If your employees are not British Citizens, a national of the European Economic Area, or Switzerland, they are likely to need permission to work within the UK.
As an employer, after 29 February 2008, you need to ask your prospective employees for certain documents that establish their right to work in the UK. Only by showing that you have taken the necessary steps can you establish that you have a "statutory excuse" against civil penalties should your employee subsequently be found to be illegally working in the UK.
This is not just a one off exercise either. Some documentation needs to be examined annually. The penalties can be as high as £10,000 per employee and these are reduced to nil if you have carried out the correct procedures.
The UK Border Agency provides some excellent guidance for employers and what they need to do to keep within the law, namely the Immigration, Asylum and Nationality Act 2006. Their Prevention of Illegal Working Summary Guidance is an excellent place to start. You can find out more information at their website http://www.ukba.homeoffice.gov.uk/