How to hire your first employee.

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With a growing start-up company, it is an exciting turning point for many when we realise we have enough workload and income to take on our first employee. But, there are a number of factors to consider before taking the plunge on your first hire.
First Employee Hire

You become an ‘employer.’

While this might sound glaringly obvious, it is essential to recognise the differences between working for your own company alone and actually becoming an employer. It isn’t just a case of selecting a candidate and getting to work – there are many important legal aspects to consider when taking on your first employee, so let’s take a look at what we have to put in place before sending out those job vacancies.

Contract of employment  

Before you even consider thinking about how to attract the right talent to your company, you have to get the basics put in place properly. A contract of employment should state (at the least) a job description of the role you are filling; hours of work; salary; holiday entitlement; sickness policy; pension scheme information; notice periods and any disciplinary procedures.

Your employee will need access to this, preferably before their start date, but no later than two months after they start their employment – so it is worth putting the time into getting this right before you start advertising your job. We’d recommend hiring a solicitor to help you draft your contract. This way you have it ready for if you need to expand your team again and it should prevent you running into legal complications with an invalid contract at a later date.

Salary for your first employee

It’s critical to work out your salary expectations before you start to interview. It’s good to do your research here on what the average salary is for the skill level you are hiring for to get an idea in your mind of where you should be setting your salary. Rather than just having a fixed rate that won’t budge, it can be useful to consider a moving number with a lower and upper limit, depending on the age and experience of the candidate you interview and what you think they could bring to your company.

As a small company, often it can pay off to offer a slightly higher than average salary for an experienced candidate that can drive your business forward, rather than going for the cheaper option of someone with less experience. Often an inexperienced employee will need a lot of training, and that could end up being more costly in the long run so do consider this before you make your decision. Keep in mind when you are working out your job salary that you will be required to pay the 12.8% National Insurance Contribution for your employee and don’t forget to consider any benefits or extras you are offering in your package too.

Payroll

Now that you have decided on your salary level you need to consider how you will legally pay your employee and you will need to establish a payroll scheme with HMRC. They have a new employer helpline and can register your business and send you out all the necessary information to get you started. (HMRC New Employer helpline on 0845-60-70-143).

Having an accountant is often worth the cost as they can deal directly with payroll on your behalf and set up all the necessary legal systems with HMRC as well as help you manage your accounts with the business. They can take on the job of preparing payslips and making payments of PAYE/NIC to the Collector of Taxes. However, if you don’t want to go through an accountant, it is possible to manage this yourself. We’d recommend purchasing software to help you with your calculations, so you don’t run into any nasty surprises later on if the numbers don’t add up.

Employer’s Insurance

As an employer, you will need to make sure to protect yourself and your business through insurance. The law requires you to have an employer’s liability insurance but the good news it is straightforward to organise and will probably cost you in the region of £200 per year (depending on your business).

Health and Safety

Employees have never been more aware of their rights in the workplace, and it is essential you are adhering to health and safety regulations.  The Health and Safety Executive (HSE) is responsible for checking standards in the workplace, and if you are found not to be up to scratch, you could face hefty fines and even prosecution.

Avoid any health and safety problems by getting legal advice from the start of your venture – talk to HSE and the small business service at the Department of Trade and Industry. Information packs are available from the HSE, and they have an information helpline to talk you through any questions you may have. It is worth investing the time in this before taking on your employee to avoid problems later on.

Religious Holidays

You must be aware of your employee’s rights regarding religious holiday entitlement (dates for the upcoming year 2019 can be viewed here )Even if this is taken as annual leave, you must allow employees to celebrate their religious holidays, and by refusing time off for this, you could open up a huge can of worms concerning compensation claims. Companies have been known to have had to pay out over £10,000 in compensation for refusing religious holiday allowance, and as a small business venture, this kind of payment could utterly crush your growth.

Attracting the right talent

So, now you have all the legal aspects properly in place – the exciting part can begin. You get to expand your growing business but to keep growing you need to attract the right candidate. Of course, it is always great to use contacts and networks you have already started to build first. If you can source a brilliant candidate this way, then you can avoid any fees. Similarly, if you have a following on social media or a blog as a business, you could advertise your role that way and see who responds.

Failing these avenues, there are some brilliant sites out there that are looked at by thousands of potential clients every day. Agencies can be great at sourcing your talent for you but make sure to be very clear on your arrangements and fees before you agree. You need to be entirely sure of their commission structure so that you aren’t left out of pocket more than you had budgeted for.

Interviewing your candidate

Because you’ve already put in the groundwork to think through salary expectations and the contract of employment you can be very clear during the interview process on what great benefits the job will offer the potential employee and this will be useful if they have any questions regarding their package. It would be worth carefully considering the types of questions you will ask during the process, and what you want to learn about someone who may be coming to work or your company, so you are prepared.

Legally, there are also some points to keep very clear whilst you interview. The laws surrounding discrimination in the workplace are very tightly put in place, so you need to be aware of what those laws are.

  • Firstly, you must not discriminate against race, age, gender or religion while you interview, and none of your questions should be geared towards asking for this information.
  • Next, you need to know that all employees on the same work level are entitled to the equal pay – for example, it is illegal to pay a male more than a female when they are in the same role.
  • Thirdly, you cannot discriminate against disability. You may be required to adapt and make reasonable changes to your workplace to allow someone with a disability to access the work.
  • Finally, make sure you are aware of maternity and paternity rights too before starting your interview process.

Disciplinary procedure

In an ideal world, you will have managed to find the ‘right fit’ for your company during the interview process, and you will not need to use disciplinary action against your staff. However, even if you never need to use it it is vital you have a structure in place that everyone in the workplace is very clear on.

Unfair dismissal claims can wreak havoc on a small company, and so if you decide you need to start a dismissal process, we would advise you pay for sound legal advice first.

What type of employee do you need?

It is also worth considering if you need a full-time employee when you first start to hire for your company. Some of the above issues can be avoided if you decide to hire part-time, agency or self-employed workers.

However, the growth of your business and what is right for you should come at the forefront of your decision-making process and then you should start to prepare your workplace, so it adheres to the legalities surrounding becoming an employer.

by Mahshid Javaheri

Mahshid Javaheri

After working as a solicitor for 3 years, Mahshid joined Legafit.com as an Editor and contributor of legal content. Mahshid is passionate about connecting practicing lawyer with the wider business community; she helps lawyers create and distribute insightful and actionable legal content that delivers value to businesses, whilst showcasing the lawyers’ expertise.

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