If you are taking on a new employee, you need to be aware of a whole range of issues. With staff come a range of responsibilities that you, as an employer, are required to fulfil.
Taking on the first employee in your small business is something you should take real care doing. What many employers don’t realise is that small errors in an employee’s early days can cost them thousands of pounds.
To help you successfully hire your first member of staff, here are 4 key things that you must get right.
1. Before you even think about employing anybody…
If you don’t have employer’s liability insurance yet – put that on your to-do list for today. Before you take on an employee, by law you need to have cover at a minimum of £5 million. Otherwise you risk facing fines of around £2,500 per day.
There are some situations where you may not need cover – for example if your employees supply their own materials, or if you don’t deduct NI payments or income tax from their pay.
However, check the rules carefully, as even if someone is declared as self-employed for tax purposes, you may still need employer’s liability insurance.
Finally, you’ll need to display your policy certificate to your staff, detailing the minimum level of cover provided and the company covered. You can even display it electronically if you’d like (as long as staff have computers to access it), so there’s really little excuse – make sure it’s in a folder where your employees can read it if they want to.
2. You must check employees have the right to work in the UK
Before employing a new worker, you’ll first need to check that your new staff member has the right to work in the UK. If this isn’t done correctly you could be liable to a fine of up to £20,000 per employee that isn’t allowed to work here.
There’s a fairly simple system to confirm this though. It’s called ‘Obtain. Check. Copy’ – a process that does pretty much exactly as described.
The first thing to do is ‘Obtain’ the new employee’s original documents, for example a passport if they’re a UK or EEA (European Economic Area)/Swiss citizen, an immigration document or a certificate of permanent residence. These may be time limited, so be sure to take note of when they are due to be renewed.
Next, you’ll need to ‘Check’ these documents. Look out for consistency between the candidate and any photographs; expiry dates; restrictions on work; different names due to marriage, divorce, deed poll, etc. (you’ll need proof of those documents too); and of course, make sure the documents are in fact real!
Last, make a ‘Copy’ of the documents for your records. With passports, you’ll only need the photo page with all the important information on it. However, with other documents you’ll need to copy both sides.
You must keep these copies on file for no less than two years after the employment has come to an end. It’s best to take note of the date you checked too – especially if they are going to need to be renewed.
3. Get your tax right
Next up is HMRC. When taking on your first member of staff, you will need to register yourself, and your new employee with HMRC.
There’s a quick and simple government web portal where you can register as an employer. You’ll need to do this before you pay your new worker and it usually takes about two weeks to get set up.
To register your employee you will need to do a Full Payment Submission. In order to register your employee in this way, you’ll need a P45 from their previous employer if possible – that’s if they earn above £120 per week (2020/21) and qualify for PAYE.
Be sure to take into account any Student Loans and National Insurance too before starting to register them.
If you are a new employer, you’ll get 30 days to register your new employee once you have paid them; but don’t miss the deadline as you could incur a fine of at least £100.
4. Ensure you are covered by your employment contract
Contracts are the basis of your new employee’s agreement to work for you, so it’s essential that you get them right.
What type of employment contract do you need for your new employee? Permanent? Fixed Term? Zero Hours? Annualised? These are crucial questions to ask yourself when considering taking someone on.
When you have your new employee, there’s a few key pieces of information you need to include (beyond the obvious name, date etc.) in their employment contract. Check that you have the following:
- Start date
- Job role (a job description may be outlined in a contract but is often provided as a separate document)
- The address of where they will work
- Their hours of work
- Their salary, including when it will be paid
- Holiday entitlement
- Any probationary and notice periods
Once you have all this information, and anything else you might need to include, make sure you issue it on time! You’d be surprised how many employers think it’s OK to rely on terms of employment from emails and other conversations – which it isn’t.
It’s in fact a breach of employment law not to issue a contract within two months of your new employee starting. So note it in your diary, stick post-its where you’ll see them, or set a reminder on your phone – just don’t forget!
We’ve looked at just four of the most important elements of hiring an employee here – but there are other things to think about read up on.
For example, are you sure that your workplace is safe and secure for your employee to work in? Have you provided them the right amount of holiday? Are you set up to handle their personal data securely? Do you need a first aider? All of this and more you’ll need to bear in mind when taking on a new member of staff.
It might sound like a lot to think about, but remember, your people are your most important resource when growing a business.
Some of it may even sound obvious to you, but it is well worth paying close attention to it all to ensure you don’t get caught out. After all it’s best to spend your money growing your business rather than on penalties to HMRC!
This guide has been written for ByteStart by David Lester, Founder of citrusHR – the small business HR experts with a fresh, affordable way to keep up with employment law.