This guide explains what you need to know as a new employer. It includes important information on setting up your payroll, paying employees, payments to HM Revenue & Customs (HMRC) and employment rights. Everything you need to get started can be accessed from this page. If you haven't yet registered as an employer, you can find out more in the guide 'How to register as an employer' - see link in the section 'An introduction to payroll'.
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As an employer you have a responsibility to deduct PAYE (Pay As You Earn) tax and National Insurance contributions (NICs) from your employees' pay. You are required to report this information to HMRC each time you pay an employee.
You must also give your employees a pay statement and maintain adequate records of how much has been paid and any deductions made.
How to register as an employer
Paying your employees and making deductions
You must report your payroll information to HMRC online. You have two main options for operating your payroll:
There are very few employers who are exempt from reporting payroll online. More information can be found using the link below 'Guidance for employers exempt from filing or unable to file online'.
More information on choosing a payroll system best suited to your business can be found in the guide 'Software packages and other payroll options' - follow the link below.
Software packages and other payroll options
Guidance for employers exempt from filing or unable to file online
Once you've registered as an employer with HMRC your new employer registration letter will provide you with two very important numbers:
This is the only notification you will receive, so HMRC recommends that you keep this letter in a safe place.
You must use your Accounts Office reference when making payments and contacting HMRC about payments. You should use your PAYE reference in all other contacts with HMRC and on all your payroll records. If you haven't yet registered as an employer you can find out more in the guide 'How to register as an employer' - just follow the link in the section of this guide 'An introduction to payroll'.
If you use a payroll agent they will need these references to send your payroll information to HMRC.
Your payroll software makes the process of running an efficient payroll operation much simpler. Whether you use a commercial payroll package - some of which are free - or HMRC's Basic PAYE Tools, most of your record keeping requirements will be met by the payroll records these produce.
If you've already decided to use HMRC's Basic PAYE Tools to calculate your payroll, below there's a quick link you can follow to download the version you need. The Tools are designed for employers with nine or fewer employees.
The following guide will show you how to tell HMRC you have a new employee - this must be done through your payroll software.
Taking on a new employee - first steps
After you have run your weekly/monthly payroll and sent your Full Payment Submission (FPS) to HMRC, you must pay any tax and NICs due to HMRC by a set date. If these payments are made late, penalties and interest may be charged. For more about this see the next section 'Late filing and late payment penalties'.
PAYE/National Insurance payments and deadlines
How to pay PAYE/Class 1 National Insurance/CIS
You may have to pay a penalty if you don't send your PAYE information to HMRC or you don't make payments by the appropriate deadlines. You can find out more about this by following the links below.
What happens if you don't report payroll information on time
Matters such as employment contracts, pay, absence, holiday entitlement and the rights of workers and employers in the workplace are all important areas for a new employer to get right.
There is lots of information and tools to help you with these subjects in the 'Employing people' section of the GOV.UK website.
Employing people on the GOV.UK website (Opens new window)
As you take on an employee you may come across other pay related matters such as making sure you pay the national minimum wage, or paying sick pay. HMRC recommends that you check out the various tools that are available on HMRC's website to help you handle different situations as they arise.
The HMRC New Employer Helpline is available as a supplementary source of help.
Find contact details for HMRC's New Employer Helpline
HMRC has reduced the amount of information posted to employers by replacing it with online guidance, downloadable applications, forms and other publications.
HMRC strongly recommends that you register for their employer email alert service so that they can remind you when the latest information, including each edition of the Employer Bulletin, is made available online.
Register for the HMRC employer email alert service
HMRC publishes the Employer Bulletin three times a year. It is designed to give employers and their agents the latest information about payroll topics and other issues that may affect them. It also provides pointers to new procedures and initiatives which may be of interest and contains direct links to more detailed information allowing you to explore topics further.
It is in a handy, accessible format that you can either download and view or print off in magazine format if you do not want to read it on screen.
HMRC offers a range of support to help you get your tax affairs right.
