Guide to Employing Someone for The First Time

Hiring an employee for the first time as a small business or sole trader signals confidence in your future and represents the step from being a solo operation to being a manager/team leader. However, it also comes with legal responsibilities and costs; our guide on employment laws small business need to know can help you with any questions.

This guide walks you through the hiring process step by step, with a focus on compliance, as well as the importance of supporting employee wellbeing and mental health to build a sustainable and positive working environment.

How to employ someone as a sole trader or small business

Making the right decision 

Before you start sending out advertisements for the role, you must consider whether it’s the right time for your business to bring in a new employee. The temptation to begin hiring can be extremely strong, but doing so prematurely could cost your business in the long run.

Hiring a new employee can cost a business thousands of pounds, when factoring in payroll systems, insurance, equipment, administration and training time. Before hiring, consider:

• Can you comfortably cover both the hiring costs and the salary, even if your revenue temporarily declines?
• Is there a consistent volume of meaningful work to keep this person productively engaged?
• Do you have the time and resources to properly train and manage them?
• Will bringing in this person help generate income, reduce expenses or allow you to focus on higher-value tasks?

If your answers are mostly ‘yes’, the next step is to determine what kind of working relationship best fits your needs.

What type of employee do you want to hire?

Understanding what type of working relationship suits your needs will affect who you recruit and the financial obligations that come with it. Take a look at three different working relationships you can choose from below:

• Employees

Employees work under a contract of employment where the employer has a significant degree of control over what work is done, how it is done, and when and where it takes place. In return for their work, employees receive wages or a salary and are entitled to a range of legal rights and protections. This working relationship tends to attract the highest costs through employer National Insurance, holiday pay, pension contributions and statutory payments.

A common type of employee is an apprentice, who will get practical work experience together with formal training and education. If you have the time to invest in their guidance and mentoring, apprentices can be a great first hire for a small business. Take a look at our guide on why you should consider hiring an apprentice.

• Workers 

All employees are workers, but not all workers are employees. A worker is expected to perform work and receive core protections such as holiday pay and the National Minimum Wage, but they don’t receive the broad spectrum of employment rights that employees do, and often have casual hours arrangements and flexibility.

• Self-employed 

This type of working environment is different from the other two, as a self-employed person will perform work that you have contracted them for, but they are not strictly under your management. Someone who is self-employed runs their own business, controls how they work and can send invoices for their services. 

Creating a strong job role

If you have decided the time is right to take on a new employee, then it’s start crafting an effective job description. This will attract suitable candidates, provide a clear framework, form the basis of the employment contract, and will set clear expectations from the outset. Consider these when forming the job role:

• Job title – Try using industry-standard titles that will make the job easy to find for possible candidates. 
• Key responsibilities – List some of the main responsibilities you will need your new hire to carry out, and be specific. You don’t want there to be any misinformation that catches the employee off guard when they start.
• Purpose of the role – Detail why your business needs a new member and how it will contribute to the company’s objectives. 
• Essential requirements – You should list the qualifications, skills, and experience needed, but be aware that the more requirements there are, the smaller the application pool will be. Try to avoid unnecessary requirements that could be seen as discriminatory. If someone could learn it in the first month, it is generally not considered an essential requirement. 

It’s important to avoid phrases and language that could be seen as discriminatory – for example, phrases such as native English speaker’ or ‘recent graduate’ may disadvantage certain groups and should generally be avoided unless they can be objectively justified. If a high level of English is required, try using the phrase ‘requires advanced English proficiency’.

 Set up the essential systems 

Before you begin the recruitment process, there are a couple of essential systems your business must put in place. These include:

• Registering as an employer – Before the first payday, and if your employees earn above a certain threshold, you must register as an employer through HMRC. Online registration should take around 10 to 15 minutes.
• Preparing your payroll system – No matter what system you’re using, it must be ready before your new employee begins. Some businesses manage their payroll through software and others may outsource it to an accountant. 
• Employer’s Liability Insurance – This is a legal requirement, and failure to have Employer’s Liability Insurance can result in heavy fines.
• Researching workplace pensions – If you set up pension schemes in advance, it will avoid last-minute issues and ensures you are fully prepared for your new starter.

Once all these systems are in place, it’s time to start searching for the right candidate.

The recruitment process 

There are three main steps to the recruitment process:

1. Advertise the role for potential candidates 

Where and how you advertise will all depend on your budget. Websites such as LinkedIn and Total Jobs tend to cost more for advertising job listings, whereas websites such as Indeed offer cheaper pay-per-click opportunities. If you want to keep it free, you can advertise on Facebook groups or your own social media. You can even try word-of-mouth through networking and university or college events. 

