Payroll and auto-enrolment for first-time employers

Taking on your first member of staff is a milestone, and it brings a set of duties that start before they've done a day's work: registering as an employer, setting up payroll correctly, and — whatever the size of the business — automatic enrolment.

Registering as an employer

You need to register with HMRC as an employer before, or on, the date you first pay your new employee. It can take up to 15 working days to get your PAYE reference, so this isn't something to leave until the week they start. Once registered, you'll report pay and deductions to HMRC through Real Time Information (RTI) each time you run payroll, not just at year end.

Running payroll

Each pay period, payroll calculates gross pay, deducts Income Tax and National Insurance (and student loan repayments where relevant), and produces a payslip. Statutory payments — sick pay, maternity and paternity pay among them — follow their own rules and need to be factored in correctly from the start, not worked out after the fact.

Automatic enrolment duties

Every employer has automatic enrolment duties from the day they take on their first worker, even if that's just one person. Staff aged between 22 and State Pension age, earning more than £10,000 a year, must be automatically enrolled into a workplace pension on their qualifying earnings — broadly, earnings between £6,240 and £50,270 a year. The current minimum contribution is 8% of qualifying earnings in total, with at least 3% coming from the employer and the rest from the employee.

You'll also need to complete a declaration of compliance with The Pensions Regulator confirming you've met your duties, within a set window of your duties start date.

What if nobody qualifies yet?

The duties still apply even if no one currently meets the earnings threshold — you may still need to assess staff and, in some cases, write to them explaining their position. "No one qualifies" isn't the same as "nothing to do."

Do I need to do this for just one employee, or a director-only company?

In most cases, yes — the duties apply from your first PAYE-liable worker. There are specific exemptions for some director-only companies with no other staff, but they depend on the detail of your circumstances, so it's worth checking your position rather than assuming either way.

What's the real deadline?

Your duties start on your employee's first day of work, not whenever you get round to setting things up. Getting PAYE registration and auto-enrolment arrangements in place before that date avoids a scramble in the first week.