Startup First Hire Checklist: Contracts And Policies

What do you actually need to have ready before your first employee starts?

The reassuring answer is: less than you might think, but the documents and setup you do need should be clear, signed and in place before day one. Your first hire is exciting, and getting the paperwork right now helps you avoid awkward disputes later.

For a UK startup, your first-hire legal checklist usually comes down to a few core things: the employment contract, right to work check, payroll, pension, Employers' Liability insurance, privacy notice, workplace policies and strong confidentiality and IP wording.

What Documents Do I Need Before My First Employee Starts?

You should have your employment contract, right to work evidence, payroll setup, pension arrangements, Employers' Liability insurance, privacy notice and key workplace policies ready before your new employee starts work.

Some of these are legal requirements. Others are practical protections that make your working relationship much clearer from the beginning.

Your first-hire document pack will usually include:

• Employment contract or written statement: You need to give the employee their main written terms on or before their first day under the Employment Rights Act 1996.
• Right to work check record: You need to check and keep evidence that they can legally work in the UK before employment starts.
• Payroll information: You need their starter information, National Insurance number where available, tax details and bank details so you can run PAYE.
• Pension auto-enrolment information: You need to assess whether they're eligible and communicate with them about their pension rights.
• Employers' Liability insurance: Most employers must have EL insurance in place as soon as they become an employer, with cover of at least £5 million from an authorised insurer. You also need to make the certificate available to employees.
• Employee privacy notice: You need to explain how your business will collect, use, store and share their personal data under UK GDPR and the Data Protection Act 2018.
• Staff handbook or starter policies: At a minimum, cover disciplinary and grievance, sickness, holiday, health and safety, IT use, AI use, equal opportunities and harassment.
• Confidentiality and IP clauses: These should be in the contract, especially if your employee will create code, designs, content, customer lists, processes or product ideas.

Example: Priya's First Hire

Priya runs a small SaaS startup and hires her first operations assistant on a salary of £30,000, working 37.5 hours per week from 1 June.

Before 1 June, Priya sends the contract for signature, completes the right to work check, registers as an employer with HMRC, arranges Employers' Liability insurance, gives the employee a privacy notice and sets up pension assessment. Because the employee works 5 days a week, Priya also records statutory holiday as 5.6 weeks, which is 28 days per holiday year including bank holidays if the contract says bank holidays are included.

What Should Go In A First Employee Contract?

Your first employee contract should include the legal minimum terms, plus the clauses your startup needs to protect its information, customers and intellectual property.

A written statement of employment particulars is required from day one, but most startups use a fuller employment contract so everything sits in one place. That way, you aren't just ticking a compliance box. You're setting expectations about the role, pay, hours, probation, leave, confidentiality and what happens if the arrangement ends.

A good first employee contract usually covers:

1. Parties and start date: Name your company, the employee and the date employment begins.
2. Job title and duties: Describe the role clearly, with flexibility for reasonable changes as the startup grows.
3. Place of work: State whether the role is office-based, remote, hybrid or flexible.
4. Hours of work: Set ordinary hours, any flexibility and how overtime or additional hours are handled.
5. Salary and benefits: State pay, payment frequency, benefits and any conditions attached to them.
6. Probation period: Set the length, review process and notice during probation.
7. Holiday: Explain annual leave entitlement, bank holidays and how holiday is approved.
8. Sickness absence: Cover reporting requirements and sick pay, including statutory sick pay if applicable.
9. Notice periods: Include contractual notice, making sure it isn't less than the statutory minimum.
10. Confidentiality: Protect commercial information, product plans, customer data, pricing and know-how.
11. Intellectual property: Deal with ownership of work, inventions, code, content, designs and moral rights.
12. Policies and procedures: Refer to your handbook and say which policies are non-contractual if you want flexibility to update them.
13. Post-termination restrictions: Use carefully and only where they're genuinely needed to protect your business.

This outline is a useful starting point, not a finished legal document. Templates often miss startup-specific issues such as founder IP, product development, customer relationships and employee share scheme incentives, so it's worth getting the contract tailored before you use it.

How Do I Handle Right To Work, Payroll And Pension Setup?

You need to complete the right to work check before the employee starts, register for PAYE before the first payday if required, and assess pension auto-enrolment from the start of employment.

For the right to work check, follow the Home Office process that applies to your employee. Depending on their circumstances, this might involve checking original documents, using an online share code check, or using an approved identity service provider for certain checks. Keep a clear record of what you checked and when.

For payroll, you'll usually need to register as an employer with HMRC before the first payday. HMRC says it can take up to 15 working days to receive your employer PAYE reference, so don't leave this until the morning you want to pay wages. You'll need to report pay and deductions to HMRC through Real Time Information when you run payroll.

You may need to register even if you only have one employee, particularly if they're paid at or above the PAYE threshold, have another job, receive benefits or expenses, or you're operating a pension scheme. If your situation is close to a threshold, check the current HMRC position before you process the first payment.

For pensions, the Pensions Regulator expects you to assess your employee for auto-enrolment. In general, an eligible jobholder is aged between 22 and State Pension age and earns over £10,000 a year. The current minimum total pension contribution is 8% of qualifying earnings, with at least 3% from you as the employer. Payroll software or your pension provider can help calculate the exact amounts.

