When your business reaches the point where you’re no longer able to keep up with consumer demand on your own, you know that you’re going to need to take on your first dedicated employee. Knowing that you need to take on an employee can be such an exciting time, and recruiting an employee can be the beginning of a new period of growth and prosperity. 
However, when taking on a new employee, there’s a lot to consider. In order to ensure that your new employee’s rights are protected – and that your company remains compliant with the law – here are some things that all business owners need to know. 

Your new employee’s rights 

Though your workforce may be small, you’ll still want to demonstrate your commitment to your new employee’s rights (and all who follow after them). If you’re ever unsure about how to keep the recruitment side of your business compliant The ACAS (Advisory, Conciliation and Arbitration Service) website is a great resource full of tools and templates which can be hugely beneficial for business owners doing this for the first time. 

Important employee rights to consider 

Under the Equality Act 2010, it is illegal discriminate against any employee or prospective employee on the grounds of sex, gender identity, race, disability, religious beliefs, sexual orientation, age, marital status or pregnancy or maternity status. Employers in violation of this act can be taken to a tribunal and issued with an unlimited fine. 
 
When it comes to ending an employee’s working contract, they can only be dismissed when you can show that you have a good reason for doing so and have acted fairly. Employees have the right to appeal any decision made within five working days. 
 
Lastly, all employees are entitled to one weeks’ notice. This increases by one week for every year of continuous service up to a maximum of twelve weeks. Notice periods can be even longer if mutually agreed. 

Wages, benefits and tax 

When you start paying your employees, this opens up another area of liability for employers. Your first obligation is to ensure that your employee is paid in line with minimum wage legislation. As of April 2019 the National Minimum Wage is as follows: 
 
£3.90 per hour for apprentices 
£4.35 per hour for school leavers under 18 
£6.15 per hour for employees 18-20 years old 
£7.70 per hour for employees aged 21-24 
£8.21 per hour for employees over 25 
 
The National Living Wage is £10.55 per hour in London and £9.00 per hour for the rest of the UK. This in an independently calculated recommended minimum wage, set by the Living Wage Foundation based on national average composite living cost. It is not a legal requirement – but more and more companies are now starting to offer the National Living Wage. 
The Pensions Act 2008 obliges employers to enter qualifying employees into a pension scheme (called auto-enrolment). The minimum contribution from the employer and staff combined is 8%; the employer must make a minimum contribution of 3%, which leaves the employee having to make up the remaining 5% (though employees do not have to make a minimum contribution unlike employers). Some employers prefer to contribute the full 8% minimum themselves – or more – which can be an attractive benefit to employees. 
 
Employers also have a legal obligation to pay National Insurance Contributions (NICs) which are usually 13.8% on their employees’ earnings. If you join the Employment Allowance Scheme, you can claim up to £3,000 in reduction on your National Insurance bill. 

Finally, remember that all employees have rights as follows… 

It doesn’t matter if they’re full-time, part-time or even on a zero hours contract – all employees are entitled to holiday leave. Full-time employees are entitled to 28 days’ annual leave. It’s slightly more complicated for part time workers. Leave entitlement is calculated by multiplying the number of full days they work for you by 5.6. 
 
All employers must pay Statutory Sick Pay of £92.05 per week for periods of sickness up to 28 days – though some companies offer more, with some offering full pay to employees if they are off sick for an extended period. 
 
Every employee has a right to 52 weeks’ maternity leave and 39 weeks’ maternity pay, regardless of length of service. Statutory Maternity Pay is 90% of employees’ Average Weekly Earnings for the first 6 weeks and £145.18 per week thereafter. 

Recruitment 

Now we’ve looked at your obligation to your future employees, we need to look at the recruitment process. Recruitment is a multifaceted process that involves many different skills. This is why many small businesses start by employing trusted associates, contacts or even friends and family. However, let’s assume that you’re casting the net wide and starting out by posting a job ad. Let’s take it step-by-step… 
 
Step 1: Job description 
Start with the job title and a brief summary of the job encapsulated in a sentence or two. Condense it down to the main tasks you expect to be carried out and how they fit into the business’s operations. It’s also a good idea to mention the salary; rarely will job hunters put the effort into an application if they don’t know what they’ll be paid! 
 
Step 2: Advertising the job 
There are a multitude of ways in which you can advertise your job posting.  
You can still use the time-honoured method of posting an ad in your shop window or on community notice boards, or you can post exclusively on social media. You could post on job sites like Indeed, Monster and the like – or you can do a combination of all of the above. Whichever you choose, ensure that job hunters know how to apply – after all, the easier you make it to apply, the more applications you can expect. 
 
Step 3: Interviews 
Now you have a healthy amount of applications it’s time to start shortlisting for interviews. Ideally you should get someone to help you with this. Two heads are better than one and you don’t want unintentional bias to creep into your selection process, no matter how confident you are that this won’t be an issue. Compile a list of open-ended questions which will give you an insight into your candidates’ skills and experience. It’s also a good idea to invite them to ask their own questions after you’ve asked yours. 
 
Step 4: Drawing up your new employee’s contract 
You need to draw up a contract of employment within two working months of their first day. For your protection and theirs, it’s a good idea to talk to an employment law specialist when drawing up your contract to ensure that it’s lawful and compliant. Pertinent information to include in your contract may include working days and hours, pay and bonuses, holiday entitlement and overtime or flexitime if relevant. 

Informing the appropriate bodies 

When you take on a new employee you need to inform HMRC on or before their first day. Your new employee should have their P45 from their previous job which you will use to work out their tax code. This is essential in ensuring that they start off paying the right amount of tax. 

Next steps 

There are a lot of boxes to tick when making your first hire, but by starting your employee’s journey with you on the right track, you can lay the foundations for a string and successful working relationship. 
 
We’ve written an extended guide to employing your first member of staff, which you can download for free here
 
If you’d like tailored advice, please book a call with Nicola, or send us an email. We’d love to help you on this exciting journey. 
 
 
 
 
Written by: 
 
Nicola J Sorrell 
Effective Accounting 
 
Founder | Xero Champion | IR35 Expert 
Tagged as: Employer, HMRC, Staff
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