Set yourself up as an employer

Arranging payment for your new employee

When preparing for payday - at least a week before - make sure you've done the following:

• Dealt with your new employee's P45 or - if a P45 isn't available - prepared a P46.
• Thought about choosing a payroll system - are you going to run a manual payroll, use a software package, or have the work done by a payroll service? See the page in this guide on choosing a payroll system.
• Recorded your new employee's details on a P11 for a manual payroll, or on the computer if you're using payroll software.

Calculating deductions
Before you pay your employee, there are usually three figures to be calculated:

• the tax to be deducted
• the employee's National Insurance contributions (NICs) to be deducted
• the employer's NICs that your business has to pay

There may be other figures to calculate if HM Revenue & Customs tells you that you should make deductions from your employee's earnings in repayment of a student loan, pay Working Tax Credits or you are making payments of Statutory Sick, Maternity, Paternity or Adoption Pay.

If you're running payroll software, this will do the calculations for you. However, if you're doing the calculations yourself, it's obviously important to get these figures right, so use the help that is available from a range of sources:

• call the HM Revenue & Customs New Employers Helpline on Tel 0845 60 70 143
• download the help book on paying someone for the first time from the HM Revenue & Customs website (PDF) (a copy is also in your starter pack)
• see our guides on PAYE: the basics and National Insurance: the basics

You must keep a record of all payments and deductions.

Subjects covered in this guide

• Introduction
• Who counts as an "employee"?
• First steps in taking on a new employee
• The New Employer's Starter Pack
• Dealing with a new employee's P45
• What if my new employee doesn't have a P45?
• When a new employee doesn't have or know their NI number
• Choosing a payroll system
• Operating the payroll manually
• Using payroll software
• Arranging payment for your new employee
• Paying your employee for the first time