So, you have followed the advice in our article on managing your finances when starting a new business and have now successfully established your own company. Congratulations! With any luck, you are starting to get nice and busy. Maybe you could even do with a helping hand?
Recruiting staff is a massive, and quite scary, step. There is a huge amount of responsibility which comes with employing a member of staff. Not only legally, but financially too.
Is your business ready?
Before you jump in both feet first, make sure that your business is financially ready to take on a staff member. By employing another person, you are committing to paying their wages for as long as they are with you. Alongside a new salary to pay, there will also be other financial commitments:
By taking on this responsibility too soon, you may experience cash flow issues and get yourself into a bit of a tricky spot. Begin by setting up a meeting with your financial adviser to review your finances. They will be able to check that you are in a comfortable enough position to take on the extra financial commitment.
Steps for hiring your first employee
If you and your adviser come to the conclusion that you are in a good position to employ your first member of staff, it’s time to crack on. There is quite a bit to remember so we would recommend a to-do list!
What job is on offer?
First thing’s first, define the job role. You need to be clear and specific about what you would expect your new employee to do. Though, you should also leave enough wiggle room to allow their role to adjust and grow as your business continues to flourish.
Once the role has been defined, you’ll have a better idea of the number of work hours needing to be covered. Do you need someone on a full-time basis (35 hours or more a week) or is a part-time contract more suitable?
It doesn’t matter whether you hire on a part-time or full-time basis – both should get identical treatment on:
- Pay rates
- Pension opportunities and benefits
- Training and career development
- Selection for promotion and redundancy
- Opportunities for a career break.
Decide on the salary
Once you’ve settled on the job role and contract type, it’s time to think about salary. Any person you employ should receive at least the minimum wage, which varies depending on age. As of April 2019 the current rates are:
- Apprentice £3.90 per hour
- Under 18 £4.35
- 18-20 years £6.15
- 21-24 years £7.70
- 25 years and over £8.21
Generally, employers will choose the salary they offer dependant on experience. Someone who has many years of sales experience and will help your business grow, for example, will expect a higher salary than a young person, straight out of college, who will undertake basic admin duties.
Either way, a new employee should be bringing value to the business. Whether that is generating more cash or simply freeing up your time allowing you to build your business further. To get a good idea of the salary you can expect to pay, check out similar roles being advertised.
Recruit someone and carry out employment checks
Now, the exciting bit. It’s time to recruit! You must make sure you recruit employees fairly – avoid discrimination and make the process accessible for all. Display your vacancy advert in as many places as possible to increase the chances of your ideal candidate spotting it. Once you’ve created a shortlist, you can invite your chosen few for interview. By the end of the interview process you should have whittled your list down to one or two contenders. Making the final decision may simply come down to who you think will fit in the company best.
Once you’ve chosen your candidate, don’t forget that it’s your responsibility to check that the person you hire has the legal right to work in the UK. If you don’t you could be hit with a civil penalty of up to £20,000.
When you’re happy with everything, it’s time to issue a contract.
As soon as you become and employer you must get Employers’ Liability Insurance. It must cover you for at least £5million and come from an authorised insurer.
The purpose of Employers’ Liability insurance is to cover you in case your employee is injured or becomes sick because of the work they do for you.
If you don’t take out Employers’ Liability insurance, you can be fined up to £2,500 for every day of which you are not covered.
Tell HM Revenue and Customs (HMRC) by registering as an employer
This can be done up to 4 weeks before you pay your new staff member. You will be responsible for paying your new staff member the pre-agreed salary and deducting any income tax and national insurance contributions.
Set up a company pension scheme
If your new employee is over 22 and earns at least £10,000 a year you must enrol them in a workplace pension scheme. As an employer you should pay at least 3% of the employee’s qualifying earnings into the pension scheme.
If you do not pay the minimum contribution, or make late payments, you could be fined.
You can use the Pensions Regulator’s tool for employers to find out exactly what you need to do and when you need to do it.
Setting up an auto enrolment scheme can be a bit of a headache! But don’t fret, your financial adviser can give you a helping hand with this. Here at Face to Face Finance we will do all the hard work for you in 10 easy steps. We can cover everything from acquiring terms from different providers to putting together and delivering a presentation for your employee(s) explaining the scheme.
Get help and advice if you need it
Phew, see what we mean when we say there is a lot to remember! If this has caused you to break out in a cold sweat, don’t panic. There are plenty of places you can find help and advice. The Gov.uk have a whole host of useful articles.
You can also speak to other small businesses who have been there and done that. It’s a very friendly community. Or, if you need someone who knows exactly what they are talking about, consider talking to an HR company.
Now go, enjoy the exciting, scary ride of becoming an employer!