UK Payroll Software

Hiring Your First Employee in the UK: Payroll and Pension Duties Explained

Elena Segura

Cofounder

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Givver is officially recognised by HMRC (HM Revenue & Customs) as a payroll software provider. This recognition means our software has met HMRC’s standards, passed their testing process, and is listed on the official GOV.UK site. We’re committed to upholding the quality and compliance that come with this recognition.

Hiring Your First Employee in the UK: Payroll and Pension Duties Explained

Hiring your first employee is an exciting milestone. It means your business is growing, and you’re ready to build a team. But along with that excitement comes new responsibilities – particularly around payroll, pensions, and legal duties as an employer in the UK.

If this is your first time dealing with payroll, don’t worry. This guide explains in plain English what you need to know about employer duties, payroll setup, and automatic enrolment.

What Are Employer Duties in the UK?

As soon as you hire staff in the UK, you take on a set of legal responsibilities. These include:

  • Registering as an employer with HMRC.

  • Running payroll correctly, including PAYE (Pay As You Earn) and National Insurance.

  • Meeting your automatic enrolment duties by enrolling eligible staff into a workplace pension scheme.

  • Keeping accurate records of pay, deductions, and communications with staff.

Failing to meet these duties can result in fines from HMRC or The Pensions Regulator – so it’s important to get it right from the start.

What Is Automatic Enrolment?

Automatic enrolment is a UK law designed to make sure employees are saving for retirement.

If your employees are:

  • Aged 22 or over, and

  • Earning more than £10,000 per year,

you must automatically enrol them into a workplace pension scheme and pay contributions on their behalf.

Even if your staff don’t meet these criteria, some can still choose to join a pension scheme, and you must be ready to handle that too.

Why Payroll Setup Matters for Employer Duties

A good payroll system will make your life much easier. It can:

  • Store essential staff information (name, address, date of birth, National Insurance number).

  • Assess staff every pay cycle to check who must be enrolled.

  • Calculate contributions for both employer and employee.

  • Deduct pension contributions directly from wages.

  • Send the correct data files to your pension provider.

  • Generate letters or emails to inform staff of their rights.

Without the right payroll setup, you’ll face extra admin – and a higher risk of missing legal deadlines.

Payroll and Pension Duties: The 10 Steps Every Employer Must Follow

When you’re hiring your first employee in the UK, here are the key steps to stay compliant:

  1. Assess your staff – check who qualifies for automatic enrolment.

  2. Calculate pension contributions – both employer and employee shares.

  3. Send data to your pension provider – in the correct format.

  4. Inform your staff – explain their pension rights by letter or email.

  5. Pay contributions on time – make sure the pension scheme receives them by the deadline.

  6. Allow opt-ins – staff not automatically enrolled can still ask to join.

  7. Manage opt-outs – if staff leave the scheme, refund their contributions promptly.

  8. Submit a declaration of compliance – confirm to The Pensions Regulator that you’ve met your duties.

  9. Keep records – including assessments, payments, and communications.

  10. Re-enrol every three years – check eligibility again and re-enrol staff if needed.

Common Mistakes First-Time Employers Should Avoid

When setting up payroll and pensions, it’s easy to make errors. The most common are:

  • Starting too late: it takes time to set up with a pension provider and test payroll.

  • Incorrect staff details: mistakes in names, dates of birth, or National Insurance numbers can delay compliance.

  • Underpaying contributions: you must meet the legal minimum contribution levels.

  • Forgetting staff communications: informing employees about their pension rights is a legal requirement.

Helpful Resources for UK Employers

Final Thoughts

Hiring your first employee in the UK comes with new payroll and pension duties – but it doesn’t need to be overwhelming.

✅ Set up payroll properly.
✅ Understand your automatic enrolment obligations.
✅ Follow the 10 steps outlined above.

By doing so, you’ll stay compliant with the law, avoid penalties, and give your employees peace of mind about their future.

No more juggling multiple systems or drowning in spreadsheets.

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