Payroll For A Growing Team: When To Set It Up And What Employers Often Miss

Taking on your first member of staff is a big moment. It means your business is moving forward, and that is something to be proud of. But with that excitement comes a new set of responsibilities — and payroll is right at the top of the list.

Whether you are hiring your first employee or your fifth, getting payroll right from the start matters more than many business owners realise. Miss a step, and you could face HMRC penalties, pension issues, unhappy staff or a problem that takes far longer to fix later.

This guide walks you through when to set up payroll, what is involved, and the common mistakes that catch employers off guard.

When Should You Set Up Payroll?

The short answer is: before your first payday.

You need to register as an employer with HMRC before paying staff for the first time. You cannot usually register more than 2 months before you start paying people, so it is sensible to do this once your first payday is planned.

This can apply whether you are hiring someone full-time, part-time or casually. You may need to operate PAYE if you pay an employee £96 or more a week in the 2026/27 tax year, or if they receive expenses or benefits, have another job, receive a pension, or have recently received certain taxable state benefits.

It is also worth noting that directors of limited companies who pay themselves a salary may need to run payroll too. If you are unsure where you stand, speak to an accountants in slough you can rely on to help you understand your obligations.

Registering As An Employer With HMRC

Once you are ready to hire, here is what needs to happen.

Register for PAYE. This is done through HMRC’s online services. Once registered, you will receive an employer PAYE reference and an accounts office reference, which you need for payroll submissions and payments to HMRC.

Set up an employee record. You need key details from your new starter, including their name, date of birth, National Insurance number, address, start date and pay details. You should also ask for a P45 from their previous employer. If they do not have one, they should complete HMRC’s starter checklist.

Choose payroll software. HMRC provides a list of recognised payroll software, including some free options. You can also work with a professional offering payroll services slough businesses trust, which can take the admin off your plate.

Make your first submission. Every time you pay your employees, you need to send a Full Payment Submission to HMRC on or before payday. This is known as Real Time Information, or RTI.

What Employers Commonly Get Wrong

Plenty of well-meaning business owners set up payroll and then stumble on the details. Here are the areas that most often cause problems.

1. Missing RTI Deadlines

RTI means payroll information must be sent to HMRC on or before the date employees are paid. You cannot simply batch up submissions and deal with them later.

HMRC can charge penalties for late or missing submissions. For employers with 1 to 9 employees, the monthly penalty starts at £100. For employers with 10 to 49 employees, it rises to £200, and larger employers can face higher penalties.

The safest approach is to run payroll on a fixed schedule and use software or payroll support that submits everything correctly each time.

2. Getting Minimum Wage Wrong

The National Minimum Wage rates change every April, and the correct rate depends on the worker’s age and status.

From 1 April 2026, the National Living Wage for workers aged 21 and over is £12.71 per hour. The 18 to 20 rate is £10.85, the under 18 rate is £8.00, and the apprentice rate is £8.00.

It sounds simple, but businesses can still get caught out. Unpaid training time, travel between jobs, deductions for uniforms or tools, and salary sacrifice arrangements can all bring someone’s effective hourly pay below the legal minimum if they are not handled carefully.

3. Ignoring Auto Enrolment

If you employ at least 1 person, you have workplace pension duties. You need to assess staff for auto enrolment and keep records, even if they do not need to be enrolled immediately.

In 2026/27, an eligible jobholder is usually someone aged from 22 up to State Pension age who earns at least £10,000 per year. They normally need to be automatically enrolled into a qualifying workplace pension, unless postponement is used correctly.

The minimum total pension contribution is generally 8% of qualifying earnings, with at least 3% coming from the employer. You also need to write to staff about their pension status within 6 weeks.

If this feels unclear, speaking to auto enrolment pensions accountants slough based businesses use can help you stay compliant without the stress.

4. Miscalculating Holiday Pay

Employees and workers are entitled to 5.6 weeks of paid annual leave per year, pro-rated for part-time workers.

For fixed-hours salaried staff, holiday pay is usually straightforward. For irregular-hours workers, part-year workers, people with changing shifts, overtime, commission or variable pay, the calculation can be more complex.

Holiday pay rules changed from April 2024 for irregular-hours and part-year workers, and many employers now need to be careful about accrual, rolled-up holiday pay and reference-period calculations. Getting this wrong can lead to backdated claims.

You can read more in our post on understanding the calculation of holiday pay.

