Taking on a new employee
- first steps
When you take on a new employee there are important checks you have
to make. You need to decide what their correct employment status is
and check if they can legally work in the UK. If you employ them, you
must check whether you need to operate PAYE (Pay As You Earn) on their
You need to get certain information from your employee and send it
to HM Revenue & Customs (HMRC) on or before the employee's first
payday. If this is your first employee, you may need to register with
HMRC as an employer and set up a PAYE scheme.
This guide tells you what checks you need to make on potential new
employees, what you need to do to register as a new employer and how
to get the information you must report to HMRC.
On this page:
Important news and updates
Once you start reporting your PAYE information in real time you
won't be able to submit forms P45 and P46 via HMRC's Online Service
- this is because you must tell HMRC about people who've started
working for you, or left, using your real time submissions (Full
Payment Submissions, or FPS) through your payroll software.
If you've been notified that you must start reporting PAYE in real
time from April 2013, if you try to send P45s or P46s via HMRC's
Online Service, they will be rejected so you need to take the following
For employees who left your employment in 2012-13:
- instead of submitting a P45 you must enter the leaving date on
the employee's 2012-13 P14
- if you've already submitted their P14 for 2012-13, with your
form P35, without showing a leaving date take no further
- do not include the employee on your first FPS
or Employer Alignment Submission (EAS)
- once HMRC processes your first FPS or EAS the employee's period
of employment will show as having ended on 5 April 2013
- do not submit a revised P14
For employees who started in your employment in 2012-13:
- include details of the employee in your first FPS (or EAS if
you send one)
Read the rest of this guidance to find out how to let HMRC know
about employees who've started since you started reporting PAYE information
in real time.
Who counts as an employee?
It's your responsibility to decide on the correct employment status
of someone who works for you. If you get their employment status wrong
you might have to pay extra tax, National Insurance contributions (NICs),
interest and a penalty.
You must decide whether someone who is going to work for you is an
employee or self-employed. You can't simply accept that someone's self-employed
because they say they are. A person's employment status depends on
the terms of the contract between you and them:
- a contract of service usually makes them an employee
- a contract for services usually makes them self-employed
The guide 'Employment status: employed or self-employed?' will help
you decide what sort of contract it is and explains what you have to
take into account to make your decision. It also tells you how to use
a tool to help you decide and how you can also ask HMRC for a decision.
Employment status: employed or self-employed?
First employee - registering as an employer
If this is your first employee and any of the following apply:
- their earnings meet certain thresholds
- you provide them with employee benefits
- they have another job or a pension
You need to register with HMRC as an employer and operate PAYE. To
find out more and how to do this, read HMRC's guide 'How to register
as an employer'.
If you're already registered as an employer with HMRC, the guide 'New
employer - getting started' summarises all the steps you need to take
and where to find information on how to do them. The rest of this guide
covers the key steps in taking on a new employee.
If you're a new employer, or have been in business for less than three
years, you can also get advice by calling HMRC's New Employer Helpline.
How to register as an employer
New employer - getting
contact details for HMRC's New Employer Helpline
Reporting employee information to HMRC
You need to send payroll information to HMRC about everyone you
employ before or on every payday, even if they only work for a very
short time or don't earn much. This includes those earning under
the Lower Earnings Limit, people paid just once a year and any temporary
or casual staff. Before you can pay anyone new, you need to get certain
basic information from them so it's ready to send to HMRC in an FPS.
How to get employee information
When you take on a new employee you will need to obtain and keep
a record of information that is needed when you submit your first
FPS that includes them. This information can be gathered and stored
however you prefer - letter, email or a form. Make sure the information you get from your new employee is accurate (National Insurance number, full name, gender and date of birth) as this is used by HMRC to match a new employment to the individual’s PAYE record. You must keep your records for the current year and the three previous tax years.
Information you need
- full name
- date of birth
- full address
- National Insurance number
- the date the employment started
The guide 'Notifying and getting new employee information
right' tells you what you must find out from your employee.
Notifying and getting new employee information
When you report new employees
When you take on a new employee, you don't need to tell HMRC straightaway
- but you do need to send a report before or on the employee's first
payday. You can take on an employee at any point during a pay period,
but whenever you take on an employee you should record their start
date and report it to HMRC in the first FPS for that employee.
It's a good idea to set up your new employee's details on your payroll
as soon as you receive them, so you have their details ready for
your first FPS.
Notifying and getting new employee information
How to report your payroll
When to report your payroll
Paying your first employee for the first time
When you pay someone for the first time, there are a number of things
you can do to help you decide how much tax and NICs to deduct before
you pay them.
You need to decide which method you're going to use to calculate tax,
NICs and other deductions - this process is known as running your payroll.
You can use an agent or payroll bureau or do it yourself using either
commercial payroll software or HMRC's Basic PAYE Tools. You can read
more about the options available in the guide 'Software packages and
other payroll options'.
You also need the information listed above in 'Reporting employee
information to HMRC' to put into your payroll system or into the Employer
Database of the Basic PAYE Tools. You need some of this information
to send to HMRC when you report your payroll information on an FPS
for your employee and some of it to help you calculate the right tax
and NICs for them.
Other information that you have to put into your payroll system or
the Basic PAYE Tools is information you will know - such as the start
date, whether or not the employee is also a director, and the approximate
number of hours worked each week.
and other payroll options
Understanding employee tax codes
Temps and other special cases
There are special rules for deducting tax and NICs in certain circumstances,
for example when your employee is:
- not resident in the UK
- not UK domiciled
- a temporary or agency worker
- a harvest casual or casual beater
- a female who is entitled to pay reduced rate NICs