Hiring your first employee in the UK is an exciting milestone for any international founder. It’s a clear sign that your idea is gaining traction, your business is maturing and you’re stepping into the role of a true employer. But here’s what many international founders don’t realise: in the UK, employees have legal rights from day one, and you don’t have the control you might expect.
UK employment law is strict, with mandatory obligations around payroll, pensions, contracts and dismissal procedures. Understanding these legal requirements isn’t optional - get it wrong and you could face tribunals, penalties and serious financial consequences.
This article is designed to give international innovators a clear, practical overview of what it really takes to hire your first UK employee. From legal compliance to payroll, probation and team culture, it covers the essentials you need to get right when building your first UK-based team.
Legal requirements you must understand: UK employment law and employee rights
Before you even advertise a role, it’s important to understand the direction of UK employment law. The Employment Rights Bill passed in December 2025 introduced wide-ranging reforms that will roll out across 2026 and 2027. These changes significantly strengthen employee protections and reduce the margin for error for new employers.
One of the most important shifts is the expansion of day-one rights. From April 2026, paternity leave and ordinary parental leave will be available from the first day of employment, and statutory sick pay will be payable from day one of absence with no lower earnings threshold. At the same time, the qualifying period for unfair dismissal protection will reduce.
From January 2027, employees will gain protection after six months rather than two years. While the government has stopped short of introducing full day-one unfair dismissal rights, a statutory probation period with lighter-touch procedures is expected, although the final details are still subject to consultation.
The timeframe for bringing employment tribunal claims is also changing, with most claims extending from three months to six months after the issue arises. Taken together, these reforms mean that careful hiring decisions, structured onboarding and well-managed probation periods are no longer optional. The old assumption that employers had two years of flexibility has effectively disappeared, and fair processes now need to be in place from the very beginning.
Mandatory legal setup: What you must do before you hire
Once you’re confident about the legal landscape, the mandatory setup begins. This is a legal requirement: any business paying an employee £96 or more per week must register as an employer with HMRC and operate PAYE. This threshold was lowered in April 2025, bringing many early-stage companies into the system sooner than expected.
Registration must happen before your first payday and can only be completed up to two months in advance, so timing matters. HMRC will issue an employer PAYE reference and an accounts office reference, both of which you’ll need for payroll reporting and payments.
Payroll is an area where many international founders choose to invest early. You can manage payroll yourself using HMRC’s free Basic PAYE Tools, but this places the administrative burden entirely on you. Commercial payroll software such as Xero, QuickBooks or BrightPay automates calculations, generates payslips and often integrates pensions. Alternatively, you can outsource payroll to an accountant or payroll bureau, which is more expensive but removes risk and saves time. For a first hire, professional software or external support is usually a worthwhile investment.
Legal requirement: Workplace pensions and auto-enrolment
Alongside payroll, every UK employer must comply with workplace pension auto-enrolment. If your employee earns £10,000 or more per year, is aged between 22 and state pension age and works in the UK, you must automatically enrol them into a qualifying pension scheme. You are required to contribute at least three percent of qualifying earnings, with the employee contributing five percent. Setting this up before your employee starts avoids unnecessary complications later.
Legal requirement: Employers’ liability insurance
You’ll also need employers’ liability insurance in place from day one. This is a legal requirement and must provide cover of at least £5 million, although most policies offer £10 million as standard. For tech and office-based businesses the cost is usually modest, but it’s essential protection should an employee be injured or become ill as a result of their work.
Getting the employment contract right
The employment contract is the foundation of your relationship with your first hire. Are you aware there are several different types of employment contract? Choosing the right one is a legal requirement.
The main types include permanent contracts, fixed-term contracts, zero-hours contracts and part-time contracts. Each has different legal implications for both you and your employee. UK law requires you to provide a written statement of employment particulars from day one, setting out key terms such as job role, salary, hours, holiday entitlement, notice periods, probation, pension arrangements and place of work.
