10 simple payroll tips for new employers

Small Business Guides

3 min read

There's a lot to think about when you’re a first-time employer and your task list can be daunting. So use this checklist to be organised before you hire your first staff member.

10 steps to payroll preparation

Hiring an employee is a big decision. If you've never hired one before, it can be hard to know where to start. Our payroll checklist will help you and your business prepare for this exciting new phase.

  1. Set a clear, comprehensive job description

    Define the tasks, duties and responsibilities you want your new employee to perform. Then think about the qualities and experience you need and expect from your new employee. A clear, accurate definition will attract the best candidates. Take your time over this. It will save you interviewing people who aren't suitable.

  2. Decide on a salary range

    The best employees will cost more – so you'll have to balance cost against ability and business needs:

    • Use accounting software to make some forecasts
    • Find a salary range that works for you and is a good match with the market rate
    • Be aware of local legislation about wages, including any minimum wages.
  3. Make sure the candidate has a legal right to work

    In many countries, employers have an obligation to check that their employees are legal. You can be fined if you hire illegal workers. Make sure anyone you hire has the right to work in your country. Check the candidates’ visas if necessary.

  4. Do all the necessary verification checks

    You should always check work references, but you may need to do more. That's especially true when you hire people to work with children or vulnerable adults. Some possible checks include:

    • medical records
    • employment history
    • education
    • professional licensing and qualifications
    • personal references
    • drug screening
    • driving licence and infringement record
    • criminal record including sex offences.

    Ask a lawyer which ones you should carry out, but only do what's necessary.

  5. Employ the right person for the job

    You need to make sure you hire the right employees. Think about experience, qualifications, personality and culture fit. Interview each person twice and get someone you trust to help interview. Very often they will pick up something that you have missed. It's vital you get it right first time, or you may face problems later.

  6. Get the right insurance cover

    Insurance is a legal requirement in many countries. It protects your employees and your business in the event of unfortunate incidents. Make sure you ask a lawyer for advice.

  7. Register as an employer with the government

    In some countries you have to register as an employer. Do this in plenty of time, as it can take a few weeks to set up. Check government websites for details.

  8. Set up the new employee in your payroll software

    Payroll is a vital part of employment, and payroll compliance for an employee’s first day is essential. Use good payroll accounting software and make sure it:

    • automates regular payroll tasks
    • integrates with your accounting software
    • schedules direct salary payments
    • is easy to use
    • connects to other business applications
    • can be used on a smartphone, tablet or laptop.

    Online payroll software has all of these features and more. Talk to your accountant or bookkeeper for help and ideas. Then get your new hire added to the system.

  9. Write an employment agreement

    Contracts protect your employees – and also your business. They aren't always a legal requirement, but they're a good idea anyway. Make sure any agreement includes this information:

    • your business name
    • the employee's name
    • job title and description
    • the date their employment begins
    • salary details
    • hours of work
    • holidays and holiday pay
    • notice period and conditions for termination
    • a dispute resolution process
    • confidentiality clause for sensitive information.

    If you have any doubts about what you should include in any employment agreement, ask a lawyer for advice.

  10. Learn about management techniques

    Being a new employer, you have plenty to learn. Read about management skills and see if you can find some local courses too. If you manage your new employee well, it will help your business run smoothly and reduce payroll work.

Learn more about pay runs

Get more on the hiring process and how to do a pay run in our complete guide to hiring staff.