Hiring Your First Employee: How to Set Up Payroll and Keep HMRC Happy in London
- bes Accountancy Services
- Mar 30
- 8 min read
Hiring your first employee is a major milestone. It means your business is growing, your workload is increasing, and your reputation is strong enough to bring in more demand. For many small trade and construction businesses in London, that first hire is exciting, but it also introduces a new layer of responsibility.
If you are a plumber, electrician, carpenter, builder, or subcontractor who has built a business through specialist skill and hard work, payroll can feel like unfamiliar territory. You may know how to deliver excellent work on site, but tax codes, National Insurance, Real Time Information submissions, pensions, and CIS obligations can quickly become overwhelming. That is where the right support matters.
At Bes Accountancy, a leading London accounting company serving businesses across the UK, we help small and medium sized businesses put the right systems in place from the start. Our goal is simple, to help you pay your staff correctly, stay compliant with HMRC, and give you peace of mind as your team grows.
Need help now?
Call our director Besnik today: 07816264205
If you are new to payroll, you are not alone. Many business owners delay hiring because they are worried about getting it wrong. The good news is that payroll becomes far more manageable when it is set up properly from the beginning.
Why payroll matters the moment you hire your first employee
The moment you take on an employee, your responsibilities change. You are no longer just managing jobs, suppliers, and invoices. You are now responsible for ensuring someone is paid accurately and on time, while also meeting your legal duties as an employer.
Payroll is not just about transferring wages into a bank account. It involves recording employee details, calculating tax and National Insurance correctly, providing payslips, reporting payments to HMRC, and checking whether pension rules apply. If your business also operates in construction, you may need to think about how payroll and CIS for trades work alongside each other.
For a growing business, poor payroll processes can create unnecessary risk. Late submissions, incorrect deductions, or missing records can lead to penalties, confusion, and unhappy staff. Good payroll management for small businesses creates stability, supports cash flow planning, and builds trust with employees from day one.
As Besnik Vata, director of Bes Accountancy, a London based accounting company, explains, “The first employee often changes the structure of a business. When payroll is set up correctly from the beginning, business owners can grow with confidence instead of constantly worrying about HMRC deadlines and avoidable mistakes.”
Want to dive deeper into accounting for businesses?
Read our related blog, where we provide a full guide to submitting your File Your Tax Return Early.
Step one, register as an employer with HMRC
Before paying your first employee, you must register as an employer with HMRC. This is one of the first essential steps in new employee payroll setup. Once registered, you receive the references needed to operate PAYE properly.
Many new employers assume this can be done at the last minute. In reality, leaving it too late can delay payroll and create unnecessary stress. The earlier you prepare, the easier it becomes to onboard your first team member smoothly.
This is particularly important for businesses in construction and related trades, where growth can happen quickly. A sole trader or small contractor may suddenly need admin support, a labourer, or a junior tradesperson. Having your payroll system for startups ready in advance allows you to respond to opportunity instead of being slowed down by paperwork.
Step two, choose the right payroll software
Choosing suitable software is one of the smartest decisions you can make when it comes to payroll setup for new employees. Good systems reduce manual errors, help automate calculations, and keep your records organised.
At Bes Accountancy, we work with Xero and QuickBooks, helping clients move towards efficient digital accounting that supports long term growth. For a small business owner, this means clearer records, more reliable payroll processes, and less time spent trying to work everything out manually.
For many London businesses, payroll software becomes even more useful as the team grows. It can support regular pay runs, automatic calculations, payslip production, and clearer reporting. That makes it a strong foundation for small business payroll London operations.
You can also learn more about how we embrace cloud accounting here:
Step three, collect the right employee information
Before your first pay run, you need accurate employee details. This includes their full name, address, date of birth, National Insurance number, and bank account information. You also need the right starter information so the correct tax treatment can be applied.
A simple mistake here can create problems later. Incorrect data may affect tax codes, payment records, or HMRC reporting. That is why a careful, organised onboarding process is so important.
For busy trade business owners, this is often where professional support becomes valuable. Instead of trying to piece everything together after hours, you can rely on experienced accountants who know what is required and can explain it in straightforward language.
Step four, run PAYE correctly and on time
PAYE is the system used to deduct Income Tax and National Insurance contributions before wages are paid. It sounds technical, but the principle is simple. You need to make sure the right deductions are made, the employee receives a proper payslip, and HMRC is informed on time.
This is where many first time employers become anxious. They worry about deadlines, figures, and the risk of fines. That concern is understandable. Payroll compliance London businesses need is not just about getting through one month, it is about building a process you can repeat confidently.
