Taking on staff for the first time
It's a big step for a small business, here is some food for thought on how to make the most of taking on additional people to work in your business.
The role you want your new member of staff to perform
Employing someone might not be just a way of getting an extra pair of hands: think about any existing staff, how you would like your organisation structured, and what new skills you might want to introduce to your business to help its growth and development. This thought process gives you the opportunity to consider the function of the role and at what level of seniority you want the new person to work at. Do you want someone who can deputise for you in your absence, for example, or would the business benefit more from someone fulfilling a more junior or operational role?
Working hours: full-time, part-time, short-term, or freelance?
Don’t just think you need to employ someone on a full-time basis, you could employ someone on a part-time basis to save paying a full-time salary, just for the duration of a project or a specific piece of work, or you could bring in specialists on a freelance basis.
Be clear on your requirements and reasons, and make sure your prospective employee/freelancer is very clear as to the terms under which you are employing them or buying their services.
How much should you pay your staff ?
You need to pay your staff at least the national minimum wage but, depending on their role, you maybe paying them a lot more than this. In order to attract and retain the best candidates check the current rates being paid by firms in your industry for similar roles.
As far as your costs are concerned, remember to factor in employer's NI contributions and the cost of running or outsourcing a payroll, as well as the cost of any additional perks and benefits you offer.
Also remember that if you employ staff you must, by law, have employer’s liability insurance in place. Don’t risk a fine by not having this compulsory insurance. You can get a quote for employer’s liability insurance here.
How to pay your staff
If you employ staff whether it's full-time, part-time or short-term, you are responsible for deducting the correct amount of tax and NI contributions from their pay and submitting it to HMRC. You can submit tax and NI contributions for your employees online. Employers with fewer than 50 employees aren't required to do so yet, but you can get a tax-free payment from HMRC if you file online before it becomes a requirement!
For more information on minimum wage rates and operating a payroll see our Checklist for taking on staff.
Paying freelancers and how to check if they should really be employees
Freelancers are responsible for their own tax and national insurance contributions so this could be a simple way to get the additional skills and resources your business needs without the regulatory overhead involved in setting up a payroll and complying with other legal obligations.
However this is a complex area and a topic of hot debate amongst small business owners, their accountants or tax advisors, and HMRC. Typical terms you will hear mentioned are IR35, managed services companies, personal service companies, or intermediaries.
If you are considering taking on someone on a freelance basis you are strongly advised to check that they would be viewed as freelancers in the eyes of HMRC. Consult your accountant or legal advisor and check this HMRC guide called Are your workers employed or self-employed for tax and National Insurance contributions.
Managing your staff, setting expectations and avoiding disputes
You're taking a big risk by introducing a stranger into your business and mistakes can be time consuming and costly. Here are a few idea to help you mitigate this risk:
- Have an agreed job description or role definition from the outset
- Set clear expectations on the duties, the level of performance and how it will be measured
- Agree on a probabtion period of a few months before confirming their employment
- Be clear on what is, and is not, acceptable behaviour
- Have clear and written guidelines on use of company property and resources, specifically including personal telephone internet and email usage. Get an Email and Internet Acceptable Use Policy that sets out the rights, responsibilities and limitations on the use of organisational internet and email facilities.
- Have a clear and written grievance and disciplinary procedure
Alternatively you might want to consider using an outsourced HR management company to ensure you are legally compliant.
Next steps to employing staff
Taking on staff for the first time
It's a big step for a small business, here is some food for thought on how to make the most of taking on additional people to work in your business.
The role you want your new member of staff to perform
Employing someone might not be just a way of getting an extra pair of hands: think about any existing staff, how you would like your organisation structured, and what new skills you might want to introduce to your business to help its growth and development. This thought process gives you the opportunity to consider the function of the role and at what level of seniority you want the new person to work at. Do you want someone who can deputise for you in your absence, for example, or would the business benefit more from someone fulfilling a more junior or operational role?
Working hours: full-time, part-time, short-term, or freelance?
Don’t just think you need to employ someone on a full-time basis, you could employ someone on a part-time basis to save paying a full-time salary, just for the duration of a project or a specific piece of work, or you could bring in specialists on a freelance basis.
Be clear on your requirements and reasons, and make sure your prospective employee/freelancer is very clear as to the terms under which you are employing them or buying their services.
How much should you pay your staff ?
You need to pay your staff at least the national minimum wage but, depending on their role, you maybe paying them a lot more than this. In order to attract and retain the best candidates check the current rates being paid by firms in your industry for similar roles.
As far as your costs are concerned, remember to factor in employer's NI contributions and the cost of running or outsourcing a payroll, as well as the cost of any additional perks and benefits you offer.
Also remember that if you employ staff you must, by law, have employer’s liability insurance in place. Don’t risk a fine by not having this compulsory insurance. You can get a quote for employer’s liability insurance here.
How to pay your staff
If you employ staff whether it's full-time, part-time or short-term, you are responsible for deducting the correct amount of tax and NI contributions from their pay and submitting it to HMRC. You can submit tax and NI contributions for your employees online. Employers with fewer than 50 employees aren't required to do so yet, but you can get a tax-free payment from HMRC if you file online before it becomes a requirement!
For more information on minimum wage rates and operating a payroll see our Checklist for taking on staff.
Paying freelancers and how to check if they should really be employees
Freelancers are responsible for their own tax and national insurance contributions so this could be a simple way to get the additional skills and resources your business needs without the regulatory overhead involved in setting up a payroll and complying with other legal obligations.
However this is a complex area and a topic of hot debate amongst small business owners, their accountants or tax advisors, and HMRC. Typical terms you will hear mentioned are IR35, managed services companies, personal service companies, or intermediaries.
If you are considering taking on someone on a freelance basis you are strongly advised to check that they would be viewed as freelancers in the eyes of HMRC. Consult your accountant or legal advisor and check this HMRC guide called Are your workers employed or self-employed for tax and National Insurance contributions.
Managing your staff, setting expectations and avoiding disputes
You're taking a big risk by introducing a stranger into your business and mistakes can be time consuming and costly. Here are a few idea to help you mitigate this risk:
- Have an agreed job description or role definition from the outset
- Set clear expectations on the duties, the level of performance and how it will be measured
- Agree on a probabtion period of a few months before confirming their employment
- Be clear on what is, and is not, acceptable behaviour
- Have clear and written guidelines on use of company property and resources, specifically including personal telephone internet and email usage. Get an Email and Internet Acceptable Use Policy that sets out the rights, responsibilities and limitations on the use of organisational internet and email facilities.
- Have a clear and written grievance and disciplinary procedure
Alternatively you might want to consider using an outsourced HR management company to ensure you are legally compliant.
Next steps to employing staff