February 26, 2026
By Ahmed and Sharon, the FFT payroll team
Hiring your first employee is a genuine milestone and it usually means the business is growing, demand is there, and you can’t keep doing everything yourself (which is good!).
However, it also means you are stepping into a world of payroll compliance, employment law, and reporting to HMRC that many new employers underestimate.
As payroll experts in the heart of Manchester, we see far too many businesses rush this stage, only to unravel it later with penalties, stressed staff, or messy corrections.
Hopefully, this guide walks through how to hire and pay your first employee properly, with a particular focus on payroll mechanics and compliance.
Before payroll even comes into play, you need to be clear on the basics of hiring someone.
First, decide whether you are hiring an employee or engaging a contractor.
This matters because employees must be paid through PAYE (Pay-As-You-Earn), while genuine contractors may not.
If you get this wrong, HMRC could reclassify the relationship later, along with backdated tax and National Insurance contributions which you will have to pay.
You will also need to:
HMRC employer registration can take up to five working days, so do not leave it until the week before payday.
Once you have decided to hire someone, payroll becomes a legal obligation and, at minimum, your setup must handle:
You’ll need payroll software that is RTI compliant (meaning it can submit Real Time Information to HMRC every time you pay staff).
Each pay run triggers a Full Payment Submission, which must be sent on or before payday, not after.
Missed or late submissions will result in penalties even if the tax itself is paid later.
For businesses looking for reliable payroll services in Manchester, this is often the point where outsourcing to an accounting firm becomes sensible.
Unfortunately, paying someone is not as simple as transferring their agreed salary and each payslip must show:
You must also make sure:
If the employee is a director, the payroll treatment may differ again, particularly around National Insurance thresholds and timing.
This is a common area where specialist advice is needed.
Even with one employee, pension auto-enrolment applies and you must:
This applies even if the employee opts out later and missing the declaration deadline can trigger fines surprisingly quickly.
Payroll software usually integrates with pension providers, but it still needs to be configured correctly.
Simply put, every pay period, you must:
Every year, you must:
If anything changes mid-year, (like salary increases, bonuses, or statutory sick pay) payroll needs to be adjusted immediately and correctly.
For many small businesses, especially at the first hire stage, outsourcing makes financial and practical sense.
To pick a good payroll provider, make sure they:
If you are searching for dependable payroll expert in Manchester, please do consider FFT because we do all of the above as well as offer advice based on your specific situation and circumstances.
Our advice is to treat payroll as a specialist function whether you manage it in-house or use a payroll expert in Manchester like FFT.
Regardless, make sure it is set up correctly, reviewed regularly, and handled by someone who understands the detail.
Getting it right early saves a huge amount of pain later – trust me!
Want to talk payroll with us? Click here to get in touch.
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