Here's Farillio's superguide for successfully hiring your first employee. Make sure you line up the items listed in the What You'll Need section and follow the recommended actions in the order they're set out.
What you'll need
- a vacancy for an employee (rather than any other variety of hired help)
- a completed registration with HMRC as an employer
- a job description
- a plan for conducting a search/advertising the role (including any associated costs)
- an application form (and possibly an assessment task that you might want the candidate to undertake as part of your decision-making process)
- a job candidates' privacy notice
- offer of employment letter
- an employment contract suitable for the role
- an employee, contractors and other workers' privacy notice
- a payroll system
- a pension scheme
- employer’s liability insurance (potentially other types of insurance, e.g. directors' and officers' insurance, depending on the intended seniority of your new hire)
- a staff handbook - your go-to resource for many of the additional key details, rules and responsibilities governing your relationship with your employee
- key HR documentation, like a sickness self-certification form and a new starter form, or you might prefer to adopt an appropriate HR software solution
- IT equipment, related software, maybe basic stationery (and somewhere for the employee to work, if applicable)
Identifying the right help
Before we get started, are you sure you need an employee? It's not a silly question, we promise!
Employees can absolutely bring stability to your business and the right person can be invaluable. But they come at a financial cost (which, in total, may equate to more than you might pay for other forms of help), and they also affect your legal and tax obligations (all explored below).
They're typically also a more longer-term commitment for your business than other types of hire. If you're not sure about your other options, take a look at our guide about the different types of help you can bring on board and carry on to the next section about how much an employee can cost.
If you've made your mind up and you know it's an employee that you need, skip the next section and let's get you employee ready.
Can you afford an employee?
Let's take a look at what financial and administrative costs are involved in taking on an employee. You might want to set this out in a spreadsheet tally (we did this when we first started hiring people and it really helped).
Non-salary related costs - there are several things to cover in addition to salary. These include National Insurance and pension contributions, employer’s liability insurance, IT equipment, sick and holiday pay, and office space. Don't forget any associated software and licensing costs too, like those you'll need to pay to cover email and other document management costs, or more skills-specific products like graphic design, social media management, data and analytics or payroll and HR management software. And for more specialist employees, you may also need to cover fees for any professional training and/or annual certification renewal requirements. For a comprehensive overview, check out our guide about the costs involved in hiring an employee.
Tax - so, as well as paying the employee's salary, the employer's also responsible for paying their National Insurance contributions (NI). NI is a mandatory legal obligation on employers and the money that's collected is used to fund state benefits. NI is different from income tax, which the employee pays themselves.
Payroll and associated administrative costs - employers are responsible for deducting NI contributions and income tax from employees’ wages and paying them to HM Revenue and Customs’ (HMRC) each month, before the remainder of the monthly salary hits the employee's bank account. You can either manage these payment obligations yourself, ideally using payroll software, or you can pay a payroll provider or accountant to do it for you. We've got more information about how to go about setting this all up later on.
Employer's liability insurance - believe it or not, it’s a legal requirement to have employer’s liability insurance cover of £5 million even if you only have 1 employee! This insurance protects you against the cost of employee claims for compensation arising from illness or injury suffered by that employee while working for you. You can be fined £2,500 a day if you’re employing people and you haven’t got this insurance in place. More about setting this up this later.
Salary – and of course, there's the salary. You may already have an idea of what salary range you want to offer. Take a look at our guide about setting wages to see if you’re on the right track, and that you're paying the minimum amount that's legally required.
Working time - with the health and safety of employees in mind, UK law now contains working time regulations so that they're not working too many hours. So balancing out these costs by requiring employees to work longer hours may not be a popular or viable option! Find out what you need to know here in our guide about these rules.
So, you still want an employee... let's get employee ready!
Search for the ideal candidate
A good starting point when starting your search for the right person is listing the main tasks required for the job and the key skills you’ll be looking for in the successful candidate. Try not to go too overboard as this can look a bit off-putting!
Finding your candidates - get help or go it alone?
This can be as simple as sending a social media post or uploading/publishing an advert to where you think your ideal employees are likely to look. Lots of sites like Upwork or Talent.io offer affordable ways to source great candidates who are already open to considering new opportunities and have posted their own search criteria for you to consider. Or you could use the more traditional approach of engaging an agency to help you find your candidates.
When you come to advertise your role, your job description will help prospective candidates know whether it could be a good fit. And you may want to include the salary range you've got in mind in your advert, as this not only indicates the seniority of the role but also whether it's within the ballpark that your prospective candidate is looking for. It's also proof that you're a responsible employer and pay, at the very least, the minimum legal requirements.
Shortlisting candidates can be a time-consuming task, especially if you're managing the search process yourself. It's easy to overlook just how much time the recruitment process takes up. You’ll have to sift through all of the applications yourself for a start…which may negate the benefit of saving money on engaging someone else to help you find the right people. So, outsourcing to a recruitment platform or an agency may be useful and worth the fee.
A good recruitment platform or agency should also have an excellent source of candidates and know how to find them, they’ll usually also help you to craft a compelling advert, and agents especially can act as an experienced promoter for you too - making the whole process a lot quicker and simpler. Be sure to agree on their fee upfront though, and don’t be shy about negotiating it.
Do have a read of their other terms of engagement too - usually, you'll be signing up to theirs. There may be provisions contained in them that you also need to be aware of, like when their fee must be paid, whether there are any extra costs that they may charge in relation to the services that they could offer you and their confidentiality obligations to you (including how they may talk about their relationship with you and any of your hiring or strategic activities, to others).
However you choose to find your candidates, don't forget to include your job candidate's privacy notice as part of your advertised opportunity (you may want to host this on a careers or other section of your website, so it's always available and easy to signpost).
You'll need this from the outset to comply with the recently updated personal data handling rules in the UK (also known as 'the GDPR'). The job candidate's privacy notice tells the candidate how you collect information about them when they decide to put themselves forward for consideration in response to your advertised opportunity, and how you use that information during the recruitment process and after, they are offered the job, if they're successful. (Once employed, they should be covered by your employee, contractors and other workers privacy notice.)
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