With the right payroll system and professional oversight, tasks such as calculating deductions, generating payslips, and making HMRC payroll regulations work for your business become much less intimidating.
For official employer guidance, it is helpful to review HMRC’s payroll information on GOV.UK: PAYE and payroll for employers.
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Do not overlook pensions and workplace responsibilities
Hiring your first employee may also mean dealing with workplace pension obligations. Depending on the employee’s age and earnings, you may need to meet auto enrolment requirements.
This is an area where many small businesses are caught off guard. They focus on wages, but forget that payroll compliance also includes pension responsibilities. Missing these duties can create additional complications and unnecessary pressure.
A well structured payroll management process helps ensure that these obligations are reviewed at the right time, rather than being discovered after a deadline has passed.
Payroll and CIS, what growing trade businesses need to understand
If you run a construction business, payroll often overlaps with CIS responsibilities. Employees and subcontractors are treated differently, and getting that distinction wrong can create compliance problems.
This is why payroll for construction businesses needs a more tailored approach. A general understanding of payroll is not always enough. You need support from someone who understands how small trade businesses actually operate, how labour is structured, and how CIS registration payroll issues can affect your day to day admin.
At Bes Accountancy, we support businesses that need help navigating both payroll and wider accounting responsibilities. That includes bookkeeping, VAT, financial accounting, and account preparation for sole traders and partnerships, so your business finances stay joined up rather than fragmented.
Common payroll mistakes first time employers make
The most common payroll mistakes are rarely caused by carelessness. More often, they happen because a capable business owner is trying to handle too much without the right guidance.
Common issues include:
registering too late with HMRC
missing RTI submission deadlines
using the wrong tax code or National Insurance category
failing to issue proper payslips
misunderstanding the difference between employees and subcontractors
overlooking pension responsibilities
relying on manual processes that increase the risk of error
Each of these problems can affect employee confidence and business cash flow. More importantly, they can damage the peace of mind that every growing business owner needs.
Why London businesses choose Bes Accountancy
When you hire your first employee, you do not just need an accountant. You need a reliable partner who understands what growth looks like for small businesses, especially in trades and construction.
Bes Accountancy is a London based accounting company founded in 2020, serving clients across London and the wider UK. Led by Besnik Vata, a certified bookkeeper with an AAT licence, our team provides practical and cost effective support to businesses that want clarity, compliance, and confidence.
Our core values are availability, efficiency, and trust. That matters when you are running jobs, managing staff, chasing materials, and trying to keep the business moving. You need answers in plain English, responsive support, and systems that make life easier.
To explore more about Bes Accountancy, refer to our About Us page, Instagram page, Projects section, and other blog articles.
Speak to a qualified accountant for tailored advice.
Call for a free quote: 07816264205 | Email for a free quote: Info@bestax.co.uk
Final thoughts, set payroll up properly before it becomes a problem
Hiring your first employee should feel like progress, not pressure. With the right payroll setup, clear records, and expert guidance, you can grow your team without constantly worrying about compliance issues.
Whether you are taking on your first office assistant, first apprentice, or first site worker, a strong payroll process protects your business and supports your reputation. It helps you pay people on time, avoid unnecessary mistakes, and stay focused on the work that wins jobs and drives growth.
If you are looking for support with payroll management for small businesses, payroll compliance London, or CIS for trades, Bes Accountancy is here to help.
Frequently Asked Questions:
Do I need to register with HMRC before paying my first employee?
Yes. You must register as an employer with HMRC before running payroll. This gives you the references needed to operate PAYE correctly.
What is the easiest way to manage payroll for a small business?
For most small businesses, using compliant payroll software with professional support is the easiest option. It reduces errors, saves time, and helps ensure deadlines are met.
Is payroll different for construction businesses?
It can be. If your business uses subcontractors as well as employees, you may also need to manage CIS responsibilities. This is why payroll for construction businesses often needs specialist support.
What happens if I get payroll wrong?
Mistakes can lead to incorrect pay, unhappy staff, HMRC penalties, and extra admin. Getting the setup right from the beginning is the best way to reduce risk.
Can Bes Accountancy help with more than payroll?
Yes. Bes Accountancy also supports businesses with bookkeeping, VAT, financial accounting, account preparation, and digital systems such as Xero and QuickBooks.
About BES Accountancy
Founded in twenty twenty and based in London, BES Accountancy helps businesses and self employed professionals across the UK with bookkeeping, payroll, VAT, financial accounting, and accounts preparation for sole traders and partnerships. We work with Xero and QuickBooks and our values are availability, efficiency, trust.
Get a free quote by phone | Email Info@bestax.co.uk
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