Payroll setup checklist: What you need before your first payroll run

Hiring employees is an exciting milestone for any business, but it also brings new responsibilities. Before you can pay your employees, you'll need to make sure the right payroll processes, records and reporting arrangements are in place.

From employer registration and employee information to pensions, pay schedules and payroll deadlines, there are several decisions that need to be made before your first payday.

This payroll setup checklist explains the key steps involved and provides a practical framework for preparing your business to run payroll for the first time.

Key insights

• Payroll setup is a one-off activity that prepares your business for future payroll runs.
• Getting employee information, payroll deadlines and employer registrations right from the start can help prevent future payroll issues.
• A payroll calendar helps create a repeatable process before the first payday arrives.
• Workplace pension responsibilities should be considered before your first payroll run.
• Payroll can be managed internally, through software, with an accountant or by an external payroll provider.
• A final setup review can help identify gaps before employees are paid for the first time.

What does setting up payroll involve?

Setting up payroll is the process of putting everything in place before employees can be paid for the first time. This typically includes registering as an employer, choosing how payroll will be managed, gathering employee information, deciding on a pay schedule and preparing the systems, records and processes needed to run payroll.

Payroll setup is different from payroll processing. Payroll setup is usually a one-off activity completed when a business hires its first employees or introduces a new payroll system. Payroll processing is the ongoing cycle used to calculate pay, apply deductions, issue payslips, report payroll information and pay employees each pay period.

A successful payroll setup helps create a repeatable process for future payroll runs. Taking the time to establish clear deadlines, accurate employee records and consistent payroll procedures can make payroll easier to manage as the business grows.

Payroll setup checklist

Setting up payroll involves more than registering as an employer. Before your first payroll run, you'll need the right employee information, processes, reporting arrangements and payroll schedule in place. Use the checklist below to make sure you're prepared before employees are paid for the first time.

Setting up payroll for the first time?

Whether you're hiring your first employee, growing your workforce or establishing a presence in the UK, setting up payroll involves more than choosing a payday. ADP can help simplify payroll setup with payroll software, managed payroll services and support from payroll specialists.

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1. Register as an employer

Before you can run payroll, you'll usually need to register as an employer and set up PAYE. This allows you to report employee pay and deductions and meet your payroll reporting responsibilities.

If you're employing staff for the first time, it's worth allowing enough time for registration before your first payday. Waiting until the last minute can create unnecessary delays when you're trying to prepare your first payroll run.

Once registered, you'll receive references that you'll need when setting up payroll software, working with a payroll provider or reporting payroll information.

2. Decide how payroll will be managed

Before running your first payroll, decide who will be responsible for payroll and how it will be managed. The right approach depends on factors such as the size of the business, payroll complexity, internal expertise and how much time can be dedicated to payroll administration.

Common options include:

• Managing payroll yourself, typically using payroll software to calculate pay, deductions and reporting.
• Using an accountant or bookkeeper to help administer payroll alongside other financial responsibilities.
• Outsourcing payroll to a specialist provider who manages some or all of the payroll process on your behalf.
• Using a hybrid approach, where payroll data and approvals are managed internally while calculations, reporting or administration are supported externally.

There is no single best option for every business. A payroll approach that works well for a small employer with a handful of employees may not be suitable as employee numbers grow, payroll becomes more complex or reporting requirements increase.

3. Gather employee information

Before running payroll, you'll need accurate information for every employee you plan to pay. Collecting this information early can help avoid delays, incorrect payments and reporting issues when your first payroll run approaches.

Employee information may include:

• Full name and address
• Date of birth
• National Insurance number
• Bank account details
• Start date
• Salary or hourly pay rate
• Working hours and employment status
• Tax information, such as a P45 or Starter Checklist
• Workplace pension details, where applicable

It's also worth deciding how employee information will be collected, stored and updated. As the business grows, having a consistent process can make it easier to manage payroll records and keep employee information accurate.

4. Choose a pay frequency and payday

Before your first payroll run, you'll need to decide how often employees will be paid and when payday will fall. Common pay frequencies include weekly, fortnightly, four-weekly and monthly payroll.

The right approach depends on factors such as workforce type, business operations, cash flow and employee expectations. For example, salaried office employees are often paid monthly, while some employers with hourly-paid workforces may choose a more frequent pay schedule.

When selecting a payday, it's also worth considering the wider payroll process. Payroll information needs to be collected, reviewed and approved before employees can be paid, so many employers work backwards from payday to establish payroll cut-off dates and approval deadlines.

5. Set up workplace pension arrangements

Most employers need to meet workplace pension responsibilities when employing staff. This typically involves choosing a pension scheme, assessing employee eligibility, enrolling eligible employees and managing pension contributions through payroll.

Pension arrangements should be considered before the first payroll run, as pension contributions may need to be calculated and deducted from employee pay from the outset. The information required will depend on factors such as employee earnings, age and employment status.

If you're using payroll software, an accountant or a payroll provider, it's worth confirming how pension information will be collected, processed and reported. Having pension arrangements in place before payroll begins can help avoid last-minute administration and reduce the risk of errors once employees start being paid.

6. Create a payroll calendar and cut-off dates

A payroll calendar helps you plan key payroll activities and deadlines throughout the year. Creating one before your first payroll run can make it easier to collect information on time, schedule reviews and ensure employees are paid when expected.

A typical payroll calendar may include:

• Payroll cut-off dates
• Timesheet or overtime submission deadlines
• Payroll review and approval dates
• Payslip distribution dates
• Employee paydays
• Pension contribution deadlines
• Payroll reporting and payment deadlines

When setting payroll deadlines, it's important to allow enough time between the payroll cut-off date and payday to review payroll information, investigate any discrepancies and make corrections if needed.

7. Prepare payroll records and processes

Before your first payroll run, make sure you have a consistent way to record, store and maintain payroll information. Good record-keeping can make payroll easier to manage, support reporting requirements and help reduce errors as your workforce grows.

Payroll records may include:

• Employee details and employment information
• Pay rates and salary information
• Hours worked, overtime and absences
• Tax and payroll reporting records
• Pension contribution information
• Payslips and payroll summaries

It's also worth deciding how payroll information will be collected and approved. For example, who is responsible for notifying payroll about new starters, salary changes, overtime or employee departures? Establishing clear responsibilities early can help prevent information from being missed when payroll is processed.

8. Review everything before your first payroll run

Before processing payroll for the first time, carry out a final review to make sure all the necessary information, records and processes are in place.

Use the checklist below as a final sense-check:

• Employer registration and PAYE details have been completed
• Employee information has been collected and verified
• Pay rates, salary details and bank account information are accurate
• Workplace pension arrangements are in place
• Pay frequency, payday and payroll cut-off dates have been agreed
• Payroll records and approval processes have been established
• Payroll software, accountant or payroll provider has been configured correctly
• The information needed for the first payroll run has been gathered

Completing a final review can help identify missing information before payday approaches, giving you time to resolve any issues and helping your first payroll run go more smoothly.

Setting up payroll is largely a one-off process, but the decisions made at the start can influence every future payroll run. By establishing clear processes, maintaining accurate employee records and preparing key payroll information in advance, businesses can create a strong foundation for paying employees accurately and on time.

Need help getting payroll set up? Whether you're looking for payroll software to guide you through the setup process or a managed payroll service to handle payroll administration on your behalf, ADP can help simplify the journey. From collecting employee information and setting up payroll records to supporting ongoing payroll operations, our payroll solutions are designed to help businesses get up and running with confidence.

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