Employing Staff as a Sole Trader
A common misconception is that a Sole Trader cannot employ people, which is incorrect. Whilst there are specific differences between being a Sole Trader and that of running a Limited Company, there are many ways in which the day-to-day operations are very similar.
Being a Sole Trader means you are in charge of the business and therefore solely responsible for any debts that your business may incur. Whilst being a Sole Trader is the quickest and easiest way to get a business registered and up & running, this financial liability does put some people off who perhaps prefer the safety net provided by that of becoming a Limited Company.
However, regardless of whether you are a Sole Trader or a Limited Company, if you have employees, you will have certain legal responsibilities to them that you must follow. These will include having adequate insurance policies in place to protect them against accidents and sickness, as well as providing them with benefits such as holiday pay and an adequate works pension.
Hiring your first employees is a major milestone for any business. Whilst hiring staff does involve a great deal of work, it can ultimately be very rewarding, and of course a clear indication that your business is moving forward and succeeding. When looking to hire staff, there are various factors you must first be aware of, as well as actions you will need to carry out. To help you get a better understanding of everything required by you as a business owner, we have put together the following useful information:
How much to pay
This step is fairly easy in that the government has set a series of minimum hourly pay rates that you as a business owner must meet. The minimum wage is currently set at £8.21 for a person over the age of 25-years. This rate applies to both part-time and full-time employees and is the legal minimum you must pay your employee of and over this age. This rate does lower slightly for specific types of employees, including those under the age of 21-years and those employees considered apprentices – there are strict regulations governing this classification. If as a business you are found to be paying your employees less than the legal requirement, you will be subject to punishment, including heavy fines and possible restrictions on your business practices. Of course, it should be noted that the salary you will pay will depend heavily on the level of employee you are seeking to employ, as well as the market rate for such a role. Because of the added expense of a new employee, you must be sure that your business can afford this, and that hiring staff will not adversely affect your financial stability in the long-term.
What you need to do to hire new staff
Once you have identified the need to hire a new employee and successfully factored in the additional costs of doing so, there are numerous other checks you are required to perform. If you have identified a successful applicant and are preparing to offer them employment, you must first check that they are legally allowed to work in the UK. You will also be required to submit them for any required security checks, such as those necessary for teaching and working with sensitive equipment/information. It is worth noting that such checks can take a while, sometimes up to 2-months, and you should therefore factor such time in when looking to hire someone as this may cause a problematic delay for your business and prospective employee.
When you have made your decision, and your applicant has successfully passed any and all required checks, you are then ready to offer them the job. When you do this, you will be required to provide a ‘Written Statement of Employment’. This document must contain comprehensive details of the job they are accepting, including salary, duties, location and all other related terms and conditions. You must provide this document in written form, with many companies now providing an electronic copy also. This document must be given to any new employee that will be working at your business for longer than one-month.
You will also be required to register any new employee with HMRC. This must be done up to one-month before you pay them for the first time. Failure to do so may results in a financial penalty. If you are hiring someone over the age of 22-years, and who will be earning more than £10,000 a year, you are now required by law to provide them with a workplace pension. If you have to provide this pension, you will be required to contribute at least 1% of their ‘qualifying earnings’ to this.
It is no exaggeration to say that hiring a new employee, particularly if it is your first, is a big step. And whilst we have highlighted the legal requirements of doing so, there are of course other, more common-sense requirements, you should be looking to provide. Creating a friendly, non-threatening working environment ensures new employees fit in easier and get up to speed quicker. Employees are often the difference between a successful company and that of a failing one, and therefore treating employees with respect and compassion helps strengthen ties and greatly contributes to employee happiness. Finally, you must also ensure your working environment is safe. There are of course laws governing health & safety, and these can vary significantly depending on the type of industry you are operating in. However, regardless of whether you are running a factory with lots of machinery or operating as a mobile hairdresser visiting client’s homes, you will need to perform a health & safety check to identify any dangers and ensure procedures are put in place to protect employees, clients and the General Public.