Thinking about your first hire? What it really means to employ someone
This is part 1 of Employing people: a small business guide — a plain-English series on taking on staff. See the full guide.
You didn't start your business to get tangled up in HR.
If you're a joiner, you started it because you're good with wood. If you run a café, it's because you can cook, or because you know how to make people feel at home. You had a skill and a bit of nerve, and you backed yourself. A year or two on, it's going well — well enough that you can't keep up on your own. So you start thinking about taking somebody on.
And that's usually the moment it dawns on people: I've no idea how to actually employ someone.
That's not a failing. It's completely normal. Nobody hands you an employment law manual when you register a business. But taking on your first member of staff is one of the biggest steps you'll take, and it's worth understanding what you're really signing up for before you post that job advert. This guide is the first in a series that walks you through the whole journey — from your first hire right through to someone eventually leaving. We'll keep it plain, and we'll flag the bits that carry real risk.
Employing someone isn't just an extra pair of hands
Here's the shift in thinking that matters most. When you take somebody on, you're not just buying a few more hours in the day. You're becoming an employer — and that comes with legal responsibilities to that person that start on day one, not after some settling-in period.
From the moment they start, you owe them things: a written statement of their terms, at least the minimum wage, a safe place to work, holiday, and more besides. In return they owe you a fair day's work. It's a proper two-way relationship, and the law sets the floor for both sides.
None of this should put you off. Taking on staff is how good businesses grow, and the vast majority of employment relationships are happy, straightforward and never trouble a solicitor. But the way to keep it that way is to get the foundations right at the start. Most of the horror stories you hear — the tribunal claims, the fines, the fallings-out — come from corners cut at the beginning, not from bad luck.
Why getting it right matters so much
There are three big reasons to take this seriously.
People are almost certainly your biggest cost. For most small businesses, wages dwarf every other outgoing. That means a hire is one of the largest financial commitments you'll make — bigger than a van, bigger than your premises. A commitment that size deserves to be done properly, and we'll come back to what it really costs below.
People do their best work when they feel secure. This is the part that's easy to overlook when you're buried in the paperwork. When someone has a clear contract, knows what's expected of them, gets paid correctly and on time, and feels genuinely welcomed, they relax and get on with the job. When any of that is shaky, they don't. Good HR isn't red tape for its own sake — it's what makes people feel safe enough to be good at their jobs.
The penalties for getting it wrong are real. Employment law has teeth. Fail to check someone's right to work and you can be fined up to £45,000 per worker for a first breach and £60,000 for a repeat one. Don't hold employer's liability insurance and it's up to £2,500 for every day you're uninsured. Get a dismissal wrong and you could be facing an employment tribunal — and, as we'll see, the ceiling on what tribunals can award for unfair dismissal is being removed. None of this is meant to scare you. It's meant to show why the boring foundations are worth an afternoon of your time.
What a first employee really costs
When people budget for a hire, they usually think about the salary and stop there. The salary is only part of the picture. The real cost — sometimes called the "on-cost" — includes several extras on top.
The wage itself has a legal floor. From April 2026 the National Living Wage for workers aged 21 and over is £12.71 an hour. It's £10.85 for 18 to 20-year-olds, and £8.00 for those aged 16 to 17 and for apprentices. These rates usually rise every April, so it's worth checking them each year.
On top of the wage, you'll typically pay:
Employer's National Insurance. You pay this on your employees' earnings above a threshold. The rate is currently 15%, on earnings above £5,000 a year. Many small employers can offset some or all of this through the Employment Allowance (currently worth up to £10,500 a year), which softens the blow considerably for a first hire.
Pension contributions. If your employee qualifies, you must enrol them in a workplace pension and contribute. More on that below.
Holiday pay. Paid time off is a cost even though no work happens during it — you're paying for weeks when the person isn't producing anything.
The bits and pieces. Tools, equipment, a uniform, training, insurance, a phone — whatever they need to do the job.
A useful rule of thumb: budget meaningfully more than the headline salary. Exactly how much more depends on the wage and the person, and we'll do the sums properly in the payroll post later in this series. For now, the point is simple — plan for the full cost, not just the wage, so the hire doesn't stretch you further than you expected.
What the law expects from day one
You don't need to become an employment lawyer. But you do need to know the handful of things that have to be in place. Here's the overview — each of these gets its own detailed guide later in the series.
A written contract. Every employee has the right to a written statement of their main terms of employment — pay, hours, holiday, job title, notice periods and so on — on or before their first day. This has been a day-one right since April 2020. A handshake and a friendly "we'll sort the details later" doesn't meet the standard, and it's exactly the kind of gap that causes arguments down the line.
A right to work check. Before someone starts, you must check they're legally allowed to work in the UK, and keep a record of it. This isn't optional and it isn't just for big companies — the penalties above apply to everyone. From 1 October 2026 the rules are widening to cover more kinds of working arrangement, including some contractors and gig or platform workers, so it's an area to watch.
PAYE with HMRC. If you're paying someone above a certain level, you'll need to register as an employer with HMRC and run payroll — deducting Income Tax and National Insurance and reporting it. This is the mechanical side of paying people properly, and it's where a good payroll setup (or a good bookkeeper) earns its keep.
