Pay As You Earn for Employers (PAYE)
Employer registration
As an employer, you must operate PAYE (Pay As You Earn - HMRC's system to collect Income Tax and National Insurance from employment) as part of your company payroll, unless the member of staff earns less than £242 a week (£1,048 a month or £12,570 a year). This threshold remains the same throughout the 2024/2025 tax year.
Rates and thresholds for employers 2023-2024:
https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2023-to-2024
Rates and thresholds for employers 2024-2025:
https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2024-to-2025
You need to register a new member of staff before their first payday, and you can do this up to two months before you want to start paying them.
Register as an employer: https://www.gov.uk/register-employer
Register PAYE online: https://www.gov.uk/paye-online/using
Check if you qualify for Employment Allowance. Employers can get up to £5,000 a year off their National Insurance bill - https://www.gov.uk/claim-employment-allowance
When you don't need to register with HMRC
As long as:
a) the employee is earning under the threshold (£242 per week)
b) their only employment is with you and
c) they have no pension income
You, as an employer, will not have to make any deductions from their pay and they will not be subject to the employer's national insurance contributions.
HMRC, however, advise businesses to print off the starter checklist and get the employee to sign this (for internal safe-keeping), as proof of their declaration of circumstances (see the employee statement section) - https://www.gov.uk/government/publications/paye-starter-checklist.
Therefore, all the employer needs to keep (for tax purposes) is a spreadsheet of the employee's name, address, how much and when they were paid.
Employers still need to provide employees with a pay statement but they can purchase manual wage slip books and templates at most stationers/online.