Beyond the statutory minimum, well-drafted contracts usually include confidentiality provisions, intellectual property assignment, probation review processes, expenses policies and any flexible working arrangements. For international founders, especially those operating across borders or developing proprietary technology, legal advice is strongly recommended. Generic templates rarely provide sufficient protection or clarity.
Using probation periods effectively
Probation periods are not legally required, but they are widely used and strongly encouraged by ACAS. Most UK employers opt for a six-month probation, particularly for professional roles, as this allows enough time to properly assess performance and cultural fit. Shorter probation periods can work for junior or administrative roles, while longer periods are typically reserved for very senior or highly specialised positions. With upcoming reforms, the government is proposing a maximum probation length of nine months from 2026, making clarity from the outset even more important.
A well-written probation clause should clearly set out the length of the probation, whether it can be extended, how performance will be reviewed, what standards are expected and what notice applies during this period. Managing probation properly means structured onboarding in the first week, regular check-ins throughout and clear documentation of progress, feedback and any concerns. If issues arise, they should be addressed early and formally, even during probation. While dismissal procedures are lighter at this stage, decisions must still be fair and never discriminatory or automatically unfair.
Running your first payroll
Running payroll smoothly depends on good preparation. Before the first payday, you’ll need to collect key information from your employee, including their National Insurance number, bank details, right to work documentation and either a P45 or new starter declaration.
Each pay cycle involves calculating gross pay, applying tax, National Insurance and pension deductions, submitting a full payment submission to HMRC on or before payday and paying HMRC by the following month’s deadline. From April 2025, employer National Insurance increased to fifteen percent, but the expanded Employment Allowance means many small employers will not actually pay employer NI at all.
At the end of each tax year, you’ll also need to issue P60s to employees and submit any required P11Ds for benefits or expenses not processed through payroll. These obligations are routine, but they must be met consistently to avoid penalties.
Building company culture from day one
Beyond compliance, your first hire plays a defining role in shaping your company culture. UK workplace norms tend to favour polite, indirect communication, flatter hierarchies and clearer work-life boundaries than in some other markets. Feedback is often delivered subtly, so creating a culture where open, constructive conversations are encouraged is especially valuable.
Strong cultures are built intentionally from day one. This means being clear about your values, holding regular one-to-one meetings, explaining decisions transparently and recognising contributions openly. Psychological safety is particularly important in small teams. When founders model honesty, curiosity and accountability, employees feel able to speak up, ask questions and learn from mistakes.
Flexible working is another area where early-stage companies can stand out. Employees in the UK can request flexible working from their first day, and employers must handle requests reasonably. For international founders competing for talent, genuine flexibility can be a powerful differentiator, provided expectations around communication, collaboration and availability are clearly defined.
Common mistakes first-time employers make
Many first-time employers make avoidable mistakes. Relying too heavily on unmodified contract templates, setting vague objectives, skipping structured onboarding or letting probation periods drift without review can all create problems later. Misclassifying employees as contractors is particularly risky and can lead to serious tax and legal consequences. Investing early in professional advice and support often costs far less than fixing mistakes down the line.
Looking ahead
Hiring your first UK employee is complex, but it becomes easier once the right systems are in place. The processes you establish now will form the blueprint for future growth. Employment law will continue to evolve over the next few years, so staying informed and seeking advice when needed is essential.
Most importantly, treat your first hire as the foundation of your future team. When you approach this step with care, clarity and respect, you don’t just stay compliant. You create a business that people genuinely want to be part of, and that’s one of the strongest advantages a growing company can have.
Need expert guidance?
Employment law is complex and the stakes are high. If you have questions or are unsure about any aspect of hiring employees in the UK from contracts and employee rights to payroll and dismissal procedures, you don’t have to go it alone. Book an expert session with an Innovator International HR specialist who understands the unique challenges international founders face.
Karen is a highly qualified HR professional with 30 years experience who will be able to guide you with your decisions, signpost where to get more information or provide options for your recruitment challenges
👉 Book your expert session here
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