How do I hire my first employee?

by | Nov 15, 2021 | Business, Tax

So – your business is going strong. You’ve got a nice, healthy order book, but you’re beginning to work long hours. You get home from a 12 hour day and then the admin starts; sending out quotes, filing your paperwork, completing your reports, and checking that inbox. The paperwork is drifting into the weekend as well …

These could all be signs that you’re ready to grow and hire your first employee. With them on board, you can begin to focus on other things, go for the bigger jobs or even get back some of your evenings and share the burden. But, in my opinion, hiring employee number one needs to be meticulously planned.

This is a question we get quite a lot as our clients start to grow. So, here are our things to consider, talking as well from first-hand experience having gone through this very process ourselves.

Can you afford it?

First things first. You need to crunch the numbers and work out can you actually afford to hire them. We always suggest you should have at least one to three months of running costs in reserve, depending on your profession, should there be any issues so you can cover their salary. Naturally as well, you should have forecast sufficient profits to be able to absorb their salary without making losses.

The easiest way to work this out is with a cash flow forecast. Think about what you will do if a big client leaves, if you have a shortage of work in the future, or an unexpected bill. If that member of staff is vital but you’re running on the limits of your cash, consider ways you can bring more cash into the business.

Finding the right person

You need to make sure the very first person you hire is a good fit for you, your business, and your customers. They will be an extension of you and what you stand for.

First, ensure you assess their skills and technical abilities. That could be checking qualifications or licenses are in order, or even some form of test. One of my previous interviews when I was employed actually consisted of a case study, based on a ‘real world’ example within that business I applied to work for. They knew that if I handled those tests well, I could probably jump straight into the job without much issue.

Beyond that though, I would say arguably of more importance is personality, drive, and fit. They can be the best electrician in the world, but if they turn up late, seem disinterested, or don’t care about what they are doing, it will rarely end up well.

Make sure you have a good interview process, think about where you can find ideal candidates, and consider a recruitment consultant too if it’s a bit of a challenge.

Can you utilise any incentives (time sensitive)?

Consider what you need and whether these grants could be of use to you.

You can receive a £3,000 incentive for hiring an apprentice to cover costs, such as computers, uniforms, or other equipment. There are conditions to be eligible, as well as requirements to pay for apprentices to go on study leave, but it can go some way to cover the costs of training up someone to become an effective employee for you in the future.

Another option is the Kickstart scheme, but this is closing soon (17th December). Here, the government will cover a new employee for six months of their time working with you, in exchange for giving them valuable skills and time to help them become employable. The candidates that come through this scheme are from 16-24, on Universal Credit, and at risk of long-term unemployment.

Setting up a payroll and remembering your duties.

To employ someone, you need a payroll scheme in place for your business and have to register as an employer with HMRC. You need to register before the first payday, and you’ll receive an Accounts Office and PAYE reference number once successfully done. HMRC expect you to regularly submit digital reports on what you’ve paid, through methods known as RTI and EPS. You will need payroll software to do this.

You must also be sure you pay them fairly. This includes calculating holiday pay due or ensuring they are paid statutory sick pay or statutory maternity pay correctly.

If you run your own Limited Company, you may very well already have a payroll in place for your own salary.

Employing people comes with it other considerations too. Remember your obligations when it comes to pensions. Depending on their age and earnings, you may legally be required to opt your employee into a pension scheme. You must also declare your compliance with The Pensions Regulator, or potentially face fines. Ensure as well you have the appropriate insurance in place when you hire staff.

Preparing for their arrival and helping them grow

Be ready for day one – issue them with a contract, so both you and they are clear as to the terms and conditions. Whilst it’s tempting to copy a template from the internet, it’s always worthwhile getting it written for you and your business. Seek their references and ensure they have the right to work in the UK.

Prepare for their arrival too with everything specific for the business, whether that’s setting them up with an email account, to putting them on the van insurance, you don’t want admin issues or oversights to waste their first day and give them a bad impression of you as an employer. Build a new joiner checklist, so you’re ready for this and any future hires.

Finally, think about their development. Think of training or learning they could benefit from. Set their objectives and make them feel welcome. This is a whole topic in its own right.

What are the alternatives?

Has this made you reconsider your decision? What can you do?

First, sometimes you may be able to consider employing staff on a zero-hours contract. This gives you more flexibility in only paying your staff as and when work is there, but because of this lack of certainty when it comes to paid work for the employee, they have more control and can refuse to work or seek work elsewhere.

You may consider subcontracting. Here, the person will invoice you as a subcontractor for their effort. It is then for them to declare and pay their own taxes accordingly. This works nicely in meaning you are not obliged to pay pension contributions, national insurance, or holiday pay for them, but be careful they are not considered a de facto employee in the eyes of employment law. This means regardless of their status they are entitled to all of these things.

Finally, you can always look to outsource other aspects of your work. If you’re spending hours scheduling your diaries, why not outsource to a virtual assistant company? Or if you’re spending the weekend bookkeeping, appointing a bookkeeper can free up your time. This may give you back large chunks of time, without committing you to hire or train an individual.

Ready to hire your first employee, or want to talk about making the leap? Get in touch to see how we can help.



Ready to start the journey?

To get help with your accounts and start freeing up your time to focus on growth, talk to the Mayflower team today.

Subscribe To Our Newsletter

Join our mailing list to receive the latest news and updates from our team.

By submitting your details you agree to receive email marketing from Mayflower Accountancy and have read and understood our Privacy Notice. You can withdraw your consent or change your preferences at any time by emailing us or by clicking the link at the bottom of every email we send you.

You have Successfully Subscribed!