The BIG Guide to Employing Staff

Hiring someone is a big moment.

Usually it means one of two things:

• the business is growing, which is great

• you are absolutely snowed under, which is less great

For most Gold Stag clients, employing staff does not mean building a giant team with an HR department and matching lanyards.

It usually means:

• hiring your first employee

• employing your spouse or partner

• paying a family member who genuinely helps out

• taking on one part-time person

• bringing in an apprentice

• or finally admitting that doing absolutely everything yourself is no longer realistic

This guide is for small businesses, freelancers and family-run companies. No corporate waffle. Just the bits that actually matter.

Step 1: before you pay anyone, get set up properly

Before the first payday, you will normally need to register as an employer with HMRC and set up payroll through PAYE.

Payroll is how wages, tax and National Insurance get reported to HMRC each pay run.

That usually means:

• registering as an employer

• setting up payroll software or using a payroll provider

• reporting pay on or before payday

• keeping payroll records up to date

You will usually also need Employers’ Liability insurance as soon as you become an employer, unless a specific exemption applies. And if your staff meet the rules for workplace pensions, auto-enrolment duties can apply too.

If we run payroll for you, we also need your payroll information in good time. That means hours worked, overtime, bonuses, new starters and leavers sent over before payroll is due.

If that arrives late, payroll can be late.

Nobody enjoys that.

The first big misconception: “It’ll cost a fortune to employ someone”

A lot of freelancers assume hiring staff is financially impossible.

Sometimes it is not the right time. Fair enough.

But people often overestimate the cost because they focus only on the wage and forget the tax treatment and available reliefs.

Wages are normally a deductible business cost, so they reduce taxable profit. Employer National Insurance and employer pension contributions are normally deductible too.

For 2026/27, employer NIC is generally 15% above the secondary threshold, which is:

• £96 per week

• £417 per month

• £5,000 per year

There is also Employment Allowance, which can reduce eligible employers’ Class 1 NIC bill by up to £10,500 a year.

That can make a noticeable difference for small employers.

But there is an important catch: not everyone qualifies. For example, many single-director companies cannot claim it if the director is the only employee paid above the secondary threshold.

So no, employing someone is not free.

But it is not always the financial horror story people imagine either.

2026/27 key rates you actually need

From 1 April 2026, the National Minimum Wage and National Living Wage rates are:

• age 21 and over: £12.71 per hour

• age 18 to 20: £10.85 per hour

• under 18: £8.00 per hour

• apprentices under 19: £8.00 per hour

• apprentices aged 19 or over in the first year of their apprenticeship: £8.00 per hour

For 2026/27, the main payroll thresholds include:

• Lower Earnings Limit: £129 per week / £559 per month / £6,708 per year

• employee Primary Threshold: £242 per week / £1,048 per month / £12,570 per year

• employer Secondary Threshold: £96 per week / £417 per month / £5,000 per year

• Upper Earnings Limit: £967 per week / £4,189 per month / £50,270 per year

Employee NIC is generally 8% between the primary threshold and upper earnings limit, then 2% above that.

Employer NIC is generally 15% above the secondary threshold.

That employer rate and lower secondary threshold are a big part of why some small businesses feel employing staff has become tighter on cashflow.

Full-time vs part-time: what actually changes?

Legally, part-time staff are still staff.

They can still have rights around:

• minimum wage

• holiday pay

• sick pay, if eligible

• workplace pensions, depending on age and earnings

The main differences are usually practical, not magical.

A part-time employee has lower gross wages, and holiday entitlement is usually worked out on a pro-rata basis. Most workers are entitled to 5.6 weeks’ paid holiday a year. Someone working five days a week will usually get 28 days. A part-time worker gets the equivalent based on the days or hours they work.

From a tax and payroll point of view, part-time staff can still trigger payroll, pension and compliance obligations.

So “they only do a few hours” does not mean “none of the rules apply”.

Sick pay: this is the bit small employers are rightly watching

This is a big one.

From 6 April 2026, Statutory Sick Pay changes so that:

• there is no lower earnings threshold for eligibility

• there are no waiting days

• SSP starts from the first full day of sickness absence

• the rate is £123.25 per week or 80% of average weekly earnings, whichever is lower

For larger employers, this may be manageable.

For freelancers and small businesses with one or two members of staff, it can be more of a hit. If wages are already tight, extra sick pay from day one can make planning harder.

That does not mean you get to ignore it.

It just means it is another reason to cost hires properly before jumping in.

Holiday pay, minimum wage and the basics still matter

Most workers are entitled to 5.6 weeks’ paid holiday a year.

And minimum wage is not optional just because the person is family, “only helping out”, or happy to be paid less.

In most normal business situations, if someone is genuinely working for the business, you need to take minimum wage rules seriously.

There are some narrow exceptions around family members living in the family home and helping in a family business, and there are separate rules for younger children and local child-employment permits. So this is an area where assumptions can go wrong very quickly.

HMRC does not care that somebody “was fine with it” if the rules say otherwise.

Employing your spouse or partner

This is very common.

Sometimes a spouse becomes:

• a director

• a shareholder

• an employee on payroll

• or some mix of the above

Sometimes they simply do admin, bookkeeping, chasing invoices, customer calls or general support in the business and are paid a salary.

That can all be perfectly fine.

