What are the tax and pension requirements if you become an employer?

When you become an employer, it is vital you understand and fulfil the legal requirements and process in paying employed staff. Here we look at some of the main responsibilities you have as an employer regarding PAYE and pensions.


Registering as an Employer

When you start employing staff, or using subcontractors for construction work, you need to register as an employer with the HMRC. This includes if you have employed yourself as a director and pay yourself a salary. Through this process you will receive a PAYE reference number which will be necessary when submitting Real Time Information submissions to HMRC.

Real Time Information (RTI) Submissions

Every time you pay your employees you will have to submit an RTI to HMRC by using payroll software. This works hand in hand with HMRC’s Pay As You Earn (PAYE) system, which ensures you as an employer, deduct tax and national insurance contributions from the employee’s gross wage before they receive their net payment. The tax deducted from each employee can vary due to their tax code, which is set by the HMRC depending on a number of factors.


Any tax or national insurance contributions deducted from an employee’s gross pay will then be owed to HMRC. Payments will be collected monthly, or quarterly if you usually pay less than £1,500 per month. You may be charged a penalty if you do not pay on time or in full.


Automatic Enrolment

Your legal duties for automatic enrolment begin on the day your first member of staff started working for you. An assessment should be made each time an employee is paid to measure whether they are eligible based on age and earning criteria. If they are eligible you must put them into a scheme and pay into it, this is called automatic enrolment. You must also advise all staff how automatic enrolment applies to them, as even members of staff who do not fit the eligibility criteria can choose to make pension contributions voluntarily.


By law a minimum amount of contributions must be paid into the scheme. As of 6th April 2019 the minimum contribution is 8% with at least 3% from the employer.

Declaration of Compliance

You must also complete a declaration of compliance with The Pension Regulator within 6 months of your employer start date to declare how you have completed your legal duties.