- How to hire the first employee: the written contract is signed before work begins, in accordance with Article 21, paragraph 3, of the Labor Code.
- The contract requires twelve mandatory elements. The probationary period exists only if it is written and lasts up to three months.
- The payroll list must be submitted electronically only by the 20th of the following month for trading companies and by the 20th after each quarter for individual traders.
- The fine for an undeclared employee is 200,000 lekë for VAT or simplified tax entities and 50,000 lekë for other entities.
- A minimum-wage employee of 50,000 lek gross costs the business 58,350 lek per month and receives 44,400 lek in hand.
"How do I hire my first employee?" is the question that usually comes up three or four months after opening a business, when the work exceeds what one person can handle. Hiring your first employee isn't a one-time event; it's a six-step process that begins with the employment contract and ends with the first payroll. Each step has its own deadline, and two of them fall before the employee's first day on the job.
Order matters more than speed. The contract is signed before the employee starts work, the declaration to the tax administration is made before or on the start date, and the payroll is submitted afterward, within its monthly or quarterly deadline. When this order is reversed, the business ends up with an employee working without being declared, and that is the most expensive violation of the entire group.
This guide follows the entire process of hiring someone for the first time, from the decision to hire a person to submitting the payroll and paying the required contributions. For each step, it provides the deadline, the legal basis, and the mistake we see most often.
Read also: Can I afford to hire, and how is the decision calculated before it begins?
What are the steps from the decision to the first paycheck?
The initial hiring process has six steps. The diagram below arranges them in chronological order and divides them into three phases, based on their relationship to the first day of work.
The first two steps are the ones that get forgotten. They come before the first day of work, at a time when the business is still being organized and the employee isn't yet part of the monthly routine.
Employment contract: what to sign before the first day
The individual employment contract is the written agreement that specifies the position, salary, schedule, and terms of the employment relationship. It is entered into in writing before the start of work and must contain The twelve mandatory elements of Article 21, paragraph 3, of the Labor Code.
When should the contract be ready?
The rule is that the contract must be drawn up before work begins. For special and justified cases, the law allows the contract to be signed within seven days of the date of employment. This is an exception, not the standard rule, and it is not used routinely.
The absence of one of the twelve elements does not invalidate the contract. It simply leaves the employer without evidence when something is contested, and in an employment dispute the lack of evidence is construed against the party who should have kept it.
Which elements are most often forgotten?
Three elements are missing more often than others in the contracts we see.
- Trial period. If it is not written in the contract, it does not exist. When it is written, it lasts for the first three months under Article 142.
- Pay elements and pay date. The net amount alone is not enough; you need the base salary, mandatory allowances, and the day of the month when payment is made.
- Disciplinary measures. The types and procedures are mandatory when there is no collective bargaining agreement in the sector or in the enterprise.
The contract's start date must be the same as the date declared to the tax authorities. If the two do not match, the inspection treats the discrepancy as an undeclared period.
Read also: Work templates and forms, full texts
When an employee is declared to the tax administration
The new employee is added to the employee list and reflected in the payroll for the period during which the employment relationship begins, with the exact start date. The start date determines the coverage days and the first month's base.
The exact timing of the declaration relative to the first day of work follows a procedural deadline that must be verified in the applicable regulation before being taken for granted. The practical rule we apply is to declare before the first day of work, because the fine for undeclared employees is among the highest in the tax system.
What is the fine for undeclared employees?
The fine is 200,000 lekë for entities registered for VAT or simplified tax, and 50,000 lekë for other entities. This is a fine for each undeclared employee found, not for the inspection as a whole.
For comparison, a self-assessed taxpayer's late filing penalty is 10,000 or 5,000 lek according to the category, and late payment costs 0.061% of the liability per day of delay, up to 365 days. So the difference between a delay and a failure to declare is not a rate but a different category.
What is the payroll deadline?
The deadline depends on the form of the business, not on the number of employees.
| Who declares | Deadline |
|---|---|
| Entities and commercial companies | The 20th of the following month, every month |
| Merchant natural person | On the 20th after each quarter |
| Self-employed with employees | On the 20th after each quarter |
Within the same period, the obligation is also paid. A declaration without payment does not satisfy the obligation, and a payment without declaration does not either. The declaration is made only electronically; there is no in-person counter.
How much does the first employee cost? Example calculation.
Hire a first employee at the minimum wage, 50,000 lek gross per month, on a full-time contract.
| Voice | The amount |
|---|---|
| Gross salary | 50,000 lek |
| Withheld payroll tax | zero lek |
| Employee contribution withheld from wages | 5,600 lek |
| Employer contribution on wages | 8,350 lek |
| The employee takes it into his hands. | 44,400 lek |
| The full cost for the business | 58,350 lek |
The two figures that usually surprise are the third and the last. The employer's contribution is not deducted from the employee's salary; it is added to it. Therefore, the real cost of a minimum wage is not 50,000 lek, it is 58,350 lek, about 16.71% more.
