How Do I Hire My First Employee?

If you’re at the point where you need a little help with your business, it might be time to recruit your first member of staff. You don’t have to go it alone and, despite a common misconception, even sole traders can hire someone if they need to!

There’s more to being an employer than inviting somebody in and paying them though. The process for becoming an employer can vary depending on what the work is and who you hire, but there are core points which apply to everyone. In this article we’ll go over the step-by-step guide to hiring your first employee.

Step-by-step: The process for hiring, at a glance

The process of hiring someone can be quite extensive, so it’s useful to have a rough overview before getting stuck into the details.

• Check you can afford to employ someone
• Write the job description, advertise the role, and select a candidate
• Check their right to work
• Confirm their position and issue a contract
• Arrange appropriate insurance
• Register as an employer
• Set up payroll and collect employee details
• Assess your workplace pension duties
• Prepare onboarding, training, and any kit or equipment required

What to consider before hiring staff

This can look different for every business, but it’s generally worth thinking about what level of experience and knowledge you need to hire, and how much you can afford to pay. Once you get past that, you’ll also need to consider the logistics of where they’ll work from, and what they need for the role.

How much it costs to be an employer

Employing someone is a commitment, so the first step is to take a look over the figures and make sure you can afford to take them on for the duration of their contract.

The cost of employing someone includes more than just their salary, though. As well as working out how much someone in that role would expect to be paid, you’ll also need to estimate costs like:

• Employer pension contributions
• Statutory Sick Pay (SSP) which is currently £123.25 per week, plus extra staff if you need to arrange cover, and discretionary sick pay if you decide to top up the statutory minimum
• Employer’s National Insurance contributions
• Parental pay and appropriate cover for leave, such as maternity or paternity leave
• Holiday pay and the cost of covering leave when someone is off
• Any extra kit you might need, such as computer and desk equipment, uniforms and PPE, tools and machinery, and even training costs

You might also need to think about other perks you might offer staff beyond their wages – which can be a great recruitment tool for finding the right person in a competitive environment.

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Can I afford not to employ someone?

Working out the cost of taking on a new member of staff works in reverse too. If you’re at maximum capacity and in danger of missing out on terrific opportunities for business growth, it might be time to recruit a helping hand or additional skills and experience.

Would it be better to outsource?

There’s always a moment of worry about whether hiring new staff is the right decision. If you can’t justify taking on an employee, you might consider outsourcing to an external agency or freelancer.

Do you have the physical space to expand?

Additional staff take up additional space – but cramped spaces diminish productivity and aren’t that great for morale either. You might hire remote or hybrid workers to share the space, or it might be time to look at a larger workplace.

Create a fair recruitment process

Although there isn’t a set legal process for hiring someone, it’s your responsibility to ensure your recruitment process is fair and avoids discrimination. You can advertise the role yourself or through a recruitment agency, but it’s essential the advert avoids any potentially discriminatory language.

Draft a recruitment policy to help you make sure your process for reviewing, selecting, and interviewing candidates is applied consistently.

• Define the role, and what skills, experience, and qualifications are required to fill it
• Use neutral language in the job advert, including in the job title itself. This will also help you attract a more diverse pool of candidates who are qualified for the role.
• Plan interviews in advance. Candidates should be asked broadly the same questions in the same order, and scored against their responses.

Right to work

Once you make your selection, you’ll need to check they’re allowed to work for you before employing them. This involves requesting documents so you can check their legal working status, but it can also include other background checks if these are required for a specific role.

Make sure they have the right to work in the UK

The first step is to request documents so you can check the applicant has the right to work in the United Kingdom with you as their employer. Harsh penalties await those who fail to carry out the appropriate checks and are found to employ illegal workers:

• Fines can be as much as £20,000 per illegal worker
• Employers who knowingly employ individuals without the right to work in the UK can face jail time of up to five years

Carry out any other checks required

Further pre-employment checks can include following up on references provided and, depending on the role, a Disclosure and Barring Service (DBS) search to check the candidate’s criminal record. This is a requirement if you are hiring within the health or childcare sectors.

Provide a written statement of employment

Anyone employed for longer than a month must receive a written statement confirming the offer, and a contract which details their role, responsibilities, rights, and working conditions. This can be made up of more than one document and must include at least the following:

• The business name
• The employee’s name, their job title, and a description of the work
• Employee start date
• Rate and schedule of pay
• Working hours
• Holiday entitlement (we have a separate guide which explains how to work out how much holiday your employee is entitled to)
• The job location
• Any contractual benefits or bonuses

Sort out Employer’s Liability insurance

You will need to ensure you hold Employers’ Liability insurance if you take on staff. This must cover you for at least £5 million.

It’s important (and a legal requirement) to make sure you have it in place, as this will pay compensation if an employee is hurt in the workplace or becomes ill due to their work. This is not a cost to skimp on!

Register as an employer with HMRC

Anyone taking on an employee or director earning £5,000 or more per year (£96 per week) must register as an employer for PAYE:

• Before the first payday
• But not more than two months before you start paying them

The registration rules apply even if you’re only employing yourself! Once registered, HMRC will send you an employer PAYE reference number – you’ll need this when you report and pay the deductions you take from your employees’ wages.

Set up payroll

To get started you’ll need to:

• Record the details of any new starters: Use a new starter checklist to gather information so employees can be set up on payroll correctly
• Choose payroll software if you’re doing it yourself: Payroll calculations can be complicated! Using payroll software isn’t mandatory, but it will make the process easier. You can also use it to report payroll information to HMRC.
• Add your employee to your payroll: Enter your new starter’s details correctly, including their tax code (to make sure deductions are worked out correctly)
• Keep detailed records: Record things like rates of pay, bonuses, and allowances; absences, the reason for them, and whether they were paid or unpaid
• Send reports to HMRC: Send a Full Payment Submission to HMRC on or before every payday to tell them about your payroll – even if you don’t need to make any deductions
• Pay everyone – including HMRC: Give your employee their payslip, pay their wages, and pay any deductions and contributions to HMRC

You can also use payroll to reimburse employees for any business expenses, but these payments aren’t subject to tax and NI – so make sure they’re recorded correctly!

It’s entirely up to you whether you outsource payroll to someone else such as your accountant, or set up and operate payroll yourself.

Check if you need to set up a workplace pension

One of your responsibilities as a new employer includes setting up a workplace pension scheme, and automatically enrolling any employees who are eligible. You can outsource this task to your accountant or payroll provider! The Pensions Regulator website can also help.

Being a good employer

The next step? Looking after your new hire! A well-prepared onboarding and training process will help a new starter settle in more quickly – which is particularly important if you’re taking on an apprentice or someone who doesn’t have much work experience.

Make sure they have the resources they need to do their job safely and comfortably, including access to an employee handbook which explains what is expected of them as an employee, not just the contract which explains their specific role. Document any training, and ask staff to sign everything or confirm it digitally. We have a separate guide which goes into more detail about being a good employer beyond the basics of getting started.

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