But the right route depends on:

• what work they actually do

• whether the business is a sole trade or limited company

• the overall household tax position

• whether you want ownership rights involved, or just wages

So yes, some spouses go down as directors.

Others absolutely should not.

Some are just employees.

It depends on the circumstances, not on what somebody’s brother-in-law did in 2019.

The important point is that the pay needs to reflect real work, and the payroll side needs to be done properly.

Paying children: the TikTok advice is a car crash

There is a lot of nonsense online about paying your children through the business.

Here is the boring grown-up answer:

You can only pay your child if they genuinely work for the business and the pay is reasonable for the work done.

If they genuinely do age-appropriate work such as:

• packing orders

• simple admin

• filing

• basic social media tasks

• helping at events

• stock organisation

there may be a legitimate payroll position.

But if the child is under 18, especially under 16, there can be additional child-employment rules, restrictions on hours and, in some areas, local permit requirements. Once someone reaches 16, PAYE may be needed. Once they reach 18, normal adult employment rules apply.

If they do not actually work, and you are just paying them to move income around and save tax, that is not clever planning. That is a problem waiting to happen.

So no, paying your child £12,000 a year to “be inspirational” is not a strategy.

It is just a future headache in fancy dress.

Apprentices: often a good option for small businesses

Apprentices can work really well for small businesses that need help and are happy to train someone up.

For 2026/27, the apprentice minimum wage is £8.00 per hour if the apprentice is:

• under 19

• or aged 19 or over and in the first year of the apprenticeship

Once an apprentice is aged 19 or over and has completed the first year, they are entitled to the minimum wage for their age band.

There can also be an NIC advantage here. For apprentices under 25, employers can pay 0% employer NIC on earnings up to the apprentice upper secondary threshold, which is £967 per week / £50,270 per year for 2026/27. Above that, normal employer NIC rules apply.

Most small clients will not need to worry about the Apprenticeship Levy, because that only starts to bite where the annual pay bill is over £3 million. The levy is 0.5%, with a £15,000 allowance. For most freelancers, this is firmly in the “not your problem yet” category.

Staff training and employees studying part-time

If an employee is studying part-time and the training is genuinely related to their job or will benefit the business, the employer can choose to pay all or part of the cost.

There is a useful tax point here too.

Work-related training paid for or reimbursed by the employer is generally exempt from tax and National Insurance. That can include related costs such as books, travel and subsistence where the training is genuinely work-related.

So if you pay for a member of staff to do training that helps them do their role better, that is often a perfectly sensible business cost.

That is very different from trying to make the business pay for some random course with no real link to the job because “education is good for everyone”.

Statutory pay: what you can reclaim

If you have employees on maternity, paternity, adoption, shared parental, parental bereavement or neonatal care pay, you can usually recover 92% of those statutory payments from HMRC.

If your total Class 1 NIC for the previous tax year was £45,000 or less, you can usually recover 109%.

For 2026/27, the weekly rate for SMP after the first 6 weeks, and for SPP, SAP, ShPP, SPBP and SNCP, is £194.32 or 90% of average weekly earnings, whichever is lower.

This matters because a lot of small employers assume they have to carry the whole cost themselves.

Often they do not.

Benefits, perks and the admin bit

If you start giving benefits like medical insurance or other perks, do not just make them up as you go along.

For 2026/27, taxable benefits can still be reported either through payroll or at the end of the tax year, and Class 1A NIC on benefits is 15%.

So the old “we’ll sort it out later” approach is still a terrible plan.

Also worth knowing: mandatory payrolling of most benefits has been pushed back to April 2027, so 2026/27 is still a transition period rather than a done deal.

Boring, yes.

Still important, also yes.

What about firing someone?

Eventually, some employers will have to deal with this.

Dismissal has to be handled fairly.

What matters is both:

• the reason for dismissal

• how you deal with the process

In England, Scotland and Wales, employers should follow a fair procedure in line with the Acas Code where discipline or grievance issues are involved. In Northern Ireland, the Labour Relations Agency Code can be taken into account.

If the issue is redundancy, it has to be genuine. Employees may have rights to notice, consultation, redundancy pay and time off to look for a new job, depending on the circumstances.

For small businesses, this is one of those moments where “I’ll just wing it” is usually a dreadful strategy.

Gold Stag reality check: what we need from you

If we run payroll for you, the setup only works if you meet us halfway.

That means:

• send employee hours on time

• tell us about pay rises, bonuses, starters and leavers promptly

• keep us updated if someone is off sick, on leave or changing role

• read the payroll reminder emails

• and sometimes just touch base before something becomes a problem

We can run payroll.

We cannot telepathically guess that your part-time employee did 23.5 hours last week and is also starting a college course next month.

The simple version

For most small businesses, employing staff usually means keeping an eye on five things:

• what are you actually paying them?

• what payroll and NIC sits on top?

• what rights do they have?

• what can you claim or recover?

• are they genuinely doing the work you say they are?

If you get those right, most of the rest becomes manageable.

Final thought

Hiring staff is a big step, but it is not something only huge businesses can do.

A lot of freelancers and family businesses start with:

• one part-time person

• a spouse helping properly in the business

• an apprentice

• or a family member doing genuine work

The key is to do it properly.

Pay real wages for real work. Use payroll. Keep records straight. Do not believe every TikTok tax hack. And do not wait until something goes wrong to ask how it should have been done.