Recruiting and employing your first employee can be an exciting time. However, there are some pitfalls to avoid if you want to make the process as stress-free and safe as possible:
- Do you need to employ someone? This may sound obvious but there are alternatives to employing someone. Employees are good when you want to have control over what work is done, when and how. It can also help give you certainty that they will be available for work. However, employees also have additional rights such as the right to sick pay (assuming they meet the requirements), right to redundancy payments etc. You should consider whether sub-contracting the work is more suitable as sub-contractors have fewer rights and it is easier to terminate their contracts.
- Draft a job description: This should contain all the necessary and desirable skills the right candidate will have and will make the recruitment process easier.
- Apprentices: If your employee will gain a work-based qualification then you should consider whether an apprentice will be appropriate. Employers who employee apprentices may be eligible for grants and the national minimum wage is usually lower for apprentices.
- Pensions: Auto-enrolment means that all employers, regardless of size, will have to provide a pension to their (qualifying) employees by 2018. Factor in the costs of the pension when you are considering what you want to pay your employee.
- Check that you are offering the national minimum wage: The national minimum wage legislation is complicated and some deductions or benefits affect the wage you pay, whereas others do not. Employers not paying the national minimum wage can face large fines. The national minimum wage increases annually so be careful to check that you keep up to date.
- Contract of employment: All employees who are due to work for 2 months or more are entitled to receive a written statement of their terms and conditions of employment. However, it is advisable to provide them with a more detailed contract so that you can include clauses that will provide with additional powers and protection e.g. the right to recuperate certain costs from your employee.
- Get proof of identity: Employers need to be satisfied that all of their employees are eligible to work in the UK otherwise they can face fines of up to £20,000 per illegal employee. Be sure to obtain and keep copies of their identification as this can act as a defence to any action by the government.
- Get employer’s liability insurance: your policy must cover you for at least £5 million and come from an authorised insurer. You can be fined £2,500 per day if you do not have insurance.
- Register with HMRC as an employer: You must do this before the first payroll. https://www.gov.uk/register-employer
- Set up a payroll: Your accountant will be able to do this for you or you can purchase software. Employers who employ nine or fewer employees can also use HMRC’s free Basic PAYE Tool: https://www.gov.uk/payroll-software
Morton Legal specialise in advising businesses on all aspects of employment, company and commercial law so please contact us if you have any queries.