5. Forgetting About Statutory Payments

Statutory Sick Pay, Statutory Maternity Pay, Statutory Paternity Pay, Statutory Adoption Pay, Shared Parental Pay and Statutory Parental Bereavement Pay all need to be processed through payroll when they apply.

Each payment has its own rules around eligibility, notice periods, qualifying earnings, rates and duration. Some statutory payments can be reclaimed in full or in part depending on the employer and payment type, but others cannot normally be reclaimed.

Many small employers only think about these payments when a situation arises. By then, they are often trying to understand the rules while also supporting the employee. It is better to have the payroll process ready before you need it.

6. Not Keeping Proper Records

HMRC requires employers to keep payroll records for at least 3 years from the end of the tax year they relate to. These records should include pay, deductions, reports to HMRC, employee details, statutory payments and payments made to HMRC.

You also need to keep suitable pension records. Some pension records must be kept for longer than general payroll records, so it is sensible to store everything clearly and securely.

Good bookkeeping services can help keep payroll, tax and pension information organised alongside the rest of your business records.

Should You Manage Payroll Yourself Or Outsource It?

For a very small team with straightforward pay, running payroll yourself using HMRC-recognised software may be manageable.

But as your team grows, so does the complexity. Different pay rates, changing hours, pension contributions, statutory payments, starters, leavers and RTI submissions can quickly build up.

Many business owners find that outsourcing to a firm offering accountant payroll services is one of the best decisions they make. It saves time, reduces the risk of errors and gives you confidence that key deadlines are being handled properly.

It also works well alongside your wider accounts. If you already work with small business accountants for tax and accounts, having payroll managed in the same place can make your records much easier to reconcile.

Do Not Forget The Bigger Picture

Payroll does not exist in isolation. As your team grows, so does your financial complexity. You may also need to think about:

VAT returns services if you are registered for VAT or approaching the £90,000 registration threshold

Financial reporting services so you can understand how payroll costs affect profit

Prepare company accounts support to keep Companies House and HMRC filings on track

Tax return accountant support if your personal or business tax affairs are becoming more complicated

If you are using sole trader accounting services and thinking about taking on staff, it may also be worth considering whether your structure still fits. Our post on moving from sole trader to limited company covers this in more detail.

If you use cloud accounting software, working with a QuickBooks accountant can make it easier to connect payroll with bookkeeping and reporting.

If you are based outside Slough, Asmat & Co also work with businesses further afield, including as accountants in reading for clients across Berkshire.

Payroll FAQs

Do I Need To Set Up Payroll If I Am Only Paying Myself As A Director?

Yes, if your limited company pays you a salary and PAYE applies, you need to register as an employer and run payroll. Even a small director’s salary can create reporting obligations depending on the amount paid and your circumstances. Read more about director pay options for 2026.

What Happens If I Miss An RTI Submission?

HMRC can charge automatic penalties for late submissions. The amount depends on the number of employees, starting at £100 per month for employers with 1 to 9 staff. Repeated problems can also lead to extra scrutiny from HMRC.

When Do I Need To Enrol Employees Into A Pension?

You must assess employees from the start of employment. Eligible staff usually need to be enrolled from the date they become eligible, unless postponement is used correctly. You must also write to staff about their pension status within 6 weeks.

Can I Run Payroll Monthly Instead Of Weekly?

Yes. You can run payroll weekly, fortnightly, four-weekly or monthly, depending on what is agreed with the employee and set out in the contract. You must submit RTI on or before each payday, whatever pay frequency you use.

Do I Need To Give Employees Payslips?

Yes. Employees and workers are entitled to an itemised payslip on or before payday. It must show gross pay, deductions and net pay. Where pay varies by hours worked, the payslip must also show the number of hours being paid.

What Is The Difference Between PAYE And Self-Employment?

PAYE applies to employees, where the employer deducts tax and National Insurance at source. Self-employed contractors are responsible for their own tax, but the label used in a contract is not enough by itself. The reality of the working relationship matters. Getting this wrong can create backdated tax, national insurance contributions and penalty risks.

Ready To Get Your Payroll Sorted?

Whether you are setting up payroll for the first time or your current system needs a proper review, Asmat & Co are here to help. We work with growing businesses across Slough, Reading and beyond, taking care of payroll, pensions, bookkeeping and everything in between.

Get in touch with our team today and let’s make sure your payroll is working properly from day 1.