If you want to grow your business at some stage you will need to take on your first employee. It can be daunting because there are many things you need to consider. But once you have taken that first step you are on your way to developing your business.
So what things do you need to consider before you take on your first employee?
1. You need to know what you want them to do within your business.
2. When you know what work you will want them to do you will know what skills you need to advertise for.
3. If you don't already know someone who will be suitable you will need to write an advert which will encourage the people you need to apply.
4. You will need to decide how much time you need to employ someone for each week - full-time or part-time.
5. Once you have decided on the number of hours you need them to work you will be able to calculate how much you will have to pay ensuring that you pay at least the national living wage for those aged 25 and over or the national minimum wage for those under 25. Details of the current minimum wage rates can be found here.
6. In addition to the payment you calculate you need to pay to your new employee you will also need to work out the additional costs to you of employing someone. This will include Employers National Insurance if they earn over £719 per month and pension contributions if they earn over £833 per month. The total cost is therefore Gross Pay plus Employers National Insurance Contributions plus Employers Pension Contribution. If your new employee works part-time and earns below the threshold for these additional costs the main cost to you will just be their Gross Pay.
7. Once you have interviewed and selected the right candidate for your business you will need to give them a contract of employment which will set out the terms under which they are employed and covers things like holiday entitlement, sick pay, hours of work and disciplinary matters.
8. You are responsible for checking that your new employee has a legal right to work in the UK and you must have employers liability insurance in place as soon as your new employee starts work.
9. You must register with HMRC as an employer. Each month (or week) you will need to process the payroll ensuring you take the correct deductions for tax, national insurance and pension contributions from your employee. This must be done with payroll software as you will need to submit a return to HMRC showing the pay and deductions on or before the date the employee is paid. You are responsible for paying the deductions for tax and NI from the employee's pay and your own employers NI to HMRC by the due date.
10. If your employee earns enough for them to be automatically enrolled in a pension scheme you must set up a scheme and enrol them into it even if they tell you they don't want to be in it. This is a legal requirement for every employer. If your employee doesn't earn enough to be automatically enrolled they are entitled to choose to join the scheme so you may have to set one up anyway. Visit The Pension Regulator website to find out more about your obligations as an employer.
Before you take on employee it is important to consider all the costs involved and your responsibilities once you are an employer. Businesses like ourselves deal with payroll and pension auto enrolment for employers so this aspect can be easily outsourced. Understanding the cost to your business and the impact it will have is important because it is more than just calculating what they will be paid. Your new employee will probably need a desk and a computer. They may need some training and you will have to spend time with them showing them what you need them to do and integrating them into your business.
Some businesses would rather bring in someone who is self-employed so they don't have the responsibility of an employee however there are rules about the status of an employee which you should be aware of if you are considering this. Visit HMRC's information on employment status to find out more.
If you have taken on your first employee and are not sure how to register as an employer, process payroll, submit information to HMRC or how to set up a pension scheme we can help with all of those things. Visit our website to find out more about our payroll services.
It may seem daunting taking on your first employee but its one of those necessary tasks that business owners have to encompass if they want their business to grow.