How to hire your first employee

Being an employer can be challenging, but it’s impossible to grow your business without getting others involved. For that reason, hiring your first employee is a big deal... here’s how to get it right.

The right person can help you expand your business by bringing on experience, knowledge, enthusiasm and commitment, while employing the wrong person can prove costly and disruptive. To make life easier, here are nine steps to help you navigate the recruitment process and comply with your duties and obligations under UK employment law.

1. Write a clear job description

Begin by getting to work on a thorough job description. Make sure you are clear about the type of person you want to hire, the skills they need to have, and the amount you can afford to pay. You must pay your employee at least the National Minimum Wage and should consider the going local rate for an employee with the same skills and experience.

Cover the basics including the job title, a summary overview of what the position entails, all key duties and responsibilities, as well as wages, hours, location employment and basis (i.e. full time, part-time, fixed term or temporary). Writing a clear job description will help when recruiting and during the hiring process.

2. Go through the recruitment process

The recruitment process can be arduous and complex, but it’s far from being the last word in human resource management. Nonetheless, it’s a crucial stage and it’s worth knowing what you’re getting into ahead of time. Here’s a brief summary of what you need to do when recruiting a staff member.

  • Advertise the job – Advertising online is popular and cheaper (or even free) compared to offline. Advertise only where you’ll reach your target candidates. It’s free to post jobs online via Universal Jobmatch, however, it’s simplest to start with your connections or put a notice in your window. Write an effective job advert as if you were speaking to your ideal candidate and make sure you don’t discriminate.

  • Interview and screen candidates – Ask candidates to provide a covering letter and CV, then compare these against the job advert specs. Invite shortlisted candidates to interview. Pre-plan your questions and be prepared to answer questions about the job and your business. Candidates will be nervous so remain professional yet friendly, and take brief interview notes throughout. Make sure you tell candidates when you will decide and how they’ll be informed.

  • Undertake employment checks – Check your chosen applicant has the legal right to work in the UK. If you work in a field that requires you to check someone’s criminal record (e.g. with vulnerable people or security), check if you need to apply for a DBS check.

  • Select candidate and offer them a job – Review your interview notes and judge fairly. Once you’ve decided which candidate you want to employ, telephone them to make the offer and congratulate them.

  • Send details of the job – You need to provide a written statement of employment (including terms and conditions) to the chosen candidate if they will be working for you for a month or more.

  • Communicate with unsuccessful candidates – Write to all interviewees to thank them and tell them your decision. Keep a record of your shortlisted candidates as they may be suitable employees down the track.

You may not have time to do all of this. It might be more efficient to outsource hiring employees to a recruitment agency, but they can be expensive with many charging a percentage of the annual income of any successful applicant.

3. Register with HMRC as an employer

In almost all cases, you’ll need to register as an employer with HMRC. You can do this up to four weeks before you pay your new staff. You will be responsible for deducting income tax and National Insurance (NI) from the employee’s pay.

Each new employee must have a NI number. All employees pay NI contributions to qualify for certain benefits including the state pension. It also means their tax payments are only recorded against their name.

A unique NI number is automatically assigned to all UK citizens just before they turn 16. If for any reason your new employee doesn’t have one – for example, if they are a new arrival in the country – they can apply for an NI number online.

4. Obtain employers’ liability insurance

You are are required by law to get employment insurance as soon as you become an employer. Employers’ liability (EL) insurance protects your business from claims made by an employee who has been injured or fallen ill at your workplace.

Your cover must be for at least £5 million and you can buy employers’ liability insurance from an insurer or from a specialist broker through the British Insurance Brokers’ Association (BIBA) or the Association of British Insurers.

5. Set up a payroll system

Your can either set up and operate payroll yourself or get professional help and outsource the setup to an accountant or bookkeeper. In either case, make sure you invest in accounting software that can address all your payroll needs. Adding payroll to your accounting software should make paying employees painless.

Look for software that:

  • makes it simple to stay compliant
  • can pay your employees efficiently
  • files reports with HMRC.

Read this checklist for setting up small business payroll if you’d like to know more about how to set up the perfect system for your business.

6. Check if you need to enrol your staff into a workplace pension

Check if you need to automatically enrol your staff into a workplace pension scheme. New legislation means that employers must enrol their staff into a workplace pension scheme if they are aged 22 or over and earn more than £10,000 (2015/16 tax year). Only larger businesses are affected now, but the new rules will be phased in for all employers by 2018. This is called ‘auto enrolment’.

Find out when you’ll need to start enrolling people via this handy tool from The Pensions Regulator.

7. Maintain accurate tax records

You are legally required to keep proper tax records for six years. It’s important that you keep them safe, secure and easily accessible. Your accounting software should be able to do this for you.

The right accounting software will also help you monitor the financial and tax status of your business in real-time – for example, by keeping track of deductible expenses. Deductible expenses are business expenses that can be claimed to reduce your overall tax bill.

8. Understand your obligations

As an employer, the tax and employment responsibilities you have for your staff will depend on the type of contract you give them and their employment status. There are many different employment agreements including full-time, part-time, fixed-term, freelance, consultant and contract.

Talk to your accountant, tax agent or HMRC if you need more detail about your obligations before hiring your first employee. 

9. Understand the rights of your employees

All employees have rights that are legally protected. This means if their rights are not met, they can seek compensation. There are two main types of employee rights: statutory (given by law) and contractual (given by a specific employment contract).

There are many employee rights. Some of the common ones cover things like:

  • terms of employment
  • pay
  • working hours
  • holiday entitlements
  • maternity, paternity and adoption leave
  • flexible working arrangements
  • discrimination

Make sure you understand all the basic rights for your employees. If you’d like to know more about your obligations when hiring employees, look at the government’s A to Z for employing people.

Your staff are your most valuable asset – choose wisely

When you’re hiring your first employee, it’s important to follow the steps above. Your employees are your company’s most valuable asset and good people are hard to find.

If you get the process right, you’ll ensure you hire the right people. And if you look after your employees, they’ll perform better, stay with you longer and help take your business to the next level.

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