When you are writing advertisements, you want to be compelling while still being honest about the realities and challenges of the role. Overselling the job may lead to employees leaving early, but underselling will fail to attract the right candidates.

1. Be selective and structure your interviews

When the applications start rolling in, you’re going to want to shortlist your candidates based on criteria derived from your job description and requirements. You can reduce bias by having someone else review the applications with you.

Structure is critical when it gets to the interview process. You’ll want a list of predetermined questions you can ask every candidate, as this may allow you to better assess job performance and create easy point of comparison between candidates. Some roles may also benefit from a practical assessment to judge the candidate’s abilities. 

1. Make the offer and conduct background checks 

Many UK employers can only make conditional offers after the completion of pre-employment checks. The conditional offer should specify the job title, working hours, salary, start date, probation period, and what pre-employment checks must be met.

Before employment starts, a right to work verification is legally required. For British and Irish citizens, original passports can be checked. For everyone else, the Home Office online checking service can be used.

If the role involves children or vulnerable adults, DBS checks are required. Be conscious that requesting checks beyond what the role requires can create data protection and discrimination risks.

Employers then need to agree to the main terms and conditions of the role, offering the following documents to the new hire:

• Conditional or formal offer letter
• Written employment contract 
• Employee handbook and equivalent policies 
• Any role-specific policies 

How to pay employees in a small business in the UK

Payroll ensures that the correct Income Tax and National Insurance contributions are deducted from employees’ wages under the PAYE (Pay As You Earn) scheme. As a first-time employer, the process for paying employees in a small business is largely the same as for a larger business. The only difference is that you may not have the funds or staff to operate certain software for your payroll.

In short, to pay employees in a small business in the UK, you must first register as an employer with HMRC and set up a payroll system. Each time you pay staff, you’ll need to calculate their gross pay, apply the appropriate deductions, and submit Real Time Information (RTI) reports to HMRC on or before payday. You must also provide employees with a payslip that clearly shows their earnings, deductions and net pay.

It’s important to maintain accurate payroll records, including hours worked, payments made and deductions taken, for at least three years from the end of the tax year. You must also meet legal requirements such as paying at least the National Minimum Wage, making pension contributions if employees are eligible for auto-enrolment, and issuing key documents such as P60s at the end of the tax year.

Preparing for arrival and the first day 

The time between role acceptance and the employee’s first day can set the tone for the entire employee experience. It can influence how nervous or anxious the new starter is for their new role, and making sure they feel confident and looked after will only go on to increase their productivity and mental health. Our guide on top tips for dealing with stress in the workplace should give you some more advice on caring for your employee’s wellbeing and how this can benefit your business.

To make your new employee ready for their first day, send them a welcome email, detailing:

• Start time and location 
• Dress code and what to expect on their first day
• What documents to bring
• Who to contact if they have further questions 

Essential first-day documents

A written statement outlining the key terms of employment must be given no later than the employee’s first day of work. This should be provided as a single document and include details such as:

• Start date
• Job title
• Place of work
• Pay information
• Working hours
• Holiday entitlement
• Sick leave arrangements
• Benefits
• Notice periods
• Any probationary period
• Training requirements

You must also complete the HMRC new starter checklist, collecting information such as the employee’s National Insurance number, student loan status and tax code. This ensures that payroll is calculated accurately from the first pay period.

 Set the right tone 

You want your new starter to feel welcome, as whether they stay or quit can be formed in their first few weeks.

On their first day, you should:

• Present a personal welcome from their manager 
• Give them a tour of the facilities 
• Introduce them to the team members 
• Go through the health and safety essentials 
• Take them out for a scheduled lunch

One of the most common mistakes employers make is by overloading their new starter with too much information. All you need to do is cover the essentials; a more detailed training schedule can begin over the coming weeks.

Manage the probation period effectively 

Probationary periods - usually lasting between three and six months – don’t carry any distinct legal status under employment law. Employees on probation are entitled to the same statutory rights as all other employees. However, certain contractual terms, such as notice periods or eligibility for specific benefits, may differ during this time depending on the terms outlined in the employment contract.

Progress should be monitored regularly, with reviews taking place weekly at first and then moving to a monthly schedule. If any issues arise, they should be properly recorded and discussed with the employee. Provide clear, constructive feedback, outline the support available, and agree on defined timelines for improvement.

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