From very early on in running your business, you’ve probably been daydreaming about the day you can bring someone on board to help you.
If you’re at the point where the daydream has become a possibility financially, firstly, well done for getting there! You’re one step closer to being able to take that holiday you were meant to book ten years ago.
We find that business owners tend to focus on the cost of an employee in salary terms, but there are a lot of other considerations to take into account that goes beyond whether or not you have the revenue to pay someone.
Run through this checklist to know exactly what to expect, so you’re fully equipped to make a decision about whether now is the right time or not.
1. Consider what you really need
Sounds obvious, doesn’t it? Ask yourself how many hours you really need an extra person in-house. You’re not limited to only taking on full-time employees – so assess whether you have enough work to warrant taking someone on full time. A part-time employee may add more value to your business.
2. Know the minimum wage
As you’ll probably already know from being an employee yourself once upon a time, you’re required to pay your staff at least the National Minimum Wage. What you may not know is that the minimum wage only applies to staff who are between 16 and 25. If your staff are age 25 or older, you’re required to pay the National Living Wage.
Here’s a helpful list from HMRC of the current rates in their different age groups.
3. Decide on how frequently you want to run payroll
Deciding whether to pay your staff weekly or monthly is just as much about you as it is about them. There are pros and cons to both. If you decide on weekly pay, you may be giving greater financial security to your staff.
Here’s a list of pros and cons to think about:
Weekly pay:
- Pro for the employee: You may be giving your staff greater financial security with a weekly paycheck.
- Pro for employer: It may make life easier with an hourly structure if you’re not a 9-5 office job. Overtime can be calculated and paid weekly rather than be recorded for the month end.
- Con for the employee: While some employees may be chuffed to have a weekly salary, most rent, household and personal bills are paid monthly – making budgeting more difficult.
- Con for the employer: If you’re running payroll yourself, you’ll have more work on your hands to meet weekly payroll deadlines.
Monthly pay:
- Pro for the employee: You may be giving your staff greater financial security with a weekly paycheck.
- Pro for employer: It may make life easier with an hourly structure if you’re not a 9-5 office job. Overtime can be calculated and paid weekly rather than be recorded for the month end.
- Con for the employee: You don’t get paid as frequently, so your cash flow can take a hit.
- Con for the employer: It’s cashflow again! You need to ensure you have a larger sum of cash in the bank every month.
4. Remember, you will need to enrol your staff in a workplace pension
Auto-enrolment was set up by the government to help employees save for their future. It is now compulsory for employers to enrol all staff automatically into a pension scheme, and to make contributions towards it.
You can take a short questionnaire here from the pensions regulator to find out what auto-enrolment will cost you as an employer based on the age and earnings of your employee.
5. Brush up on what your employees are entitled to
One of the benefits of being an employee is employee benefits! Make sure you factor in things like holiday entitlement (5.6 weeks paid holiday), when you’re thinking about hiring. Your people deserve a beach break. If you’re considering taking on an employee part-time, use this holiday entitlement calendar to figure out what’s owed to a part-time worker.
Of course, paid holiday is just one of the benefits you’ll need to be aware of when you become an employer, alongside statutory sick pay (SSP), Statutory maternity pay (SMP) and Statutory Paternity Pay (SPP). Make sure you’re up to speed with the entitlements here.
6. Know the law
We’ve touched on some of the most common rules of employment already, but you can find a full list here from the government, including the laws around health and safety, dismissals and redundancies, worker’s rights and the kinds of employment checks you might need to put in place.
7. Consider what you might be able to claim back as an employer
Statutory sick pay, maternity pay and paternity pay are all paid by HMRC, and you can claim full tax relief on these statutory payments when payroll is finalised for the month. Once you have employees, you might also make a claim on expenses for entertainment, equipment, Christmas parties, and childcare costs.
Don’t be put off
We know, it’s easier said than done at the end of a seemingly ginormous tick list, but there’s no reason to feel daunted about getting to this stage in your business. There’s a fair bit of information to absorb, but there are also people out there to help you make these kinds of transitions in your business.
If you’d like to have a chat about any of your requirements, talk to someone about taking over your payroll or saving tax as an employer – you know where we are.
