Hiring your first employee is a momentous occasion for your business. It's right up there with launching your website, securing your first client or customer, or making your first million!
For many UK startups, that first hire isn't always such a joyous occasion. Instead, it usually involves wrestling with apparently never-ending red tape.
However, don't let that dissuade you from taking the plunge and hiring your first employee. By understanding your legal obligations before you start the hiring process, you'll find that it's not as tricky as you expected.
Let's look at every step UK companies should follow when hiring their first employee.
We'll try to keep these steps in chronological order, but in some circumstances, you may need to skip steps and return to them later.
Planning and Prep
Before you start your search, set a few things straight. All of this prep work should be relatively straightforward, but it's worth clarifying the basics before you dive in.
- Are you ready to hire your first employee? If you're reading this article, the answer is probably yes! Check your cash flow can handle the extra pressure and that your company actually needs the extra help.
- What role will they take? Write down a job description for your new employee and pin down the skills they need to have and the responsibilities they'll take on. You should also think about whether the employee will need to work full time or if fewer hours will suffice.
- Determine a salary or wage. Look at typical market rates for your region and choose a suitable salary or wage range. You can alter the salary offered based on skills and experience, but set a firm upper limit to control your spend.
- Consider the other costs of becoming an employer. Estimate the extra bill you'll face for hiring staff. This includes NICs, employer liability insurance, pension contributions, office costs, benefits and sick pay. Try out this online calculator if you need a hand.
- Will you need a larger workplace? If you're in a home-based office, figure out if there's space for an employee to work there. It might be a good time to rent out some office space or at least search for a local co-working space.
Once you've covered these basics, it's time to start the hiring process.
Finding the right first employee for your company is incredibly important. With the limited resources you have available, you can't afford to get it wrong.
- Write the job advert. Take the job description you created previously and flesh it out. You'll also need to add some information about your company, pay, and required and desired skills or experience.
- Advertise the role. Publish the advert on your chosen job boards - they can be general boards like Indeed or Monster or industry-specific boards. You could also advertise the role in the local press, or elsewhere.
- Filter candidates. All being well, you'll soon receive plenty of applications. Some will be incomplete or clearly inadequate, so ditch these immediately. Take a closer look at the remaining applications. Invite no more than five for interviews - or perhaps more if you want to carry out multiple interview rounds.
- Hold interviews. If you don't have a suitable space available, rent an interview room or find a local cafe that can act as a decent venue. Check out our list of insightful interview questions to fully understand whether a candidate is a good fit for the role.
- Check if candidates have the legal right to work in the UK. In the UK, you're legally required to check the original documents of candidates and keep copies for your records if they are employed by you.
- Offer the job. Select the candidate who's the best fit and give them a call or send them an email stating that you're offering them a job. State the salary they'll be starting on - be ready for some negotiation. State the date their employment starts, and any conditions on their offer (give information on any pre-employment checks you need to carry out, for example).
- Pre-employment checks. Get in touch with referees, carry out DBS checks and health checks if required, and verify the validity of any qualifications you want to double-check.
The recruitment process can be a bit of an administrative nightmare, particularly when you're managing bucketloads of applications. Avoid this problem with a well-written job advert and don't be afraid to be ruthless when whittling down applications.
One-off Admin Tasks
Now that you're ready to welcome your chosen employee to the business, your next batch of paperwork begins. Thankfully you'll only need to carry out these tasks a single time (either in total or for each new employee).
- Create a written statement of employment. Within two months of the start of the employment period, you are legally required to provide the employee with a written statement of employment. This document should include the main conditions of employment.
- Take out employers' liability insurance. This is a legal requirement and helps cover you if an employee becomes injured or ill because of work they carry out for your busines.
- Register as an employer with HMRC. You have to do this before your first pay day. Do this through the Gov.uk website.
- Choose how to run payroll. You do this yourself using payroll software, or have an accountant or other payroll provider run payroll for you.
- Set up an auto-enrolment pension scheme. Find out your 'staging date', choose your pension scheme and register it. You also need to provide the new employee with information about the scheme if they meet certain criteria.
- Provide keys, set up accounts (email, Google Drive, social media etc). Ensure that your new employee has access to all the resources they require so that their first day goes smoothly.
Here's the part of hiring employees that most of us dread - the ongoing admin tasks that you must complete as an employer if you're to stay within the law.
You can't neglect these tasks, so there's no point delaying them or avoiding them entirely.
- Run payroll. If you don't want to spend the time running payroll, pass your data over to your accountant and ask them to run it for you. You also need to distribute payslips, P60s and other paperwork when required.
- Make pension scheme contributions and manage your pension scheme. You'll need to continually check which employees qualify for your pension scheme, process requests to join and leave the scheme, manage contributions and keep records.
- Follow health and safety workplace rules. Now that you're an employer, you have to ensure that your employee(s) are safe at work. Check that you're offering all the workplace facilities you need and that you have first aid arrangements in your workplace.
- Track attendance, hours, and leave. Implement and maintain a system for managing this information. A spreadsheet should be sufficient for a single employee, but if you want to futureproof your business consider a scalable solution like RotaCloud.
- Manage benefits. Flexible working, cycle-to-work schemes, and any other benefits and perks need to be managed. You probably won't need to worry too much about this until you hire more employees, but by starting off on the right foot you'll make this easier in the long run.
- Maintain records. You are legally required to hold certain staff records including information on pay rates, payroll, sickness (of more than four days), and any workplace accidents or injuries. It's also a good idea to keep the employee's contact details on file, as well as copies of employee contracts and other documents, and staff disciplinary records.
Hiring Your First Employee - Checklist
We've covered a lot of ground in this article - if you'd like a more compact version of the points we've covered, here's a PDF checklist.
Overall, hiring your first employee certainly requires extra paperwork, but not quite the mountain you might have expected. There are plenty of tools available to help you manage staff and further reduce the admin burden your first employee places on you.
Don't let the red tape hold you back: if you're ready to hire your first employee, go for it - but keep this checklist handy!