Set yourself up as an employer

Paying your employee for the first time

On payday
You must, by law, give employees an itemised pay statement when you pay them.

This has to include, as a minimum, the employee's gross pay, ie before deductions, the income tax deducted, the employee's National Insurance Contributions (NICs)deducted, and the resulting net pay.

What next?
You'll have to pay deducted tax and NICs, as well as the employer's NICs, to HM Revenue & Customs. The Accounts Office will send you a payslip booklet for this purpose.

These payments normally have to be made every month. However, you can pay every three months if your total tax and National Insurance bill is below a certain amount - you'll find the details in HM Revenue & Customs quarterly payment option form. Download the quarterly payment option form from the HM Revenue & Customs website (PDF), which is also in your starter pack.

What about expenses?
If you've paid any expenses to your employee - for example, for travel - or if you're providing any extras like a car or health insurance, these are treated separately.

You will need to tell your tax office when you first provide an employee with a car, and where appropriate fuel, as they may need to send both you and your employee a new tax coding. Call HM Revenue & Customs New Employers Helpline on Tel 0845 60 70 143 for advice. You will also need to make an annual return of any expenses and benefits paid after the end of a tax year.

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