The new-employee starter checklist for small employers


Hiring your first employee is a milestone, but it also switches on a set of payroll duties that catch many small employers out. Get the starter process right on day one and the monthly payroll runs smoothly. Run through this checklist for every new starter.

Collect the right details before the first payday

You need certain information before you can pay someone correctly. Ask the new employee for their full name, date of birth, home address, national insurance number, employment start date, and details of any student loan. You also need to know whether they have another job or receive a pension, because that changes which tax code applies.

The cleanest route is the P45. If the employee has one from their previous job, it gives you their tax code, their pay and tax to date in the tax year, and their leaving date. If there is no P45, and this is common with first jobs, returning workers and overseas hires, ask the employee to complete HMRC's new employee starter checklist. It asks a short set of questions that determine which tax code statement applies. Keep a copy of whichever document you used. Small employers who hand payroll to payroll outsourcing services usually find the starter paperwork is handled as part of the setup, which removes the most common source of first-pay errors.

Understand emergency tax codes

If you do not have the right tax code from a P45 or from HMRC, you must use an emergency code. These codes deduct tax on a non-cumulative basis, meaning each pay period is treated in isolation, and they often take too much tax. The common ones are 1257L W1 or M1, which gives the personal allowance on a week-one or month-one basis; BR, which taxes everything at 20 per cent with no personal allowance; and 0T, which gives no personal allowance and taxes at the basic, higher and additional rates as income rises.

Emergency codes are a holding position, not a solution. HMRC will usually send the correct code to your payroll software automatically once the starter is reported, and any overpaid tax is refunded through the payroll.

Student and postgraduate loan deductions

The starter checklist also asks about student loans, and you must act on the answer. For 2026/27 the repayment thresholds are 26,900 pounds a year for Plan 1, 29,385 for Plan 2, 33,795 for Plan 4, 25,000 for Plan 5 and 21,000 for postgraduate loans. You deduct 9 per cent of earnings above the threshold for undergraduate plans and 6 per cent for postgraduate loans, and both can apply at the same time. Never guess the plan type. Use the starter checklist answer or the start notice HMRC sends you, and apply the deduction from the first pay period it applies to.

Do not forget pension auto-enrolment

Your pension duties start the moment the employee starts work. Assess every new starter on day one. Workers aged between 22 and state pension age who earn over 10,000 pounds a year are eligible jobholders and must be enrolled into a qualifying workplace pension. You can postpone assessment for up to three months if you choose, but you must tell the worker about the postponement in writing, and postponement does not remove the duty.

Once enrolled, minimum contributions apply to qualifying earnings, which for 2026/27 means earnings between 6,240 and 50,270 pounds. The total minimum is 8 per cent, with the employer paying at least 3 per cent. The worker can opt out after enrolment, but you must not encourage them to. Keep records of every assessment, enrolment and opt-out for six years.

Complete the right-to-work check

Before the employee's first day, you must check they have the legal right to work in the UK. For most British and Irish citizens this means checking an original document such as a passport or birth certificate with proof of national insurance, or using the online employer checking service for those with digital immigration status. Do the check before employment begins, keep a clear copy of the documents, and record the date of the check.

Set them up in payroll and report on time

Enter the starter into your payroll software with the correct start date, tax code basis and student loan plan. Run the numbers and check them against the offer letter before the first pay run: gross pay, tax, national insurance, student loan and pension deductions should all look sensible. Then file your Full Payment Submission to HMRC on or before each payday.

Pay the PAYE bill by the deadline

After payday, pay what you owe HMRC: income tax, employer and employee national insurance, and student loan deductions, minus any statutory payments you are reclaiming. The payment is due by the 22nd of the following month if you pay electronically. Put that date in the diary alongside the RTI deadlines, and reconcile the amount to your payroll reports before you pay. A starter done properly on day one makes every payday after it straightforward, and if the whole routine feels like a lot for a small team, that is exactly what accounting outsourcing services exist to take off your plate.


 

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