A Guide to Hiring for First-Time Hires in UK and Registering for PAYE

There are several steps an employer needs to go through when hiring an employee for the first time in the UK. This is to ensure employers are following and complying with the legal requirements, including setting up a payroll system and registering for PAYE (Pay As You Earn).

 

Before an employee is hired in the UK, it is essential that the employer confirms that the individual is legally considered an employee. Employment status is typically determined by factors such as the nature of the work, how it’s controlled, and the worker’s financial risk. This will impact the rights of the worker and the employer’s responsibilities.

 

Confirming an Employee’s Work Right

For a first time hire in the UK, it is important to determine the individual’s working rights in the UK. The legal rights can be confirmed using passports, work visas, or other official immigration documents. This is a crucial step because as an employer, you can face penalties if you  employ someone who does not have the right to work.

Once you have done your background checks, you must then give the new hire a written statement of employment. This must be done prior to starting their first day. The statement must include key terms such as job title, salary, working hours, and holiday entitlement. It forms the basis of the employment contract.

 

Registering with the HMRC

Once your new employees have been hired, it is time to handle the payment side of things. You need to set up a payroll system that calculates pay, deducts National Insurance Contributions (NICs), income tax, and any other deductions like student loan repayments.

A payroll software is essential for managing these calculations and for submitting reports to HMRC (HM Revenue and Customs). Employers who intend to pay more than the Lower Earnings Limit, provide expenses, or offer employee benefits, must register with the HMRC. Registrations must also be done to deduct  income tax and NICs through the PAYE system. You should register at least two weeks before paying your employee for the first time.

 

Registering for PAYE

A PAYE reference number will be issued by the HMRC once the registration is complete. You will also be issued with an Accounts Office reference number. These details are essential for when you are reporting payroll information.

PAYE is a system used in the UK to connect income tax and NICs from employees’ wages. It is the responsibility of all employers to submit payroll information to HMRC on or before each payday through Real Time Information (RTI) submissions. The RTI reports include details such as pay, tax deductions, and NICs, which ensure employees’ tax records are kept up to date.

As an employer, you are legally obligated to provide itemized payslips to all employees. Payslips must detail earnings before and after deductions, as well as any variable pay components like overtime or bonuses.You are also legally required to maintain accurate records for compliance. All payroll records must be kept for at least three years, including details of payments, deductions, and benefits provided to employees. These records support tax calculations and help manage potential disputes.

 

Benefits and Pensions for Employees

When completing the first-time hires process in the UK, employers must also address the need for benefits and pensions.  Under the UK’s automatic enrolment regulations, employees who meet certain criteria must be enrolled in a pension plan. This plan must include both employee and employer contributions. If any benefits are provided, such as company cars or health insurance, these must be reported to HMRC and may be subject to additional tax.

 

Fulfilling Your Responsibilities As An Employer

All employers must submit final payroll reports to HMRC by the end of each tax year. All payments and deductions must be made throughout the year and must be confirmed in these statements. You will also be required to give employees the P60 forms that summarises their income and deductions for the tax year.

If you need help filing your tax returns and making sure your company is meeting its legal requirements, our 3E Accounting team can help. Get in touch with us today and find out about our list of services that your business can benefit from.