Taking on your first client is an exciting time and it’s an important milestone for your business. It shows that your business is growing and your business model is a success! Congratulations on getting to this stage!
It’s important to be aware of laws and regulations on employment.
Here are some tips of what you will need to consider;
National Minimum Wage - when deciding on a salary for your employee you must take into consideration the National Minimum Wage, there are different set amounts depending on the age of the person you are hiring.
The person you hire must have the legal right to work in the UK and you will need to make sure you see the proof of this and take copies for your records.
If you work in a field which requires one, ie working with vulnerable people or in security, you may need to apply for a DBS check (formerly known as a CRB check)
Invest in employment insurance, you will require employers liability insurance as soon as you take on your first employee
You must send a contract of employment to your employee in writing. This needs to include the job description and terms and conditions. This only applies if you are employing the person for 1 month or more.
You must register as an employer with HMRC. You need to do this up to 4 weeks before you pay your first member of staff.
Check if you need to automatically enrol your staff into a workplace pension scheme as well
You may need to create an employee handbook of procedures and policies for your staff so they know the holiday days, what to do when they are sick and about maternity and paternity leave amongst other things.
Paying HMRC tax and National Insurance
As the employer, you are responsible for complying with a number of laws and ensuring income tax and National Insurance is paid for your new employee. Failure to do so could lead to penalties.
Each month it’s your responsibility as the employer, that the correct PAYE income tax and National Insurance deductions are made. You also have to pay employer’s National Insurance for your employee.
Many accountants and book-keepers offer a payroll service, where they will sort all of the paperwork, make the relevant income tax and National Insurance deductions and provide a salary slip for your employee.
This is generally a very worthwhile investment as for a relatively small fee it will ensure you stay legal and allow you to focus on the more productive and interesting parts of running your own business.
The biggest cost of employment…. Your time!
The biggest hidden cost in taking on an employee is how much of your time they will take up. Apart from the initial training, paperwork and clarifying your business’s policies, they will need time each week for you to keep them on track and manage them effectively. If you skimp here, it will come back to bite you further down the line.
It’s worth thinking this through when planning how much extra work your business will be able to take on with an employee.
If you need any further advice on taking on your first employee then it may be advisable to get in touch with regards to our payroll services, we can also help with procedures and policies too.
It’s best to cover all bases when it comes to employment and if you need support can contact me below.