Taking on your first person and then hiring a team of people can help you develop and build your business. However, becoming an employer does bring additional responsibilities that is often an area of the unknown until you have done it a few times! For example, a fair recruitment process, your legal obligations and ongoing management.

What is an Employee?
As defined by HMRC, an employee is someone who works under an employment contract. A person may be an employee in employment law but have a different status for tax purposes. Employers must work out each worker’s status in both employment law and tax law.

Here are a few thoughts we recommend are included within your own considerations when taking someone on as an employee.

The Recruitment

  • Clearly define the job you are recruiting for – full or part time, job description, persona specification, remuneration package,
  • Effectively advertise the opportunity – consider the various channels available and consider where your ideal candidate may be. Remember, they may not even be looking for a job, so traditional job adverts and agencies may not be the only answer.
  • Have a process for shortlisting your candidates for interview – on what basis will you decide? How will it be a fair selection (eg standard application form)?
  • Comply with the data protection regulations – Be clear how long you will retain the information of applicants especially those unsuccessful. Only ask for relevant information at the application stage (eg no need for tax or bank information at this stage). Retain the information securely and only share with those that need to be involved in the process.
  • Invite for interview – Plan the interviews. Consider using tests to support your interview and selection process. What questions do you need to ask to ALL candidates you interview? Where will the interviews take place? How many people will interview? Take notes to help your consideration after the interview/s.
  • Ensure you avoid any discrimination – eg gender, race, age, marital status, disability, sexual orientation, religion. Do not ask questions around their protected characteristics.
  • How will you decide on the best candidate? – consider a consistent scoring process and understand the basis and any weighting you give to certain areas. Will you require references?

Making the appointment of your successful candidate

  • Do you require a criminal records check? Especially consider a DBS check if the role involves finance, children or vulnerable adults.
  • Does the candidate have a legal right to work in the UK? gov.uk/check-job-applicant-right-to-work.
  • Will you require permitted health checks?
  • Will you have a probation period?
  • Provide your new recruit with a written statement of their employment particulars (within 2 months of starting work).
  • Get employers liability insurance as soon as you become an employer. Your certificate should be displayed within the place of work.
  • Register with HMRC as an employer – upon acceptance you will obtain your Employer PAYE reference number and an Accounts Office reference number.
  • Set up your payroll – consider using software for running your payroll (eg we recommend Brightpay). Get the initial tax right following a P45 or new employee guidance.
  • Set up and register a workplace pension scheme under the Auto Enrolment scheme – Enrol or offer the opportunity to employees in accordance with the guidelines. Link the deductions with your payroll and establish how to effectively notify and pay over the deductions made.

Welcoming the new employee to your workplace

  • Undertake a general induction introducing your new employee to the business, the people, the culture, the role in more detail.
  • Can you allocate a ‘buddy’? A go to person that may not be the owner of the business for any questions or guidance?
  • Consider the need for any initial additional training (eg health and safety, display screen equipment, technical job specific training)

Be mindful of your ongoing responsibilities

As an employer, you will have to observe your employees rights. To name just a few: minimum wage, holiday and rest breaks, working time directive, statutory pay, notice periods, grievance procedures, flexible working, discrimination avoidance, data protection.

Many of these areas are often covered by a good employee handbook, which should be a working document and not something that is produced, circulated to all new employees and then gather dust!

Do not ever feel you are stuck with an employee. If they are not right for your business, then consider the options. It may be redundancy, disciplinary or dismissal in line with the terms of their contract. We recommend you take advice to get this right.


If you have any questions, then please contact us on 01865 379272. We are happy to share our experience and expertise. We also work closely with HR professionals that can support you with this process and are happy to introduce you.

Sage Accountant Partner Logoiris kashflowFreeagent