New Employee Joins Your Business? Here's What You Need for Payroll
A practical checklist for employers — from right to work documents to insurance — so you stay compliant from day one.
Taking on Your First (or Next) Employee
Hiring a new team member is an exciting step for any business. But before they start work, there are several legal and payroll requirements you need to have in order. Getting these right from the outset protects your business and ensures your new starter is paid correctly.
Below we walk through the key documents and checks every employer should complete when bringing someone on board.
1. Right to Work Check
Before your new employee's first day, you are legally required to verify that they have the right to work in the UK. Failing to carry out this check can result in a civil penalty of up to £45,000 per illegal worker for a first offence.
How to Conduct a Right to Work Check
- Obtain original documents — ask your employee to provide acceptable documents such as a UK or Irish passport, or a valid visa/biometric residence permit.
- Check in the employee's presence — verify that the documents are genuine, belong to the person, and allow them to do the work you are offering.
- Make and keep copies — take a clear copy (or scan) and record the date the check was performed. Keep these records for the duration of employment and for two years after.
- Use the Home Office online service — for employees with a biometric residence permit, biometric residence card, or frontier worker permit, use the online right to work checking service.
Important: The check must be completed before the employee's start date or on their first day. Retrospective checks do not provide you with a statutory excuse against a civil penalty.
2. P45 or HMRC Starter Checklist
To set up your new employee on payroll with the correct tax code, you need one of these two documents.
If They Have a P45
A P45 is issued by the employee's previous employer when they leave a job. It shows their tax code, total pay, and tax deducted so far in the current tax year.
- Collect parts 2 and 3 of the P45
- Send it to your payroll provider or add to your payroll software
- Use the tax code shown to process their first pay
If They Don't Have a P45
If the employee cannot provide a P45 — perhaps it's their first job, or they've lost it — they need to complete the HMRC Starter Checklist instead.
- Have them fill in the Starter Checklist
- Choose statement A, B, or C to determine the tax code
- Keep the completed form for your records
Download the HMRC Starter Checklist
The official form is available from GOV.UK. Your new employee should complete it before or on their first day so you can process their initial pay run.
View the Starter Checklist on GOV.UK →3. Employee Details You'll Need
Alongside the P45 or Starter Checklist, make sure you collect the following personal information to set them up on your payroll system:
- Full legal name and date of birth
- Home address
- National Insurance number
- Bank details (sort code and account number for salary payments)
- Start date and agreed salary or hourly rate
- Student loan repayment plan (if applicable)
4. Employers' Liability Insurance
As soon as you employ someone, you are legally required to have employers' liability insurance with a minimum cover of £5 million. This protects your business if an employee is injured or becomes ill as a result of their work.
Key Points
- It's a legal requirement — most businesses that employ staff must have this insurance. You can be fined £2,500 for every day you are not properly insured.
- Display the certificate — you must display your certificate of insurance where employees can easily read it, or make it available electronically. Failure to do so can result in a £1,000 fine.
- Review your cover — if you already have employers' liability insurance but are hiring additional staff, check that your policy still provides adequate cover and notify your insurer of the change in headcount.
- Use an authorised insurer — your policy must be with an insurer authorised by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA).
Don't forget: If this is your first employee, you'll need to arrange employers' liability insurance before their start date. If you already have a policy, contact your insurer to update your cover.
5. Register as an Employer with HMRC
If this is the first time you are employing someone, you will need to register as an employer with HMRC. This should be done before your first employee's payday. Once registered, you'll receive a PAYE reference number which you'll use for all future payroll submissions.
Registration can take up to two weeks, so it's important to start the process well in advance of your new employee's first pay date.
Quick Checklist: New Employee Payroll
- Complete a right to work check before their first day
- Collect their P45 — or have them complete the HMRC Starter Checklist
- Gather personal details: NI number, address, bank details, start date
- Arrange or update employers' liability insurance (minimum £5m cover)
- Register as an employer with HMRC if this is your first hire
- Set up payroll software and submit your first Full Payment Submission (FPS)
Common Questions
I'm hiring someone — what do I need to do?
Before your new employee starts, you need to carry out a right to work check, collect their P45 (or have them complete an HMRC Starter Checklist), gather their personal and bank details, and make sure you have employers' liability insurance in place. If it's your first hire, you'll also need to register as an employer with HMRC.
What happens if my new starter doesn't have a P45?
If your employee can't provide a P45 — for example, it's their first job or they've lost it — they need to fill in the HMRC Starter Checklist instead. This helps you work out the correct tax code so you deduct the right amount of tax from their first pay.
Do I need employers' liability insurance for just one employee?
Yes. By law, most businesses that employ anyone — even a single part-time member of staff — must have employers' liability insurance of at least £5 million. You can be fined £2,500 for every day you don't have it.
How do I check someone's right to work in the UK?
Ask your new employee for original identity documents (such as a passport or visa), verify them in person, and keep dated copies on file. For those with biometric documents, you can also use the Home Office online checking service. This must be done before or on their first day.
Can my accountant handle payroll setup for me?
Absolutely. Many small businesses hand payroll over to their accountant from day one. We can register you as an employer, set up your new starter on payroll, run your pay each month, and handle all RTI submissions to HMRC on your behalf.
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