Employing Your First Member of Staff in Cardiff: A Payroll Checklist

Taking on your first employee is a big step for any Cardiff business. There are legal and payroll jobs to do, several before the first payday. This checklist takes them in a sensible order, with the 2026/27 figures you need. Start by confirming the role really is employment rather than self-employment, because that decides whether PAYE applies.

In short: before your first payday you need to check your new employee’s right to work, register with HMRC as an employer, take out Employers’ Liability insurance and pay at least the minimum wage. After that you run PAYE every payday, put eligible staff into a workplace pension and keep payroll records for 3 years. Staff whose main home is in Wales get a tax code starting with C.

1. Check their right to work in the UK

You must check that a job applicant is allowed to work for you in the UK before you employ them, and you must not discriminate against anyone because of where they are from.

• You can check online if the applicant gives you a share code (British and Irish citizens cannot get one).
• Otherwise you check their original documents, such as a passport, or use an identity service provider that offers identity document validation technology.
• Keep copies of the check for the whole of their employment and for 2 years after they leave.

The civil penalty for employing an illegal worker without a correct check is up to £60,000 per worker.

2. Register as an employer with HMRC

You must register as an employer with HMRC before your first payday so that you get your employer PAYE reference number, which HMRC sends by letter. You cannot register more than 2 months before you start paying people, so time it around your planned start date.

3. Get Employers’ Liability insurance

You need Employers’ Liability insurance as soon as you become an employer. The cover must be for at least £5 million and come from an authorised insurer. You can be fined £2,500 for every day you are not properly insured. There are limited exemptions, for example if the only person you employ is a close family member, so check the GOV.UK guidance before assuming one applies to you.

4. Pay at least the minimum wage

From April 2026 the hourly rates are:

• National Living Wage (21 and over): £12.71
• 18 to 20: £10.85
• Under 18: £8.00
• Apprentice rate: £8.00

5. Set up PAYE and Real Time Information (RTI)

Once registered, you run payroll every time you pay your employee:

• Tax code: work out the new starter’s code from their P45. If they do not have one, collect their starter information instead; an emergency code (1257L W1, 1257L M1 or 1257L X for 2026/27) may apply. 1257L is the code used for most people with one job, reflecting the £12,570 Personal Allowance.
• Full Payment Submission (FPS): send it to HMRC on or before each payday, reporting pay and deductions. The new starter’s tax code and starter declaration go on the FPS on or before their first payday.
• Employer Payment Summary (EPS): send it by the 19th of the following tax month when you need to claim a reduction in what you owe, such as statutory pay.
• Paying HMRC: payment is due by the 22nd of the next tax month if you pay monthly (cheques by post must arrive by the 19th). If you pay HMRC quarterly, payment is due by the 22nd after the end of each quarter.
• Payslips: must be given on or before payday, showing pay before and after deductions, and hours worked if pay varies with time worked.

For 2026/27, employer’s National Insurance is 15% on earnings above the secondary threshold of £5,000 a year (£96 a week, £417 a month). Employee National Insurance starts at the primary threshold of £12,570 a year. Many employers can reduce this through the Employment Allowance, which is £10,500 for 2026/27, although a company with one director cannot claim if that director is the only employee liable for employer’s National Insurance.

The Welsh rate of income tax

For payroll in Wales, the main difference is that employees whose main home is in Wales pay the Welsh rates of income tax, and HMRC issues them a tax code starting with C, such as C1257L. It depends on where the employee lives, not where your business is. For 2026/27 the Welsh rates are 20%, 40% and 45%, the same overall rates as in England and Northern Ireland.

6. Workplace pension automatic enrolment

Your pension duties begin on the day your first member of staff starts work (your duties start date), even if you think nobody will need to join a scheme.

• Staff aged 22 up to State Pension age who earn over £10,000 a year (£833 a month, £192 a week) must be put into a qualifying workplace pension.
• Other staff only need to be put into a scheme if they ask, but you will still need to write to your staff about how automatic enrolment applies to them.
• The minimum total contribution is 8% of earnings within a set band, which is £6,240 to £50,270 for 2026/27. You must pay at least 3% of that as the employer.
• You must complete your declaration of compliance with The Pensions Regulator within 5 months after your duties start date. You may be fined if it is late or wrong.

7. Keep proper payroll records

Keep payroll records for 3 years from the end of the tax year they relate to, including pay and deductions, reports and payments to HMRC, leave and sickness absence, and tax code notices. If records are incomplete, HMRC can estimate what you owe and charge a penalty of up to £3,000.

8. Plan for the tax year end

The tax year ends on 5 April. Your final FPS of the year goes on or before the last payday, and every employee working for you on 5 April must receive a P60 by 31 May. When an employee leaves, they get a P45.

Frequently asked questions

Want help with your first payroll?

Payroll Service (UK) Ltd is a Cardiff payroll bureau, established in 2011. We can set up and run your payroll from the first payday, including RTI submissions, payslips and automatic enrolment, so you can concentrate on your new employee and your business.

Ask for a free quote or call us on 0800 092 6505.

Sources

• Check a job applicant’s right to work (GOV.UK)
• Register as an employer (GOV.UK)
• Employers’ liability insurance (GOV.UK)
• National Minimum Wage and National Living Wage rates (GOV.UK)
• Rates and thresholds for employers 2026 to 2027 (GOV.UK)
• Welsh Income Tax (GOV.UK)
• PAYE for employers: keeping records (GOV.UK)
• Employing staff for the first time (The Pensions Regulator)

About the author: Jack Lloyd-Lewis is director of Payroll Service (UK) Ltd, a Cardiff payroll bureau established in 2011. The bureau runs weekly, fortnightly and monthly payrolls, pension auto-enrolment and CIS for UK employers, overseas companies with UK staff, and accountancy practices that outsource their clients’ payroll, using Sage 50 Payroll and BrightPay.