As important as this milestone is, administrative challenges, legal complications and customary red tape can pull you and your business into uncharted territory. Let alone the fact that you may be about to invite someone you’ve never met into the company you’ve single-handedly raised from the ground up. Here at Danbro, we understand both the pressures, and pleasures, of employing a new member of staff for the very first time. After all, it’s a process our founders Helen & Damian have been through themselves.
To help you prepare, here are three factors you’ll need to consider when taking on your first employee.
1. Planning: Weigh up the cost an employee would have on your companyWhen you first take on an employee, it’s no longer just your own financial affairs at the mercy of your business’ successes and failures. It’s a big step in the progression of your company; the cost of which should be carefully considered. You’ll also need to ensure you’re up-to-date with the latest legislation surrounding the payment of employees, as well as any changes to the National Minimum or National Living Wage rates.
By becoming an employer, you’ll also take on the added financial responsibility of Employers’ National Insurance. You’ll pay this at a rate of 13.8% of your employee’s salary. You’re only obliged to pay Employer’s NI for those employees who are paid more than the ‘secondary threshold’, which currently stands at £8,424. For those hiring younger employees, it’s worth noting that you won’t have to pay Employer’s NI for any staff under the age of 21, unless their salary exceeds £46,350 (the upper secondary threshold for the 2018/19 tax year).
It’s also necessary to check whether any of your employees are eligible for ‘auto-enrolment’. In all likelihood, as a full-time employee, they will be. For those employees who are eligible, you’re legally obligated, as their employer, to contribute into a workplace pension. Employees are entitled to auto-enrolment if the following stipulations apply:
- The individual ordinarily works in the UK.
- They’re aged between 22 years and state pension age.
- They have ‘qualifying earnings’ of at least £10,000.
2. Personnel: Choose the right candidateSkillset. Experience. Strengths. Weaknesses. Personality. Wages. Benefits. Bonuses. Objectives. Supervision. Holidays. Hours of work. Terms of employment. The list of considerations are plentiful when creating a job description and conducting an application process; that is, of course, if you don’t already know the person you’re going to employ. But even then, appropriate documentation must be obtained. The individual must have the legal right to work in the UK and, depending on their role, CRB and DBS checks may need to be carried out. All this before you’ve even picked the person you’re going to hire … they better be worth their weight in brews.
Once the interview process has concluded, and you’re confident you’ve selected the person who’s going to take your company to historic heights, it’s best practice to issue that individual with a written contract. If they work for you for over a month, you must provide them with a ‘written statement of particulars’. This will set out the conditions of employment, such as job description, working hours, rate of pay and holiday entitlement.
To ensure you remain compliant when hiring, it’s important to keep up-to-speed with the latest information regarding employment law. So, after you’ve found the Sean Parker to your Mark Zuckerberg, you’ll need to register as an employer with HMRC. The process is fairly straightforward, should take less than two weeks, and can be completed online. And, following your registration, you’ll receive a PAYE (Pay As You Earn) reference number to begin processing your payroll.
It’s a legal requirement of an employer to have Employers’ Liability Insurance in place. In addition to this, you must meet the necessary Health and Safety obligations. Oh, and unless your newbie decides to opt out of the Working Time Directive, they cannot work any more than the 48-hour average. Early finish on Friday anyone?
DID YOU KNOW … most businesses can claim employment allowance, potentially reducing their PAYE bill.
Payment: Pay your shiny new staff memberIf your new recruit is coming to your company from another business, you’ll need to obtain their P45. If this isn’t possible, be sure to ask them to complete HMRC’s New Starter Checklist, which will help to assign them a tax code.
All businesses must report their payroll information online and in real time. So, in short, file your payroll figures with HMRC either on or before you make a payment to your employees. HMRC will have full visibility of your PAYE liability and, as you might expect, there are penalties for lateness!
If all this seems slightly overwhelming, don’t worry; help is always at hand.
As your financial responsibilities increase, the amount of time and resource that you’d once been able to put into your business may reduce as a consequence.
You can, of course, operate your own payroll using free or off-the-shelf software packages, the capability of which is dependent on the amount you’re willing to outlay. But if your experience is limited in the field of finance – and who can blame you if it is – it might be a more viable option to seek professional, affordable assistance by outsourcing to an accountant or specialist payroll provider. By allowing those qualified to look after your company’s finances, ensuring your payroll is administered on time and in full, you’ll have more time to do what you do best – take care of business.
To see how this has worked for other businesses, just like yours, check out some of the testimonials from our pool of high profile clients. Or, for a more in-depth guide to hiring your company’s first employee, including first-hand advice from our Managing Director, Helen Broughton MBE, click here.
To find out more about the wide range of services we offer here at Danbro, or if you need help setting up your company’s payroll or financial structure, get in touch today, or call our expert team of advisors on 01253 600 150.
Sam Wright is Danbro’s Marketing Manager. He produces regular content and feature articles on our digital and non-digital channels – and social platforms – for the Danbro Group and its subsidiaries, as well as having responsibility for the Company’s internal and external communications.
His background is in Journalism and Creative Writing, having previously contributed to publications such as The Daily Post, The Lancashire Evening Post, and The Blackpool Gazette.
He is a keen swimmer and avid Manchester United fan (but don’t hold that against him), and he lives in Lancashire with his wife, Sarah.