Taking on your first employee is one of those moments that feels bigger than it is administratively — and smaller than it is legally. Most first-time employers assume a written contract is optional, a nice-to-have they can sort out once things settle down. It isn't optional, and 'once things settle down' is exactly when it should already be in place.
What the law actually requires
In the UK, employees and workers are legally entitled to a written statement of employment particulars from day one — it has to be given no later than their first day of work, not sometime in the first month. It needs to cover the essentials: pay and how often it's paid, hours, holiday entitlement, job title and duties, notice periods, where they'll be working, and how long the job is expected to last if it isn't permanent. This isn't a courtesy. It's a legal minimum, and it applies from employee number one, not employee number ten.
A lot of small business owners conflate 'contract' with a long, lawyer-drafted document and assume they can put it off. The written statement doesn't have to be complicated — but it does have to exist, and it has to exist immediately.
The written statement isn't paperwork you get around to. It's a day-one legal requirement, and 'we're still figuring out the details' isn't a defence if it's missing.
Why a proper contract is worth more than the legal minimum
Meeting the bare legal minimum keeps you out of trouble, but it doesn't protect you. A proper employment contract goes further — probation periods with clear terms, confidentiality clauses if the role touches sensitive information, what happens to holiday pay if they leave mid-year, disciplinary and grievance procedures, and restrictions on working for a direct competitor if that's a genuine risk for your business. None of this is required by law in the same way as the written statement, but all of it is the sort of thing you badly wish you'd written down the one time you need it — usually mid-dispute, which is the worst possible time to be drafting it.
The cost of skipping it
The owners who skip a proper contract almost never get caught out on day one. They get caught out eight months later, when the relationship sours, and there's nothing in writing to fall back on. Was overtime meant to be paid or not? Was there a probation period, and did it get extended? What exactly were they meant to be doing? Without a written contract, every one of those becomes a 'he said, she said' — and ambiguity always favours whoever's arguing hardest, not whoever's right. A contract doesn't just protect the business; it protects the employee too, by giving both sides the same understanding from the start.
Getting it done without overspending
You don't need a bespoke, expensively-drafted contract for your first hire. A solid template — adapted properly for your specific role, hours and business, not just copy-pasted with the company name swapped in — covers most small businesses perfectly well. Where it's worth spending real money is if the role is senior, involves sensitive information or IP, or if you're hiring several people at once and want one template that scales. For a single, straightforward hire, a well-adapted template plus the day-one written statement covers the legal bar and most of the practical risk.
A worked example: what a first hire actually costs and commits you to
Say you take on your first employee at £28,000 a year, starting on a Monday in September. The salary is the part everyone budgets for. Here is the rest of it.
Employer's National Insurance runs at 15% on earnings above the £5,000 secondary threshold, so £23,000 × 15% = £3,450. If you run a limited company where the only person on the payroll until now has been you as sole director, this hire is also the moment the £10,500 Employment Allowance becomes claimable — a company with a single director and no other employee cannot claim it, and a second person on the payroll changes that. Claim it and the £3,450 disappears entirely.
Auto-enrolment applies, because £28,000 clears the £10,000 earnings trigger. The minimum employer contribution is 3% of qualifying earnings, meaning the slice between £6,240 and £50,270, so £21,760 × 3% = £653. Holiday is 5.6 weeks — 28 days including bank holidays on a five-day week — and it accrues from day one. Statutory sick pay is now payable from the first day of absence rather than the fourth, at the lower of £123.25 a week or 80% of normal weekly earnings. All in, that £28,000 hire commits you to roughly £28,650 a year with the Employment Allowance claimed, and £32,100 without it.
Then the paperwork, which has dates attached to it. The written statement has to be in their hand on or before that Monday. The right to work check has to be done before they start. Employers' liability insurance, minimum £5 million of cover, has to be in force from day one — the fine for going without runs to £2,500 for every day you are uninsured. And you need to be registered as an employer with HMRC before the first payday. None of that is expensive. All of it is time-limited, which is precisely the part first-time employers get wrong.
Does it change for part-time, casual or zero-hours staff?