A workplace pension. Under automatic enrolment, you must put eligible staff — broadly, those aged 22 up to State Pension age earning over £10,000 a year — into a pension scheme and contribute to it. The minimum total contribution is 8% of qualifying earnings, of which at least 3% comes from you as the employer.
Employer's liability insurance. If you employ anyone, you're legally required to hold this insurance, with cover of at least £5 million, and to display or make the certificate available. It covers you if a member of staff is injured or made ill because of their work. As above, being uninsured can cost you up to £2,500 a day.
At least the minimum wage. Whatever you agree, it can't fall below the legal rates for the person's age. Underpaying — even by accident, through unpaid trial shifts or unrecorded overtime — can lead to fines and being publicly named.
If that list feels like a lot, remember two things. First, it's a one-time setup for the most part — you build the foundations once and reuse them for every future hire. Second, this is precisely the sort of thing you don't have to do alone.
What's changing — and why it matters now
Employment law is going through its biggest shake-up in years, thanks to the Employment Rights Act 2025. A lot of it is rolling out in stages across 2026 and 2027, and some of it directly affects anyone taking on staff. It's worth knowing what's coming so you're not caught out.
Unfair dismissal is getting easier to claim. Right now, an employee generally needs two years' service before they can bring an ordinary unfair dismissal claim. From 1 January 2027 that qualifying period drops to six months. At the same time, the cap on unfair dismissal compensation is being removed. In plain terms: fair, well-documented processes for managing and, if it comes to it, dismissing staff will matter more than ever — and much earlier in someone's employment.
More rights start on day one. Since April 2026, paternity and parental leave are day-one rights, and statutory sick pay is payable from the first day of illness with the old lower earnings limit removed.
Right to work checks are widening from October 2026, as mentioned above.
Longer to bring a claim. From October 2026, the time limit for most employment tribunal claims is doubling from three months to six, which means keeping good records for longer.
A stronger duty around harassment. Employers have to take reasonable steps to protect staff from harassment, including from third parties like customers.
We'll keep this series up to date as the details firm up. The headline for now: the direction of travel is towards more employee protection, sooner. Getting your house in order isn't just good practice — it's good timing.
Your first-hire checklist
Here's the whole thing boiled down to a working list. If you can tick these off, you're in good shape.
Be clear on the role. What will this person actually do, how many hours, and what will you pay — at or above the minimum wage for their age?
Work out the true cost. Salary plus employer's National Insurance, pension, holiday and equipment. Make sure the numbers work.
Register as an employer with HMRC and set up payroll (or line up a bookkeeper or payroll provider to run it for you).
Sort employer's liability insurance before anyone starts.
Recruit fairly — advertise, shortlist and interview without discriminating. (This is the subject of the next post in the series.)
Check their right to work before their first day, and keep the record.
Give them a written contract — their statement of main terms — on or before day one.
Set up their pension and assess them for automatic enrolment.
Plan a proper induction so their first days are welcoming, not chaotic.
The bottom line
Employing your first person is a genuine milestone, and it's meant to feel like a big deal — because it is one. But it's not a mystery, and it's not something you have to muddle through. Break it into steps, get the foundations right, and the rest follows.
You became brilliant at your trade because you put the time in. HR is just another part of the business that rewards doing it properly — and it's one where a bit of guidance goes a long way. That's exactly what the rest of this series is for. Next up: recruitment — how to advertise, shortlist and interview so you actually end up with the right person, and stay on the right side of the law while you do it.
You've got this — and you don't have to do it alone
Taking on your first person is a big step, but as you've seen, it breaks down into a manageable run of jobs: work out what it really costs, get the paperwork right, and put the foundations in place before day one. Do that, and you've done the hard part.
At HiThrive, we're business consultants first and foremost — we help owners build better, more resilient businesses. That includes making sense of what employing people involves, thinking it through for your particular situation, and pointing you towards specialist HR or legal advice when that's what's needed. And if you'd like the payroll and bookkeeping taken off your hands, we can help there too.
If you'd like a sounding board, or just a plain-English chat about making your first hire, we'd love to help. Get in touch and let's talk it through.
Summary: employing your first employee
What does it mean to employ someone in the UK?
Employing someone means taking on legal responsibilities as well as an extra pair of hands. From day one you owe them a written contract, at least the minimum wage, a safe place to work and holiday. Before they start you must check their right to work, set up PAYE with HMRC, arrange a workplace pension, and hold employer's liability insurance.
How much does an employee cost beyond their salary?
More than the wage alone. You'll also pay employer's National Insurance (currently 15% above £5,000 a year, though the Employment Allowance can offset much of this for small employers), pension contributions, holiday pay and any equipment or training they need.
What happens if I don't check someone's right to work?
You can be fined up to £45,000 per worker for a first breach and £60,000 for a repeat one, even if you didn't realise the person couldn't work legally. The check is quick and must be done before they start.
Is unfair dismissal a "day one" right now?
Not quite. The qualifying period is dropping from two years to six months from 1 January 2027, not to day one. But it's a big reduction, so fair processes matter much earlier than they used to.
Do I have to set up a pension?
If you employ anyone who qualifies for automatic enrolment — broadly, aged 22 to State Pension age and earning over £10,000 a year — then yes, you must enrol them and contribute at least 3% of their qualifying earnings.
