Considering hiring your first employee?
Then take a read of, Jo Trimarco of JT HR Consulting Ltd’s guest blog to find out more.
Hiring employee number one is arguably the biggest, and most daunting, step for a small business owner. I thought it would be helpful if I compiled an HR checklist that covers everything you need to know.
From reducing your stress levels to avoiding legal pitfalls, there is a long list of reasons why the recruitment and onboarding process needs to be handled professionally. Trust me, I have witnessed the consequences when a business gets it wrong. I make sure to start you off in the right direction.
The legal requirements when recruiting your first employee
While small business owners need to budget for the employee’s salary, it is far from the only cost in the recruitment process. Employers need to comply with the following legal requirements that all need to be considered.
- Insurance
Whether a business has one or one hundred members of staff, it needs to take out the appropriate level of Employers’ Liability Insurance. This policy will protect you and your company from the potentially substantial level of compensation costs if an employee suffers illness or injury due to their work.
- National Insurance Contributions (NIC)
The calculation for employers’ NIC is easy as businesses pay 0% on income below the threshold and 13.8% above the threshold. To do the sums correctly, first you need to know the employee’s National Insurance category.
- HMRC registration
HMRC uses the Pay As You Earn (PAYE) system to collect Income Tax, NIC and other deductions. Businesses must register for PAYE to operate their payroll, enabling them to calculate these deductions at source prior to the employee being paid.
Employers must record all employee earnings and deductions and pay their PAYE bill monthly or quarterly. Please note that a director of a limited company is classed as an employee, so they will need to register for PAYE even if you don’t have any staff.
PAYE can be set up online and employers need to do so before the first payday, but not more than two months before.
4.Pension contributions
Since 2012 the law states that eligible employees must be auto enrolled to a qualifying pension scheme. Employers need to pay 3% of each employee’s monthly salary as a contribution to their pension pots. If an employee is enrolled late, the employer must pay all unpaid contributions.
- Documentation
While much of the HR paperwork is not required by law, there are legislative provisions relating to formal workplace disciplinary and grievance procedures, where any such procedure is required to meet the minimum statutory requirements as prescribed by the ACAS Code of Practice. I firmly believe that having robust policies is essential for defending the business against disputes and grievances. Legally sound contracts of employment must be provided on or before day one. Doing the basics correctly is the first line of defence in any legal case.
Compile a detailed job description and person specification for the role. This needs to clearly state the tasks and responsibilities of the job. Always make a formal offer of employment in writing, including the statutory minimum entitlements for pay and holiday, and remember that even a verbal offer is legally binding.
- Pre-employment checks
Employers must do the necessary pre-employment checks to ensure that the successful candidate has the right to work in the UK. Double check the qualifications they mention on their CV and ask for two references you can contact. If they are required to drive, obtain a copy of their driving licence.
Other key points for employers
As well as the legal and HMRC requirements, there are also plenty of other considerations for small businesses hiring their first employee. Many of these will depend on the nature of your business and the industry sector.
- Rewards and benefits
From company cars to share options, employers can offer a wide range of benefits to staff including life insurance and private healthcare. These need to be carefully explained and written into the contract of employment.
Today’s employers need to provide both mental and physical benefits for employees. Health and wellbeing schemes are an essential element of a safe working environment.
Before advertising the role, benchmark the salary with similar positions locally to make sure you are offering a fair wage. You might wish to offer a reward package to attract the best candidates.
2.Company equipment
Depending on the role, the business will be required to supply equipment so the new employee can carry out their job. Common examples include a phone, laptop, workwear, software and a vehicle.
- Recruitment costs
Hiring a member of staff using a recruitment agency can be expensive. Typical placement fees can be between 10 to 20% of the employee’s annual salary. The overall cost of recruiting each employee is estimated as being up to £5,000, so it is important that you choose a suitable candidate who will stay in the business.
- Allocate time
Onboarding a new member of your team requires more than a five-minute chat on their first day. Allocate space in your diary to inform a new employee about the company and their role. Share your expectations of what needs to be done, such as workloads and targets, and cover the essentials surrounding health and safety, facilities etc.
I always encourage my clients to inform new employees about the overall business strategy and how their role fits into the plans. The idea is to motivate them to help move you one step closer to your business objectives.
Jo Trimarco formed JT HRConsultancy Ltd in April 2014 to offer small businesses a flexible solution to their people problems. From maternity pay to dress codes and everything in-between, Jo is happy to help you with all your HR queries. Email: jo@jt-hrconsultancy.com Mobile: 07715 026128 Web: https://www.jt-hrconsultancy.com
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