There comes a time for many sole trader businesses when the workload becomes overwhelming and in order to prevent the business suffering, or letting clients down, the logical step is to hire someone to help. Yes, it’s time for your first employee! But where do you start and what do you need to do to ensure you follow all the legal requirements now that you are about to be an employer? We’ve consolidated the key steps to help you get the process right, as well as find the right person for the job.
Start with a job description
Sounds obvious, but you’d be surprised just how much detail you could overlook if you don’t take the time to set things out clearly by writing a proper job description. Spend a bit of time thinking about what you need your employee to do, the kind of person you are looking for, what qualifications, if any, they should have, and what previous experience. Don’t forget to add salary details (this must be at least the National Minimum Wage), working hours and location.
Advertise your vacancy
Armed with that, get an advert out asking for applicants. You don’t need a full page spread in a national broadsheet, there are plenty of options online. Depending on your business, an ad in your window or a few well-placed notices in local shops may be all you need. You may even find someone from within your network of contacts and clients, so make sure you speak to people about your vacancy.
Use your job description to help you sift through the CVs that land on your desk. Once you have a shortlist, create a list of questions to use when interviewing candidates to help you make your final selection. Remember to check references and to confirm that your chosen candidate is eligible to work in the UK. If your employee is expected to work in a field that requires a DBS (disclosure and barring service) check, you must get that done too.
Register with HMRC
Now that you are an employer, you must register as such with HMRC. You can do this up to two months before you first start to pay your new employee, but bear in mind it takes up to five days for HRMC to register them, so if you pay weekly then make sure you register well in advance. You are now also responsible for deducting tax and making National Insurance contribution deductions and payments.
As an employer, you will need to carry employer’s liability insurance. This must come from an authorised insurer and be for at least £5 million or you could be fined £2,500 for every day that you are not insured. To find an authorised insurer you can check the Financial Conduct Authority register.
Set up payroll and pension systems
You can either do this yourself or have a third party do it for you. Many employers outsource payroll management to their accountants. An auto-enrolment pension is also a legal requirement if the employee is over 22 years of age and earning over £10,000 per year. Again, a good local accountant can help you with this.
Know your obligations
As an employer you need to maintain accurate tax records and expenses and these need to be maintained and accessible for a period of six years, so you might want to use a cloud accounting package like Xero with your accountant or, if you have lots of paper records, arrange off-site document storage. You also need to ensure that all your employment contracts are accurate and in place, and these may differ depending on your business and the status of your new employee – i.e. whether they are full or part-time, freelance or contractor, etc. You also need to ensure you understand and honour the rights of your employees – for example, holiday entitlements, pay, or terms of employment.
And you’re all set! Here’s to your growing business and your first employee. And perhaps your second, third and fourth too!