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From 6 January 2024, the main rate of class 1 National Insurance contributions (NIC) deducted from employees’ wages is reduced from 12% to 10%. From 6 April 2024, the main rate of self-employed class 4 NIC will reduce from 9% to 8% and class 2 NIC will no longer be due. Those with profits below £6,725 a year can continue to pay class 2 NIC to keep their entitlement to certain state benefits. Our guidance will be updated in full in spring 2024.

Updated on 6 April 2023

Taking on an employee: an introduction

Once you have made the decision that taking someone on is the next step for you or your business, there are some important issues that you must think about. Our guidance will help you understand whether you are an employer, and if so, what you have to do.

Content on this page:

Where to start

Whether you are a busy family taking on a nanny or a successful trader taking on a labourer, the thought of becoming an employer might be daunting. This section is dedicated to providing information and guidance about key areas that you need to consider, to ensure that you meet your responsibilities and obligations as someone’s employer.

First you need to check that you will definitely be an employer. This will be the case if your worker is classed as an employee for tax purposes and not self-employed. We explain more about this on our tax status page.

As a first-time employer, one of the main things you probably need to do is register with HMRC so that a Pay As You Earn (PAYE) system can be set up. The main purpose of the PAYE system is for employers to collect tax and National Insurance (NIC) from their employees’ wages on behalf of HMRC and this is done as part of running a 'payroll’. We explain more in setting things up.

What’s involved in being an employer

In this section, you will find more information about:

How the PAYE system works: including a look at the employment allowance and tax codes

Taking on a new employee: gathering the information you need to set someone up on your payroll

Real Time Information: information on the Real Time Information (RTI) reporting system when filing online and also in relation to the limited circumstances in which you can file on paper

Pay and deductions: what counts as pay and what deductions you can make, including your minimum wage and auto enrolment pension obligations

Ongoing payroll tasks: as well as running your payroll and submitting RTI information to HMRC, you need to pay your employee and give them a payslip, and pay HMRC regularly.

End of year processes: how to finalise your payroll each year and report any benefits and expenses you provide

Employee leaving: what to do if your employee leaves your employment

Employment law: if you are taking someone on, you need to be aware of your employment law responsibilities

Keeping records: one of the most important aspects of being an employer

Dealing with PAYE errors: including correcting payroll errors and what happens if you treat your employee as self-employed incorrectly

Guidance for specific situations

If you are considering offering a person work experience or someone is volunteering for you or your organisation, then there is some guidance on our Payments to volunteers page on how to deal with any payments you make them from a PAYE perspective (for example, for expenses).

If you used the Coronavirus Job Retention Scheme to help pay your staff during the pandemic, then you can find some information about the scheme on our dedicated page. This scheme closed on 30 September 2021. However, this page can be used as reference information for any employers needing or wanting to check their claims.

If you are considering employing a disabled person for their abilities, skills or experience, we look at the support, tax related and otherwise that employers can access on our employing a disabled person page.

As an employer, you may wonder if you need to worry about tax credits or universal credit (UC). The answer is ‘yes, probably’ and as such, we have some guidance that explains the main things you need to know about employees’ welfare benefits.

Finally, we offer some specific pointers for anyone considering taking on a personal assistant (and so who may become an employer), in our Independent Living pages.

More information

There is lots of help available for new employers which we summarise on our getting more help page.

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