One assumption trips up a lot of first-time employers: that the paperwork only matters for a 'proper', full-time hire. It doesn't. The written statement requirement applies to workers as well as employees, which covers most casual and zero-hours arrangements too — the specific terms will look different (hours may genuinely be variable, for instance), but the obligation to set out pay, entitlements and how the arrangement works in writing doesn't disappear because the role is part-time or flexible. A surprising number of small businesses only formalise things once someone becomes 'proper staff', and end up with a stack of undocumented casual arrangements that are just as exposed as an undocumented full-time one — arguably more so, because the flexible terms are exactly the ones most likely to be disputed later.
What tends to go wrong when owners DIY it
The most common mistake isn't skipping the contract altogether — most owners know, at least vaguely, that they should have one. It's adapting a template badly: leaving in clauses that don't apply to the actual role, using generic hours or pay structures that don't match what was verbally agreed, or forgetting to update it when the role or pay changes six months in. A contract that contradicts what's actually happening day to day is often worse than no contract at all, because it hands a dispute two competing versions of the truth instead of one. If you're adapting a template yourself, read every clause and ask honestly whether it reflects this specific hire — not just whether it sounds professional.
The bigger point
First hires are stressful enough without wondering whether you're legally exposed. Getting the contract right on day one — properly, not just the legal minimum scribbled down — is one of the cheapest bits of insurance a growing business ever buys. It takes an afternoon. Skipping it can cost a great deal more than an afternoon, at exactly the moment you can least afford the distraction.
Common questions
When exactly do I have to give my first employee their contract?
On or before their first day — not within the first week, and not once things settle down. Section 1 of the Employment Rights Act 1996 requires a written statement of employment particulars to be given no later than the day the work starts, and it applies to workers as well as employees, so casual and zero-hours arrangements are caught too. The principal statement has to cover pay and pay frequency, hours and whether they vary, holiday entitlement, job title and duties, start date, place of work, notice periods on both sides, probation terms, any training entitlement, and sick pay and other benefits. There is no small-employer exemption. Employee number one is treated exactly like employee number one hundred.
What actually happens if I do not give one?
You cannot be taken to a tribunal for that alone, which is why so many employers get away with it for years — and why the ones who do get caught get caught badly. A failure to provide compliant particulars is not a standalone claim. It bolts onto another successful claim under section 38 of the Employment Act 2002, and the tribunal then adds two weeks' pay, or four weeks if it considers that just and equitable. A week's pay is capped at £751 from 6 April 2026, so the uplift is £1,502 or £3,004. The larger cost is evidential: with nothing in writing, every disputed term — overtime, notice, what the job actually was — becomes one person's word against another's, and employers tend to lose those arguments.
Can I just use a free template off the internet?
Yes, provided you genuinely adapt it rather than swapping in the company name and calling it done. A well-chosen template covers a straightforward first hire perfectly well, and Acas publish free ones that are a sensible starting point. What matters is that every clause describes this job: real hours, real pay, real notice, real probation length, and nothing left in about company cars or overseas travel that does not apply. A contract contradicting what happens day to day is worse than no contract, because it hands a dispute two competing versions of the truth. Pay for proper drafting where the risk is higher — a senior role, access to client lists or intellectual property, or restrictive covenants you would actually want to enforce.
What else do I legally have to sort before my first employee starts?
Four things, all with deadlines attached. Register as an employer with HMRC and set up PAYE before the first payday. Carry out a right to work check before they start and keep a dated copy, because getting this wrong risks a civil penalty even where the employment itself was entirely innocent. Take out employers' liability insurance with at least £5 million of cover from an FCA-authorised insurer: it is compulsory from the day you employ anyone, and the fine for going without runs to £2,500 for every day you are uninsured. And assess them for pension auto-enrolment — the earnings trigger is £10,000, with a minimum 3% employer contribution on qualifying earnings between £6,240 and £50,270.
Can I change the contract later if the role changes?
Only with the employee's agreement, which is precisely why getting the first version right is cheaper than fixing it later. A contractual term cannot simply be rewritten by the employer: you need consent, obtained through a real conversation and confirmed in writing, and any change to the written particulars must be notified in writing within one month of taking effect. Imposing a change unilaterally risks a breach of contract claim, or a constructive dismissal claim where the term is fundamental. Dismissing someone and re-engaging them on worse terms — fire and rehire — is being tightened further under the Employment Rights Act 2025, so it is no longer the escape hatch it once was. Build flexibility in at the start instead.