You should also arrange Employers' Liability insurance before the employee starts. Most UK employers need it as soon as they become an employer, and the policy must provide at least £5 million of cover from an authorised insurer. Keep the certificate accessible, as employees must be able to see it.

Do I Need A Privacy Notice For My First Employee?

Yes, you should give your employee a privacy notice before or when you collect their personal data.

Once you hire someone, you'll handle a lot of personal information. This can include their address, date of birth, bank details, National Insurance number, emergency contact, right to work evidence, sickness records and performance records.

Under UK GDPR and the Data Protection Act 2018, you need to be clear about what data you collect, why you collect it, who you share it with and how long you keep it for. You also need a lawful basis for processing personal data. For employment records, that might include performing the employment contract, meeting legal obligations, or your legitimate interests as an employer.

Your employee privacy notice should cover:

• What personal data you collect during recruitment and employment.
• Why you collect it and the lawful basis you rely on.
• Who receives it, such as payroll providers, pension providers, HR software or accountants.
• Whether any data is transferred outside the UK and what safeguards apply.
• How long you keep different categories of employee data.
• The employee's data protection rights, including subject access requests.
• Who they can contact about privacy questions.

If you use HR, payroll, rota, monitoring or productivity software, check the contracts with those providers too. You may need data processing terms in place, especially where a supplier processes personal data on your behalf.

Keep this practical. A privacy notice doesn't need to be intimidating, but it should be accurate. If you copy a generic notice that says you use systems you don't use, or misses systems you do use, it can create problems if an employee later asks about their data.

Which Policies Should A Startup Put In A Staff Handbook?

You should have a simple staff handbook or policy pack that explains how your workplace operates, but it doesn't need to be long or complicated for your first hire.

A handbook is useful because it keeps repeatable workplace rules out of the employment contract. If you make the handbook non-contractual, you can usually update policies as your business grows without needing to vary the contract each time. Just make sure any changes are communicated clearly.

Your starter handbook should usually include:

• Disciplinary and grievance procedures: These should reflect the ACAS Code of Practice, which Employment Tribunals can consider when looking at workplace disputes.
• Equal opportunities and anti-harassment policy: Since 26 October 2024, employers have had a proactive duty to take reasonable steps to prevent sexual harassment at work under the Worker Protection (Amendment of Equality Act 2010) Act 2023. From 30 October 2026, this strengthens to a duty to take all reasonable steps, so review your anti-harassment policies, risk assessments, training and reporting processes accordingly.
• Health and safety policy: You need safe working arrangements from day one. If you have 5 or more employees, you need to have a written health and safety policy.
• Sickness and absence policy: Explain who the employee should contact, when they need a fit note and how sick pay works.
• Holiday policy: Explain how to request leave, how much notice to give and any rules around busy periods.
• Hybrid, remote or homeworking policy: Cover equipment, data security, working hours and health and safety for remote work.
• IT, devices and acceptable use policy: Set rules for passwords, company devices, personal use, software, AI tools and cybersecurity.
• Expenses policy: Explain what can be claimed, what needs approval and what evidence is required.

If you're hiring in 2025 or 2026, be careful with older handbooks. Employment law reforms are changing some workplace rights over time, so probation, dismissal, flexible working, harassment and family-related policies should be checked against the current position before you rely on them.

How Do IP And Confidentiality Work For A First Hire?

You should include IP and confidentiality clauses in your first employee contract, especially if your startup's value sits in its product, brand, software, data, processes or customer relationships.

UK law gives employers helpful default protection in some areas. For example, copyright created by an employee in the course of employment is generally owned by the employer under the Copyright, Designs and Patents Act 1988. Patent rights can also belong to the employer in certain circumstances where the invention is made as part of the employee's normal duties.

Even so, you shouldn't rely on default rules alone. Startups often work in messy, fast-moving ways. Employees might create work outside normal hours, use personal devices, collaborate with contractors or contribute to product ideas that weren't written neatly into their job description.

Your contract should deal with:

• Ownership of work: Make clear that work created in the role belongs to your company.
• Future assignments: Require the employee to sign documents needed to confirm or register ownership.
• Moral rights: Deal with moral rights where relevant, especially for creative work.
• Inventions and improvements: Cover product ideas, processes, technical improvements and business materials.
• Confidential information: Define what is confidential, including customer lists, pricing, strategy, code, data, supplier terms and pitch materials.
• Return of property: Require return or deletion of company material when employment ends.

Say Mike hires a developer to build a new feature for his platform. The developer writes code, creates documentation and suggests a new onboarding flow. Mike's contract should make it clear that the code, documentation and related product improvements belong to the company, not the individual employee. That makes future investment, sale discussions or licensing much cleaner.

Key Takeaways

• Your first employee should receive their written employment terms on or before day one.
• Complete the right to work check before employment starts and keep a clear record.
• Register for PAYE early enough to receive your employer reference before the first payday.
• Assess pension auto-enrolment from the start, including the 8% minimum total contribution where the employee is eligible.
• Most employers need Employers' Liability insurance from day one, with at least £5 million of cover from an authorised insurer and the certificate available to employees.
• Use your contract and handbook to protect confidentiality, IP, workplace standards, privacy and your ability to grow without constant paperwork disputes.

If you'd like help with your first employment contract, staff handbook, workplace policies or privacy documents, you can reach us at 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.