What to do when employing staff for the first time

Congratulations, your business is now in a position to hire an employee. You may have been working for yourself and now business is booming, or you're setting up a company from scratch and are starting out with your first team. Whatever your circumstances, there are a few steps to carry out when employing members of staff to abide by the law.

These are not difficult but if not completed out you could be fined thousands of pounds.

1. Recruiting a member of staff and offering a salary/wage.

The first step in any recruitment is to decide what type of employee you need and check your finances to ensure you can afford it. There are full time and part time contracts, fixed term contracts, agency staff, freelancers, consultants, contractors, zero-hours contracts, or you may be hiring a member of your close family, someone under-18 or volunteers. Each of these types of employees have different rights and responsibilities.

Full time and part time employees, fixed term contracts: Entitled to the statutory amount of paid leave (5.6 weeks a year which can include bank holidays), Statutory Sick Pay (SSP), statutory rest breaks (uninterrupted 20 minutes if they work more than six hours a day, and 11 hours between work days), maternity, paternity and adoption pay, a payslip with all deductions visible, an employment contract or statement.

They must also be paid at least minimum wage, be covered under employers' liability insurance, be provided a safe place of work, be able to request flexible working, be registered with HMRC, and have changes to the workplace made on their behalf if disabled. They may qualify for a workplace pension.

Agency staff: While the business is responsible for Statutory Sick Pay and National Insurance contributions, the business pays these to an agency. They have the same working time regulation rights as permanent employees but it is an agency's responsibility to make sure these are adhered to.

After 12 weeks continuous employment, agency workers get the same treatment as permanent employees including pay and annual leave. You must tell the agency what these are. They also have a right to know about job vacancies and use of the facilities offered to other members of staff from their first day of work. A business usually still needs employers' liability insurance for agency staff.

Freelancers, consultants, contractors: These do not fall under your responsibility for employers' liability insurance. They are not necessarily entitled to the same rights as other workers such as minimum wage and national insurance and tax is their responsibility.

Zero-hours contracts: These workers are on call when you need them but they are not entitled to any set hours. Zero-hours workers are entitled to statutory annual leave (5.6 weeks holidays but bank holidays can be included) and national minimum wage. They are entitled to look for work and accept work from another employer. They still qualify to be covered under your employers' liability insurance.

Family, under-18s and volunteers: Close family members are exempt from employers' liability insurance unless the business is a limited company. They cannot be given special treatment with beneficial pay, access to promotions or working conditions. You will still need to pay national insurance and other taxes on their behalf and they may qualify for a workplace pension.

Volunteers are usually covered by already established employers' liability insurance although this should be checked with your provider.

You can hire people aged 13 and over but they cannot work during school hours, before 7am or after 7pm, for more than four hours without a one hour break, and they must have a two-week break from work during the school holidays in each calendar year.

Employers need a child employment permit from the council before they can hire under-18s. Once 18 they are treated the same as other adult workers. Children are entitled to redundancy pay and maternity pay.

In all these circumstances, health and safety is always the business' responsibility.

Other things to consider when hiring an employee:

A business must pay their employees at least the minimum wage, although the law does not state that for freelancers or contractors.

2. Check the employee has the right to work in the UK

You need to know if the employee has a British passport, a Certificate of Registration, or Naturalisation as a British Citizen. If not, the worker must be able to show they are a British citizen, is from the Channel Islands or Isle of Man. In the wake of Brexit, those from the EU, EEA or Switzerland need to have settled status to be able to work in the UK, or the business needs to sponsor them to work in the country. New immigration rules come into effect from June 30 2021. The Government has this question and answer portal to check if someone has the right to work in the UK.

If you employ an illegal worker you face a fine of up to £20,000 per worker and even a five-year jail sentence.

3. Is a DBS check needed?

Previously known as a CRB check, a Disclosure and Barring Service check is needed for people working with vulnerable people or in security. Checks can be basic, to show unspent convictions, standard—also showing cautions, enhanced—also showing information held by police that is relevant to the job, or enhanced with barred lists – also seeing if the worker has previously been banned from doing the role. Basic checks cost £23. All must be carried out by registered companies on the ‘responsible organisations’ list. More information on how to get a DBS check can be found here.

4. Get employers’ liability insurance

Unless your worker is a freelancer, contractor, or close family member, it is a legal requirement to buy employers’ liability insurance for each member of staff. It covers compensation claims and legal costs if an employee is ill, injured or dies as a result of working for you. If found to be without this insurance you can be fined £2,500 for every day the policy is missing.

There are a few exemptions for employers’ liability insurance which are explained here.

5. Send terms and conditions and expectations of the job in writing to the employee

This is needed for anyone being hired for more than a month. This needs to include:

A contract should also be provided and signed but this is not the same as a written statement. Terms to include in a contract can be found here.

6. Register with HMRC as an employer and get a PAYE reference

If this is your first member of staff you need to register as an employer with Her Majesty’s Revenue and Customs. This also applies if hiring subcontractors and if you’re employing yourself. Registration must be complete before the first pay day and can take up to five working days to get a PAYE reference number. You can register with HMRC here.

7. Enrol workers into the workplace pension scheme

Not every employee needs to be enrolled into the workplace pension scheme but if you are now a registered employer with the HMRC, staff must be enrolled if they:

If employees’ circumstances change and they fall into these categories they need to be added to the workplace pension scheme within six weeks of the change and notified. Employees with lifetime allowance protection do not need to be enrolled but you must see proof.

Salaries

The amount you choose to pay your new employee is largely down to you. There are, however, national minimum wages for different age groups.

The minimum wage changes every year on April 1 and there are different limits for apprentices, under 18s, 18-20, 21-22 and 23 and over. The Government’s minimum wage rates can be found here.