Neil Buck: Employing your first employee – What you need to consider

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Most successful and growing businesses get to the stage where extra help is required. The owner usually does everything at the start of a business but, if successful, soon realizes that they just don’t have either the skills or the time to be as fully effective any more when they first started out. So another person eventually becomes required in the business to take it to the next stage.

It can be a really exciting time – you’re growing, your bottom line is looking healthier and it now feels like the right time to recruit your first employee so you can continue to make big things happen and make progress against your overall vision.

However, that excitement and enthusiasm can quickly turn into worry, stress and doubt. When you really start to think about everything that you need to address, you can see that it can be a real can of worms and feels like a mountain to climb – the legalities, the paperwork, the responsibility for someone else and so on.

Big questions and considerations arise such as:

• Is there enough money to afford to employ the person?
• What do I need to do to be legally compliant as an employer?
• Where and how do I find the right person with the right skills and experience to join me?
• Do I need a full-time or part-time, temporary or permanent person?
• How much holiday are they entitled to?
• What happens if they’re sick?
• How do I ensure I maximize their contribution to the business?

There’s no denying that there are a ton of things that you need to think about, and you wouldn’t be the first business owner to wonder if you’ve bitten off more than you can chew. The fact is, you haven’t employed anyone before, you simply don’t know what you don’t know. And it’s hard to suddenly fathom everything about this new function of the business that you need to get right. But you do know you need to make that step at some point if growth is to happen.

I deal with a lot of first time employers and my main aim is to give them the confidence and “must-know” things to enable them take what is probably the biggest step they have made since they first started out.

Below is a very brief look at a few things what any first time employer needs to know, and do, to ensure they get off to the best possible start as an employer…

Take out suitable insurance cover

When you become an employer, you need to have employers’ liability insurance and display the certificate in the workplace. Your policy must cover you for at least £5million, and be issued by an authorised insurer. This is a very serious matter, and you could be fined £2,500 for every single day that you are not adequately insured.

Notify HMRC that you’re now an employer

You need to let HMRC know that you’re now employing someone, and this needs to be done before the first scheduled payday. The process can take up to two weeks, and can usually be all done and dusted online.

Carry out the appropriate pre-employment checks before they start on day 1

It’s your responsibility to ensure that your employee has a legal right to work here in the UK. You might also have to apply for a DBS check (previously known as a CRB check) in certain circumstances, such as if your member of staff will be working with children or vulnerable people. You might think that things like this are merely box ticking exercises, but you could face serious penalties if you don’t fulfill your obligations in these areas.

You need to record the checks as your proof of checking the right documents.

Ensure that you’re paying minimum wage

If you fail to pay your staff the national minimum or living wage, then you’re breaking the law. This is a fairly straightforward consideration, though you need to be mindful that there are different requirements in place for different groups of people. The rates usually change once a year, so you need to make sure that you’re keeping up to date with the latest news and legislation. Also you will need to administer your payroll – you must issue an itemised payslip.

Know your pension obligations

Even if you employee just one person you must offer them access to an auto-enrolment qualifying pension scheme. You must auto-enrol them and any contributions by them and you are deducted from payroll, unless they choose to opt-out. Ensure you know when your ‘staging date’ will be and what you need to do to administer such a scheme and what the contributions levels are as this will increase your employment costs.

Issue a contract of employment

You have a legal obligation to provide a statement of particulars of terms and conditions within the first two months of employment and there are certain details that must be included. The easiest way to cover everything is to actually issue them a written contract of employment that is tailored specifically to your business and requirements. This is probably the most important document you will ever produce and the one that will set you up for success or failure so taking the time and investment in getting this done right will be worthwhile.

Following the points outlined above, which really does only scratches the surface, at least highlights a few things you must do and be aware of. The reality though is that there are many, many things that you need to consider as part of the process, and it would be impossible to cover absolutely everything in the scope of this article.

Top Tips:

• Start as you mean to go on – as the employer you should set your expectations from the off
• Keep your admin and records organized from the start – bear in mind data protection legislation etc
• Always keep a paper trail re important decisions – it may be needed by you at some point
• Keep regularly updated and ‘in the know’ with employment related news and laws, so you don’t fall foul of anything
• If you do nothing else, get a contract of employment in place and issue it asap – ideally day 1 of employment
• If in doubt about anything seek professional help and advice – it will be worth the investment by being proactive rather than reactive.

So good luck if you’re thinking of taking on your first employee or already in the process of doing so, although if you prepare well and get some good advice and set things up right you won’t really need luck!