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How to hire an employee

Learn how to correctly hire an employing including advice on when to notify HMRC, employment contracts and setting up pensions
Rachel Bridge

/ Last updated on 30th October 2017

No matter how efficient and hard-working you are, if your business is going well, there is going to come a time when you will need to employ someone to work in your business with you.

Related: How to recruit great employees

How it works

Taking on your first employee can be a real milestone in the business – having been free to work how and when you please, you will now need to create a more formal structured working environment to accommodate them so that you can account for their time and yours. That can be quite a shock initially. You also need to think carefully about the type of person you wish to hire. Before recruiting someone, draw up a list of skills and attributes you will require of them – and bear in mind that because you are a start-up business the exact nature of the job requirements may change as the business evolves, so you will need to find someone flexible and adaptable who is prepared to do other roles if required.

The practicalities

Whether you are hiring a full time or part time employee you will need to adhere to the following:

1. If you are hiring someone as an employee, you will need to register as an employer with HM Revenue & Customs (HMRC) to set up a payroll, deducting tax and National Insurance contributions from your employees’ pay and forwarding the money to HMRC. Take a look at their ‘Employing people’ section for detailed information.

2. The moment an applicant unconditionally accepts your offer of a job, a contract of employment comes into existence. The terms of the contract can be oral, written, implied or a mixture of all three. Even if you do not issue a written contract, you are under a legal duty to provide most employees with a written statement of main employment particulars within two months of the start of their employment with you.

3. Your employees must be paid at least the national minimum wage and are also entitled to a minimum level of paid holiday, a maximum length of a working week and minimum levels of rest breaks.

4. If your employee is off sick for more than three days, they will be entitled to statutory sick pay. They may also be entitled to maternity, paternity or adoption leave and statutory pay.

5. Under new rules coming into force, your employee may also be entitled to compulsory pension contributions.

6. Before taking someone on, you will need to ensure that they are legally allowed to work in the UK. Failure to do so could result in a fine or even imprisonment.

7. You must make sure the working environment is safe and secure.

8. You must take out insurance to protect against claims for any illnesses, injuries or diseases your employees may pick up as a result of working for you.

9. You must treat your employees fairly and avoid discrimination. If things do go wrong, all employees are entitled to fair treatment, whether you have to dismiss them, make their position redundant or if you are selling your business.

10. If your employee is disabled, you must make reasonable adjustments to reduce or remove the impact of physical features of your premises if they put the employee at a substantial disadvantage compared with non-disabled employees.

Things to consider

If you wish to take someone on for a specific length of time or to do a specific task, then it might be better to give them a fixed-term contract.  The advantage of this is that you are only hiring them for the length of time you need them.  If you also have permanent employees, you must treat a fixed-term employee, in the same way, giving them the same pay and conditions, the same benefits package and pensions scheme and the same opportunity to apply for vacancies for permanent posts.

Top tip

When you hire an employee, always take them on initially for a trial period of say six months, after which time both sides can review the situation to see if it is working.

Useful resources

  • HMRC –
  • HMRC New Employer Helpline on Tel 0845 60 70 143
  • Pensions Advisory Service Helpline 0845 601 2923

Case study

Andy Moffat started his business, Redemption Brewing, in 2009 after quitting his job as a bond trader. He found an industrial unit to rent in Tottenham, north London, which he turned into a microbrewery to produce cask-conditioned real ales.

He started out by doing all the work himself, from building the brewery to making and delivering the beer, but as sales have grown, he has taken on a full-time employee to work in the brewery, freeing him up to concentrate on doing the deliveries. As production has increased further – he now supplies his beer to 70 pubs in London – he plans to take on a second employee to do the deliveries so he can focus on bringing in more sales. He said: “One of the best things is when people email me saying they enjoyed my beer,” he said. “It is a great feeling when you have made something, and people have really liked it.” ends.

Related: A guide to recruitment for small business

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