Deciding to make the move from sole trader or self employed, to being a limited company and hiring staff to work for you is a big step. As a one-man band you are able to make decisions about your business based solely on what’s best for you, and there is no one but you to feel the pinch if you fail to turn a profit one month. You can quite happily run a business for many years without taking the step of becoming an employer and expanding, however, without making this move there is a limit to how far you can take your company. Once you have made the decision, have found someone that fits with your brand, and are ready for the next step, here are some key things you must remember to do so that it is all above board.
When you take on one or more members of staff you have to register as an employer with HMRC. This is so they can account for money you pay as a wage and any benefits that are taken from the company that may not be taxable. Money you pay to your employee as a wage is subject to tax and national insurance so HMRC needs to be aware of anyone on your books. Once you are registered as an employer you can also set up so that your business pays you a wage. This is an option many chose as it is easier to administer and tax than drawing from your business account.
In the UK you are legally required to have employers’ liability insurance if you have one or more employees on your payroll. This insurance is designed to protect you, the business owner, against potentially very expensive illness or injury claims should something happen to a member of your staff whilst in the work place or as a result of their job. It is also very reassuring to employees to know that this is in place so that they know if the worst does happen they can be compensated without any inconvenience to their employer. The insurance must cover you for at least five million pounds and must be taken with an authorized insurer.
You should arrange a rate of pay with your new employee before they start work, and an official job description and offer of employment should be sent and signed. You need to provide a written statement of employment by law if you intend to take someone on for more than a month. Make sure to offer a salary that both reflects the work involved, and that you can afford based on previous profits, – remember that you must be sure to pay above the National Minimum Wage in order to stay above the law.
Taking on your first employee is a big step, but one that could reap dividends for your business. You’ll find help and advice at the GOV.UK website to get you started.
This article has been written on behalf of Hiscox, an insurance company offering many different insurances including insurance for business. To find out more about Hiscox employers liability insurance and to get Hiscox liability quotes simply visit their website.