How to Add an Employee to Your Company Payroll

Hiring someone is an exciting step for any business. However, before the employee reaches their first payday, you need to make sure payroll has been set up correctly.

Adding a new employee to payroll involves much more than entering their name and salary into payroll software. Employers need the correct starter information, must establish the appropriate PAYE treatment, check student or postgraduate loan information, consider workplace pension duties and report the employee to HMRC.

HMRC requires employers to tell it about a new employee on or before the employee’s first payday. Employers register the employee with HMRC by including the starter’s details in the Full Payment Submission (FPS) when they first pay them.

Getting these steps right from the beginning helps prevent incorrect tax deductions, employee queries and payroll corrections later.

How do you add a new employee to payroll?

For an employee, the process generally involves:

Check that PAYE applies.
Collect the employee’s personal and employment details.
Obtain their P45 or an HMRC Starter Checklist.
Check student or postgraduate loan information.
Set up the employee accurately in your payroll software.
Check workplace pension duties.
Calculate their first payroll correctly.
Report the new starter to HMRC through the FPS on or before their first payday.

HMRC’s employer guidance sets out these core steps for new employees.

Let’s look at each stage in more detail.

1. Check whether you should pay the person through PAYE

Before adding someone to payroll, make sure you understand their employment status. The procedure in this guide applies to someone engaged with the employment status of employee. Different rules can apply to agency staff, freelancers, consultants and contractors. This distinction matters because describing someone as a contractor does not, by itself, determine their tax or employment treatment. If the individual is an employee who needs to go through PAYE, you can move on to gathering the information required to create their payroll record.

2. Collect the new starter’s information

Accurate information is the foundation of accurate payroll. Before the first payroll run, gather the employee information needed to establish their payroll record and PAYE treatment.

HMRC’s Starter Checklist guidance asks for information including the employee’s National Insurance number, employment start date, information about other jobs or pensions since 6 April, and student or postgraduate loan details where relevant.

Where the employee has a P45 from their previous employment, that document provides important information for setting up payroll. From an operational perspective, your onboarding process will also need the information your organisation requires to pay the employee, such as the agreed salary and payment details.

Taking the time to check information before entering it into payroll is much easier than correcting an incorrect employee record after the first payment has been processed.

3. Ask for the employee’s P45

Where available, the new starter should give you their P45 from their previous employer. HMRC states that employers use the P45, or the Starter Checklist where appropriate, to obtain the information needed to add the employee to payroll and determine the tax treatment of their first pay.

The P45 helps provide continuity between the employee’s previous employment and the new payroll.

However, not every employee will have one, someone may be:

Starting their first job
Starting their first UK job
Returning to work after a break
Moving from self-employment
Working for more than one employer

HMRC’s guidance identifies these as situations where the Starter Checklist may be relevant.

4. What should you do if the employee does not have a P45?

A missing P45 does not mean you should delay adding the employee to payroll indefinitely. Instead, HMRC provides a Starter Checklist. The employee uses this checklist to provide information that the employer needs to work out the tax code for their first pay, calculate the appropriate tax deduction and identify relevant student or postgraduate loan deductions.

The Starter Checklist replaced the old P46 process. Importantly, HMRC warns that inaccurate information on the checklist could result in the employee paying too much or too little tax. Therefore, don’t guess starter information simply because a P45 has not arrived, follow the proper HMRC process.

5. Check student and postgraduate loan information

Student loan deductions are another area employers need to consider when onboarding new starters. HMRC specifically instructs employers to establish whether a new employee needs to repay a student loan before setting the individual up in payroll.

The Starter Checklist also gathers information on student and postgraduate loans and, where relevant, the employee’s repayment plan. Getting this information right at the start helps prevent incorrect deductions and subsequent employee payroll queries.

6. Add the employee to your payroll software

Once you have the necessary information, you can create the employee’s payroll record in your payroll software. Your payroll process needs to use the starter information to establish the correct payroll treatment and prepare the information that will ultimately go to HMRC.

HMRC states that employers should use the employee information to set the new employee up in their payroll software.

Be careful with payroll IDs

HMRC also permits employers to assign employees payroll IDs. However, each ID must be unique in situations where the same employee has more than one employment in the same PAYE scheme or where an employee is re-employed. Reusing a previous payroll ID can create a duplicate record and lead to incorrect payroll reporting.

This relatively small detail can create disproportionate administrative problems, so payroll teams should maintain robust employee-record controls.

7. Check workplace pension responsibilities

Adding someone to payroll can also trigger workplace pension responsibilities. The Government’s employer process specifically directs businesses to check whether the new employee needs to enter a workplace pension. For first-time employers, GOV.UK points employers towards The Pensions Regulator’s relevant guidance and tools.

Therefore, don’t treat pension administration as a completely separate process from payroll onboarding.

The employee’s payroll and pension records must remain aligned so that any required deductions and employer contributions can flow through payroll correctly.

8. Check pay and employment information

Before processing the first payroll, confirm the employee’s pay details accurately reflect the agreed employment arrangements.