For higher salaries, the payroll tax also changes, so the amount is calculated on a case-by-case basis with Gross-to-net and employer cost calculator. Contribution rates and the insurance cap are explained at Social Security and Health page.
Fixed-term or open-ended contract
An open-ended contract is the common form and does not require justification. A fixed-term contract is the exception and requires that the termination date be clearly stated in the contract, in accordance with letter d of Article 21, paragraph 3. The differences, limitations, and cases in which a fixed-term contract becomes an open-ended contract are in Types of employment contracts.
For the first hire, our advice is simple. If the job is ongoing, the contract is made for an indefinite term, and security is provided by the probationary period, not by an artificial deadline. The probationary period protects the employer during the first three months, whereas an unjustified fixed-term contract creates a risk in the opposite direction.
Be careful about a distinction that is often confused. A service contract is not an employment contract and does not create an employment relationship. When a person works on a schedule, at your premises and under your direction, the correct form is an employment contract, regardless of what the document is called. Reclassification of the self-employed It begins precisely with this difference.
Schedule, breaks, and holidays from day one
Three rights begin to accrue from the first day of employment, even during the probationary period. They do not require the completion of one year.
- The standard weekly working time does not exceed 40 hours. The specific schedule is set out in the contract and also determines the contribution rates, so it is not a formality. See work schedule.
- Paid annual leave is no less than 22 working days per year and is earned in proportion to the time worked. See annual leave.
- Official holidays are paid days off, and work on those days is paid at a premium. See Official holidays.
The leave record has been kept since the very first employee. A business with only one employee often thinks it doesn't need a record, and then can't prove how many days of leave were taken when the employment ends.
Read also: Leave register: how to keep it and how long to retain it
Payroll and wage payment
The pay slip is a legal requirement, not a voluntary practice. Articles 118(1)(1) and 119 of the Labor Code require that the employee receive, before or immediately after payment, a statement detailing the elements of the wage, the allowances earned, and the deductions made, each shown separately.
Salary is paid only through the banking system, in accordance with Article 118, paragraph 1. When the salary is calculated monthly, it is paid at the end of each month in accordance with Article 116. A payslip that shows only the net amount does not meet the requirement of Article 119, because it does not allow verification of either the gross amount or the deductions. The details are in Invoice and payment terms.
The employee's file and the documents required by the inspection.
The employee's file is opened on the first day of employment and kept for the duration of the employment relationship. It is the place where everything written above as a requirement is documented, and it is also the first thing requested during a labor inspection. The exact contents and retention periods are in employee's personnel file page.
Read also: Work inspection, required documents
Five mistakes we see in first-time hiring
- The employee starts work and is only reported on the following month's payroll. In the meantime, an inspection could catch them as unreported.
- The contract is signed after the first day, with a date written on the back. The date on the contract and the date of declaration do not match.
- The probationary period isn't written into the contract, and the employer believes he has one. Without writing, it doesn't exist.
- The invoice is submitted on time, but the payment order is not honored. The obligation remains open with a penalty and late‐payment interest.
- Wages are paid in cash, not by bank, sometimes by agreement with the employee. Article 118, paragraph 1, does not allow this.
All five of these mistakes have the same root. The initial hiring is treated as a human resources decision, whereas it is simultaneously a legal, tax, and accounting decision.
Every time there is a tax or financial change that affects your business, we notify you directly by email with a practical explanation.
Send me free notificationsFrequently asked questions
How do I hire the first employee if the business is a sole proprietorship?
The same steps apply; only the payroll deadline changes. Sole proprietors and self-employed individuals with employees submit their payroll by the 20th after the end of each quarter, not every month.
Can the employee start work before the contract is signed?
Not as a rule. The contract is drawn up in writing before work begins. Only in special and justifiable cases does the law allow it to be concluded within seven days of the date of employment.
What is the minimum wage I can write in the contract?
The minimum wage is 50,000 lek gross per month as of January 2026. A full-time contract cannot provide for a lower wage, and the contribution base cannot be set below the minimum wage for standard contracts.
Do I get the contribution reimbursement for the first employee I hire now?
No. The compensation scheme under Decision No. 141 of March 6, 2026, covers the period from January to September 2026 and is calculated on the salary difference for employees who were declared in the 40,000 to 49,999 lekë bracket in September 2025. A newly hired employee does not fall into that bracket. The application deadline for beneficiaries is October 31, 2026.
How much does an employee with a salary of 50,000 lek cost?
The total cost to the business is 58,350 lekë per month. The employee receives 44,400 lekë in hand, because 5,600 lekë is withheld as the employee's contribution and payroll tax is zero at this level.
What happens if I make a mistake on the first payroll?
Amended return. The Tax Procedure Law allows the filing of an amended return within 24 months of the deadline for the original return. An amendment that increases the liability requires payment of the difference.
Can I pay the salary in cash if the employee doesn't have a bank account?
No. Article 118, paragraph 1, requires that wages be paid only through the banking system and in the Albanian currency. The account must be opened before the first payment, not after it.
