If you employ people to work for your business and they receive at least £112/week (Lower Earnings Limit for National Insurance), or your company uses subcontractors for construction work, you are legally required to register as an employer. Furthermore, you must also register if you wish to pay yourself a director’s salary because, technically, you are employing yourself and will be required to pay tax and National Insurance on your salary income.
When to register as an employer
You are legally required to register your limited company as an employer if one or more of the following points applies:
- You take on staff and pay them at least £112 per week (£486/month; £5,824/year)
- You pay yourself a director’s salary of more than £112/week
- You employ someone who has a second job or is in receipt of a pension
- You provide expenses and benefits to your employees
- You use subcontractors under the Construction Industry Scheme
- You are reclaiming CIS deductions from payments
If you are in any doubt, you can use this helpful tool on HMRC’s website to determine your company’s employer status.
You must register your company before the first payday, but not more than 2 months before you start paying your employees or yourself. The registration process can take up to two weeks, so don’t leave it until the last minute!
How to register as an employer
It’s relatively straightforward to register a company as an employer. The entire process is carried out online through HMRC. You will most likely require operating Pay As You Earn (PAYE) as part of your payroll – this is the system HMRC uses to collect Income Tax and National Insurance deductions from employees’ wages and pensions.
HMRC will ask you to set up an Government Gateway account (unless you already have one) and provide the following information during the online employer registration process:
- Company name and registration number
- Registered office address
- Type of business activities carried out by the company
- Company’s Unique Taxpayer Reference
- Director’s details – name and National Insurance number
- Date of first payday
- Number of employees
- Your contact details
You must also tell HMRC if you are hiring subcontractors in the construction industry or operating an occupational pension scheme.
Within 5 working days, you should receive PAYE and Accounts Office references from HMRC. Within a further 5 working days, you should receive an activation code for PAYE Online. You will be asked to provide these details when you send payroll information to HMRC, so be sure to keep them safe.
Your legal requirements as an employer
As an employer, you will have a number of legal obligations and requirements to fulfil, including:
- Ensuring all workers are paid at least the National Minimum Wage or Living Wage.
- Reporting your employees’ payments and deductions to HMRC on or before each payday.
- Sending regular and annual payroll reports to HMRC.
- Maintaining and updating employee details.
- Keeping payroll records.
- Providing a written statement of employment to all workers who are employed for more than 1 month.
- Purchasing Employer’s Liability insurance if you employ anyone through your company other than yourself, your family members, or someone who is permanently based overseas.
- Enrolling all eligible employees in a workplace pension scheme by your company’s assigned ‘staging’ date.
For official information and further guidance on employing staff for the first time, visit HMRC.