GOV.UK’s employer process includes agreeing the contract and salary and checking the applicable National Minimum Wage requirements as part of taking on an employee.

From a payroll perspective, this is particularly important where remuneration includes variable elements. The more accurate the information payroll receives before the cut-off date, the less likely the organisation is to need corrections after payday.

9. Process the employee’s first payroll

Once the employee record is ready, the new starter can enter the normal payroll process.

On the first FPS, HMRC requires the employer to include the starter information collected, the tax code and starter declaration, and the employee’s pay and deductions since they started working for the employer. HMRC explicitly says not to include figures from the employee’s previous job in those pay and deduction figures.

This first payroll is worth reviewing carefully. An incorrect starter declaration, payroll ID or tax treatment can carry forward into future periods and create additional work for both the employer and employee.

10. Tell HMRC about the new employee through FPS

You do not register a normal new starter through a completely separate monthly HMRC process. Instead, you register the employee with HMRC by including their details on the Full Payment Submission the first time you pay them. GOV.UK states that employers must tell HMRC about a new employee on or before their first payday.

The FPS includes the relevant starter information along with that employee’s pay and deductions. For businesses already running payroll, this should form part of the normal payroll timetable rather than becoming a last-minute task on payday.

What if the P45 arrives after you’ve added the employee?

For late starter documentation, HMRC maintains specific guidance for circumstances where an employee’s P45 or Starter Checklist arrives late. Therefore, businesses shouldn’t simply overwrite previously reported payroll information without checking the correct HMRC procedure for the circumstances. A well-managed payroll process should flag late documentation for review rather than relying on informal corrections.

What other checks should employers complete?

Payroll is only one part of hiring an employee. GOV.UK’s employer guidance also highlights other responsibilities, including checking the individual’s right to work in the UK, considering whether a DBS check is necessary for an appropriate role, agreeing employment terms, and checking pension duties.

Therefore, HR onboarding and payroll onboarding should connect with each other. If HR has one start date, finance has another and payroll receives different information, errors become much more likely. A consistent starter process helps prevent that gap.

Common mistakes when adding someone to payroll

Waiting too long for a P45

A business should not allow a missing P45 to derail the employee’s entire payroll setup. HMRC provides the Starter Checklist specifically for situations where a P45 is unavailable or additional information is required.

Getting the starter declaration wrong

The information provided on the Starter Checklist helps determine first-pay tax treatment. Therefore, inaccurate information can result in too much or too little tax being deducted.

Reusing a payroll ID

Reusing an old payroll ID can create a duplicate employee record in HMRC reporting. HMRC specifically warns employers to use a different ID in relevant re-employment and multiple-employment situations.

Forgetting student loan information

The Starter Checklist specifically collects student and postgraduate loan details where relevant, and HMRC tells employers to check whether a new employee needs to make repayments.

Missing the first FPS deadline

The employer needs to include the starter on the FPS the first time they are paid and tell HMRC about the new employee on or before the first payday.

How can small businesses make new starter payroll easier?

The best solution is a repeatable onboarding workflow. Rather than collecting payroll information across emails, spreadsheets and conversations, create one structured process covering HR, finance, pensions and payroll.

For example, the internal workflow can clearly identify who collects starter data, who verifies it, when information reaches payroll and who approves the first pay run.

That consistency becomes increasingly valuable as the business grows.

An organisation hiring two people each year may manage starter administration relatively easily. However, a growing company adding employees every month faces a much greater risk of missing information unless it adopts a structured approach.

Should you add employees to payroll yourself or outsource It?

Businesses can operate payroll internally using appropriate payroll software.

However, payroll software still requires someone to understand the information being entered, review the output and manage the reporting process.

For a small business without dedicated HR or payroll expertise, adding starters can become another task for the founder, Finance Manager or Office Manager.

A fully managed payroll service can remove much of that recurring administration.

Your business still supplies and approves the employee information, but payroll specialists can manage the technical payroll setup, calculations and agreed HMRC reporting processes.

How PayCheck can help with new starters

At PayCheck, new starter administration forms part of the wider payroll journey.

Our Payroll Masters help UK businesses manage payroll accurately and consistently, including starter and leaver processing, RTI reporting, workplace pensions and employee payroll documentation.

For growing employers, the advantage is not simply completing a payroll task. A structured managed payroll process helps ensure onboarding information flows correctly into payroll without disrupting the rest of the business. Clients also benefit from our 3 Ring Promise, giving them quick access to a real member of our payroll support team when questions arise.

Need help managing new starters and payroll?

Get the starter information right before the first payroll, use the correct HMRC documentation, and report the employee through FPS on time. Speak to our Payroll Masters about taking payroll administration off your internal team’s workload.

How do I add a new employee to payroll in the UK?

Collect the required employee information, use their P45 or HMRC Starter Checklist to establish their starter tax information, check applicable student loan details, add the employee to your payroll software and include their starter details on the FPS when you first pay them.