Before the first payday
Collect the P45 from the previous job or, failing that, a starter checklist. The checklist's 3 statements set the tax code: A (first job since 6 April) gives the standard 1257L code cumulatively; B (had another job or pension this year) gives 1257L on a week 1/month 1 basis; C (has another job or pension now) gives BR, deducting basic rate on everything. Add the National Insurance number, date of birth, address and student loan plan, and file the starter details on your first FPS including them.
Common starter problems
No NI number? You can still pay them, leave the field blank and the employee should apply for one, do not invent placeholders. P45 from a previous tax year? It cannot be used, run the starter checklist instead. Employee ticks the wrong statement? Expect wrong deductions until HMRC issues a corrective code, usually after their Personal Tax Account or a P800 catches up. Late P45s that arrive after the first payday can be processed, your software will apply the correct code and previous pay figures going forward.
Do not forget the non payroll duties
Day 1 also triggers the right to a written statement of particulars, auto enrolment assessment from the first pay reference period, and postponement notices if you use the 3 month waiting period. Workers earning over £10,000 a year aged 22 plus must be enrolled, covered in our auto enrolment guide. And from April 2026 remember paternity leave and sick pay are day 1 rights.
Processing a leaver
Calculate final pay to the termination date, add accrued untaken holiday, which is a statutory entitlement that cannot be withheld even on dismissal, and any commission or bonus contractually due. Deduct any sums the contract authorises, such as unrepaid training costs or excess holiday taken, and check the deduction clause actually exists before relying on it. Mark the leaving date on the FPS, issue the P45 without delay, and remove them from pension contributions with the scheme notified.
Payments after leaving
A payment made after the P45 has been issued, a late bonus or backdated pay award, is processed with tax code 0T on a week 1/month 1 basis and reported on an FPS as a payment after leaving, not by reopening the employment. Genuine termination compensation up to £30,000 can be free of tax and employee NI, but since 2020 employer NI applies above £30,000, and post employment notice pay rules tax the notice element in full, so take advice on settlement packages.
Keep the file tidy
Keep starter and leaver records for at least 3 years for HMRC and 6 for minimum wage and tribunal safety. A 10 line checklist for each event, run every time, prevents nearly all of the above. Or let our payroll service onboard and offboard every employee for you, with the forms produced automatically.
Frequently asked questions
What do I need from a new employee for payroll?
Their P45, or a completed starter checklist if they do not have one, plus National Insurance number, date of birth, address, bank details and student loan plan type. You also need their right to work check completed before they start.
What tax code do I use for a new starter without a P45?
The starter checklist maps to a code: statement A gives 1257L cumulative, statement B gives 1257L on a week 1/month 1 basis, and statement C gives BR. Choosing the wrong statement is the top cause of emergency tax complaints.
What must be in a leaver's final pay?
Pay up to the leaving date, payment for accrued untaken holiday, any contractual sums such as commission earned, less lawful deductions. Then issue the P45 promptly and mark the leaving date on your FPS.