payroll → Pay your employee → Submit FPS → Pay HMRC → Keep records

You need to repeat this process each time you pay your employee.

You should also update your payroll records when circumstances change, such as a new tax code, salary change, pension change or other payroll adjustment.

First employee payroll checklist  

Before making your first payment, make sure you have:

• Registered as an employer with HMRC

• Set up PAYE

• Collected the employee's P45 or starter information

• Added the correct tax code

• Set up salary and pay frequency

• Checked National Insurance

• Assessed workplace pension requirements

• Calculated gross pay and deductions

• Submitted the FPS on or before payday

• Provided a payslip

• Paid the employee

• Paid HMRC by the applicable deadline

Conclusion

Paying your first employee does not have to be complicated when the payroll process is set up correctly. The key is to get the basics right from the first payday: register for PAYE, collect the right employee information, calculate Income Tax and National Insurance correctly, submit your FPS on time and pay HMRC what you owe.

Zoho Payroll automates payroll management for UK businesses:

• Automatically calculates PAYE Income Tax, Class 1 NICs, and pension contributions.

• Connects directly to HMRC to file Real Time Information (RTI) submissions, including your initial Full Payment Submission (FPS).

• Generates statutory payslips and delivers them securely via an employee self-service portal.

• Keeps full audit trails to ensure compliance with HMRC record-keeping requirements.  

Using payroll software can bring these calculations and submissions together, reducing the amount of manual work involved in running payroll.

Note: Zoho Payroll helps UK employers manage PAYE calculations, National Insurance, payslips, RTI submissions and employee payroll records in one place.

FAQs

Do I need to register for PAYE before paying my first employee?

Yes, if you need to operate PAYE, you should register as an employer before your first payday. (GOV.UK)

What information do I need from my first employee?

You generally need their personal details, National Insurance number, start date, pay information and P45. If they do not have a P45, use HMRC's starter checklist. (GOV.UK)

When do I report my first employee to HMRC?

You report the employee through your Full Payment Submission when you first pay them. The FPS must normally be submitted on or before payday. (GOV.UK)

What is PAYE?

PAYE stands for Pay As You Earn. It is HMRC's system for collecting Income Tax and National Insurance through employment.

Who pays National Insurance?

Both the employee and employer may pay National Insurance. Employee contributions are deducted from salary, while employer National Insurance is an additional cost paid by the business.

Do I need to provide a payslip?

Yes. You must provide your employee with a payslip on or before payday showing their pay and relevant deductions.

When do I pay HMRC?

Employers normally pay HMRC monthly. Eligible small employers may be able to arrange quarterly payments if their average monthly PAYE bill is less than £1,500. (GOV.UK)

Do I need payroll software for my first employee?

You can run payroll yourself using payroll software or use a payroll provider, accountant or payroll bureau. If you run payroll yourself, you need a method of calculating pay and making the required HMRC submissions. (GOV.UK)