If you have been working as a sole trader for a while and business has been going well, you might be ready to start thinking about taking on your first employee.
That’s great news, but there are a few things that you will need to consider first to make sure you are ready to become an employer.
Can you afford to take on staff?
Before taking on your first employee it’s a good idea to sit down and go through your accounts to make sure that you can actually afford a new member of staff.
It’s not just their monthly pay check you need to be able to cover, as well as their salary you will need to factor in things like:
- pension contributions
- sick pay
- National Insurance contributions
- maternity or paternity pay
- holiday pay
If you have an accountant it is a good idea to have a chat with them before you make any big decisions as they will be able to advise on your payroll liabilities and help you with budgeting.
You will need to set up a workplace pension scheme
All businesses are required to provide an automatic pension enrolment scheme to all qualifying employees.
On top of paying your new employee’s monthly salary you must also pay pension contributions of at least 3% of qualifying earnings, unless employees specifically opt-out. All employees must be given the option to join a workplace pension scheme.
There are various types of pension schemes available to you as an employer, find out more about your obligations and options here.
You must notify HMRC that you are going to be an employer
When you are ready to move from business owner to employer you will need to let HMRC know of the change and register as an employer up to 4 weeks before you pay your new member of staff.
You are responsible for making the necessary PAYE deductions and paying these to HMRC.
Choosing a payroll system
If you have people working for you then you need to have a payroll system in place.
You can choose to use payroll software or you can use an accountant to carry out the payroll for you. By using an accountant, you can make sure you are kept up-to-date with national minimum wage requirements, statutory requirements and statutory deadlines, as well as being confident that everything is submitted on time and that you are acting within statutory law and guidelines.
You must have Employers Liability Insurance
Employers Liability Insurance covers you as a business owner if any of your staff should suffer injuries, illnesses, or even death, as a result of the workplace.
You must get Employers Liability insurance as soon as you become an employer. The policy must cover you for at least £5million and come from an authorised insurer. You can be fined £2,500 for every day that you are not properly insured.
You will need to carry out any necessary checks on your new employee
You are required by law to check that an employee is eligible to work in the UK. If you do not check this, you could face a £20,000 fine.
It is also a good idea to do a Disclosure and Barring Service (DBS) check to receive information on the criminal record of an applicant. This can be a more detailed check if working in certain roles such as within child services or healthcare.
As you can see, there is a lot to think about before you take on your first employee. If you have any questions about payroll, budgeting, or your obligations to HMRC, feel free to get in touch with us here at Magpie Accountancy.
