Hiring your first employee: what you legally have to get right
Your first hire is a milestone and a liability in equal measure. Get a few things right at the start and it's straightforward. Get them wrong and you'll be unpicking it at a tribunal.
By Robert Festenstein, Head of Legal
Updated 1 July 2026
7 min read
The short version
- Sort out employment status first — employee, worker or self-employed changes everything.
- Employees and workers are entitled to a written statement of main terms on or before day one.
- You'll need PAYE, the right to work checks, employers' liability insurance and a pension you auto-enrol them into.
- A proper contract does far more than the legal minimum — it protects your clients, your IP and your confidential information.
First, are they even an employee?
Before anything else, be clear what you're actually creating, because "employee," "worker" and "self-employed contractor" are three different legal animals with three different sets of rights and costs. Calling someone self-employed to save on tax and holiday pay doesn't make them self-employed — the law looks at the reality, not the label on the contract, and getting it wrong is one of the most common and expensive mistakes small employers make. If you control how, when and where they work, and they can't send someone else in their place, you're very likely looking at an employee whatever the paperwork says.
What the law wants from day one
Take on an employee and a handful of obligations land immediately:
- A written statement of the main terms of employment, given on or before their first day (this is a legal requirement, not a nicety).
- Right to work checks — confirming they're legally allowed to work in the UK, before they start.
- PAYE registration with HMRC so you can handle tax and National Insurance.
- Employers' liability insurance — legally required as soon as you have staff.
- A workplace pension — you'll usually have to automatically enrol them and contribute.
Want this looked at for your situation?
Book a no-obligation conversation with one of our solicitors.
The contract that does the real work
The written statement is the floor. A proper employment contract is where you actually protect the business — and it's far easier to put these in before someone starts than to impose them later. The clauses that earn their place: notice periods, confidentiality, ownership of anything they create, and — where it matters — sensible restrictive covenants so they can't walk out and take your clients and staff with them. A contract that covers these quietly prevents most of the problems that otherwise turn up eighteen months later.
The bits people forget
A few things catch new employers out. You need clear positions on holiday, sickness and probation. You should have a basic disciplinary and grievance procedure from the start, because you'll be glad of it the first time something goes wrong. And remember the golden rule of UK employment law: it's usually not what you decide that lands you in trouble, it's how — so build the habit of following a fair process from your very first hire.
Frequently asked questions
Do I have to give my first employee a written contract?
You must give them a written statement of the main terms on or before their first day — that's a legal requirement. In practice a full contract does much more, covering notice, confidentiality, IP and restrictions, so it's well worth having a proper one rather than the bare minimum.
Can I just take someone on as self-employed to keep it simple?
Only if they genuinely are self-employed — and the law decides that on the reality of the arrangement, not the label. If you control how and when they work and they can't send a substitute, they're probably an employee or worker, and mislabelling them can lead to claims for unpaid holiday, backdated tax and more.
What insurance do I need when I take on staff?
Employers' liability insurance is legally required as soon as you have employees, with limited exceptions. It covers you if a member of staff is injured or becomes ill because of their work. You may need other cover too depending on what your business does.
Sources & further reading
This article is general information, not legal advice. The law changes and depends on your circumstances — always take advice on your specific situation before acting. Last reviewed 1 July 2026. Buzz Solicitors is a trading name of AD Solicitors Limited, a recognised body regulated by the SRA (no. 8011228).
A solicitor with more than two decades' experience in commercial law, dispute resolution, insolvency and judicial review. Robert acts for businesses, directors and individuals on the matters that carry real consequence — and leads Buzz Solicitors.
Practical law, direct to your inbox.
One useful email a month on commercial, property and private-client law for business owners — no jargon, no spam, unsubscribe anytime.
By subscribing you agree to our privacy notice.