6 things to think about before you take on your first employee
Ready to hire? Here's what you need to consider to ensure a new member of staff is able to help your business thrive
Never enough hours in the day? You’re not alone. The flip-side of winning more work for your business as a freelancer or sole trader comes when you realise you can no longer do it all on your own.
To keep your satisfied customers happy, find new ones and grow, you need to take on your first employee and perhaps more beyond. But are you ready? When you’ve never hired someone before it’s inevitable you’ll have a bunch of questions needing answers, such as:
- Will there be enough work to pay somebody’s wages?
- Will I be able to manage and quality control while also doing what I do best?
- What are the financial implications, such as salary, sick pay, insurance, equipment?
- How much paperwork is involved?
- What legal requirements are there?
- Where will we work from?
- Do I need to register a limited company?
You’re not the first to find yourself in this position. Every self-employed person that has ever decided they needed somebody to share the workload has been there.
So, to take on your first employee you first need to consider these six things:
1. Hiring in a crisis is a bad idea
If you’ve turned a happy customer into an irate one or can sense frustration levels building, taking on your first employee may not be the silver bullet you were hoping for. New employees take time to bed in and understand how you do things, which takes up your time. You’re also more likely to hire the wrong person if you do so in haste.
Far better to look at the pipeline of work you have and work out when you’re likely to reach full capacity. Ask yourself where you’d like to be in 12 months and how much income you’d need to be generating to justify paying somebody a wage.
2. Work out why you’re hiring
Is the decision to hire your first employee motivated by your ambition to grow your business or because you need somebody to share the workload or add skills you don’t have? If it’s the latter you need to think about whether the surge in demand for your service is seasonal and temporary.
You also need to think about how profitable the work that you will expect them to do is – as if you’re hiring for a resource-sapping line of work it may not make sense to put a salary against it. If there are elements you can outsource you might want to defer the decision. But for the purposes of this article let’s assume you either need complementary skills or just an extra pair of hands.
3. Put together a clear job description
You clearly need to create a job description and the list of tasks the employee will undertake, as well as the skills or qualifications you expect them to possess.
If it’s a function you’re not as comfortable with, such as finance or digital marketing, you need a strong sense of what you expect from them so it’s worth speaking to peers. Many business owners in this position turn to local business networking events.
4. Work out how you will accommodate them
If you’ve been freelance or a sole trader until now you may not have business premises per se. Perhaps you rent a desk in a co-working office, are a member of a mobile workspace group, own a van and spend most of your time on the road, or are you still running affairs from your home office or kitchen?
Whichever is true in your case, you will most likely need somewhere to work together. Inevitably, this also increases your overheads (desk rental, furniture, computer), which you’ll need to factor into the costs of taking on an employee and the revenue you expect to generate.
5 Make sure you comply with employment regulations
Before you hire somebody you need to check on the latest regulations affecting employment. The National Minimum Wage, bar the odd exemption, must be paid to all employees.
You need to check on a candidate’s right to work in the UK. Failure to do so and taking on an illegal worker could result in a fine of as much as £20,000. If your business operates in a field that requires it, such as working with vulnerable people (e.g. children) or in the security sector, you’ll also need to carry out Disclosure & Barring Service checks (which were formerly called CRB checks). Details for how to contact DBS can be found here.
Finally here, register as an employer with HM Revenue & Customs. This can be completed up to four weeks before you pay them their salary for the first time.
6. Be ready to take out the necessary insurance
A surprising number of employees are injured, or fall ill at work. As a small business owner taking on an employee you are required by law to have minimum employers’ liability insurance cover of £5m.
Once you take on your first employee you take on responsibility for their health and safety during working hours. If they slip, trip, fall or are hit by something you may be liable. The insurance covers your business against compensation claims made when an employee gets injured or alleges that their illness was caused by working conditions. Failure to get employers’ liability insurance could result in fines of up to £2,500 a day for not being insured – and could even face an additional £1,000 fine if your paperwork is not handy for inspectors.
Deepak Soni is a small business specialist at Hiscox, which offers employers' liability insurance quotes.