The moment a UK business hires its first employee, a set of legal and financial obligations begins. They are not complicated, but they are unforgiving, and several carry penalties for getting them wrong.
Right to work checks
Every employer must check that a person has the right to work in the UK before they start, and must keep evidence of the check for the duration of employment and for two years afterwards. For British and Irish citizens this is usually a passport. For others it may be a visa, settled status or a share code.
The check must be completed before the first day. Carrying it out late, or relying on a document that does not cover the period of employment, exposes the employer to civil penalties that scale with the number of workers involved.
Pay: the legal minimum
The National Living Wage applies to workers aged 21 and over and is uprated by the government each April. Separate, lower rates apply to younger workers and apprentices. Because the rates change annually, payroll should be reviewed every spring rather than set once and forgotten.
Employers must also provide payslips itemising hours where pay varies with hours worked, and must not make deductions that take pay below the legal minimum.
Employer National Insurance and pensions
Employer National Insurance contributions are charged on earnings above a secondary threshold, at a rate that rose to 15 per cent in April 2025, with the threshold reduced to 5,000 pounds. This is a genuine cost of employment and should be modelled into any salary offer rather than discovered afterwards.
Separately, automatic enrolment requires every employer to enrol eligible staff into a workplace pension and to contribute at least 3 per cent of qualifying earnings, on top of the employee's own contribution, which takes the total minimum to 8 per cent. Staff may opt out, but the employer must still enrol them, and must not encourage them to leave.
Contracts and written particulars
Employees and workers must receive a written statement of employment particulars on or before their first day. It must set out pay, hours, place of work, holiday entitlement, sick pay and notice periods.
Employment status matters. An employee has the fullest set of rights, a worker has a narrower set, and a genuinely self employed contractor has very few. The label used in a contract does not determine status. The reality of the working relationship does.
Holiday, sickness and family leave
Statutory holiday entitlement is 5.6 weeks a year for a full time employee, and bank holidays can count towards it. Statutory sick pay becomes payable after a waiting period and is subject to an earnings threshold. Statutory maternity, paternity, shared parental and adoption pay are available to eligible staff, and dismissal for reasons connected to them is unlawful.
Getting it right from the start
Most employment problems are cheaper to prevent than to resolve. Register for PAYE before the first payday. Use a written contract that reflects what will actually happen. Keep right to work evidence on file. And treat the pay and pension obligations as fixed costs rather than discretionary ones.