Hiring your first employee is a big step
Taking on your first employee usually means your business is growing. Work is increasing, opportunities are opening up, and doing everything yourself is no longer sustainable.
It can also feel daunting if you have never employed anyone before. Employment law, payroll, pensions, and contracts can seem overwhelming.
This guide explains the essentials in plain English, so you can hire confidently and stay compliant from day one.
Employee, worker or freelancer, why the difference matters
Before you hire, it is critical to understand employment status. In the UK, there are three main categories.
Employee
Employees are fully integrated into your business and work under a contract of employment. They are entitled to the full range of employment rights, including holiday pay, sick pay, parental leave, notice, and protection from unfair dismissal.
Worker
Workers are not full employees but still have important rights, such as holiday pay, National Minimum Wage, and protection from discrimination. Many small businesses unintentionally treat workers as freelancers, which can create risk.
Self employed or freelancer
A genuinely self employed person runs their own business and has control over how the work is done. They are not entitled to employee benefits.
A key point many founders miss:
The label in the contract does not decide status.
HMRC and employment law look at what happens in practice, including control, personal service, and whether the individual is part of your business.
Is it the right time to hire?
It may be time to hire if:
you are consistently overstretched
you are turning down work or missing deadlines
you need skills you do not have in house
growth is happening but you cannot keep up
you are stuck working in the business rather than on it
Your first hire does not have to be full time. Many SMEs start with a part time role or a fixed term contract.
What you must do legally when hiring your first employee
There are a few legal steps you must get right from the outset.
Register as an employer
You must register with HMRC before your first payday so you can operate PAYE and handle tax and National Insurance correctly.
Provide a written statement on or before day one
Employees and workers must receive a written statement of particulars by their first day of work. Most SMEs provide a full employment contract covering pay, hours, holiday, probation, and other key terms.
Carry out right to work checks
You must check every new starter’s right to work before employment begins.
This can be done by:
checking original documents in person
using the Home Office online service where applicable
using a certified digital identity provider for British and Irish passport holders
You must keep a record of the check.
Pay at least the National Minimum Wage
Rates change every April, and the National Living Wage now applies from age 21. Always check the current rates before making an offer.
Meet your pension duties
As soon as your first employee starts, your auto enrolment duties begin. You must assess eligibility, enrol where required, and make employer contributions.
Get employers’ liability insurance
This is a legal requirement once you employ anyone, even on a part time basis.
Provide a safe working environment
You must assess risks, provide a safe workplace, and make reasonable adjustments where required.
Prevent discrimination and harassment
Employees and workers are protected under the Equality Act 2010.
There is also a legal duty on employers to take reasonable steps to prevent sexual harassment, not just respond when issues arise. This includes policies, training, and clear reporting routes.
DBS checks (only if relevant)
DBS checks are only required for certain roles, such as those involving children, vulnerable adults, or regulated activities.
Most businesses will not need one unless the role clearly falls into these categories.
Practical tips for a smooth first hire
Be clear about the role
Define what success looks like in the first three to six months. Avoid vague “do everything” roles.
Write a simple, honest job description
Clarity around hours, tasks, and flexibility attracts stronger candidates.
Plan onboarding
Even a very small business needs an onboarding plan. Knowing what to expect helps new starters settle quickly.
Stay organised from day one
Keep contracts, right to work checks, payroll records, and policies in one place. Good record keeping protects you later.
Final thoughts
Hiring your first employee is a milestone. When you understand employment status, meet your legal obligations, and set clear expectations early, you reduce risk and create a positive experience for both you and your new hire.
If you would like support with contracts, onboarding, or getting your first hire right, this is exactly the type of work Sleek HR supports small businesses with.