Updated: Sep 26, 2019
We're really excited to be taking on a new member of staff this week and it got me thinking about the things you need to do when you become an employer for the first time. Becoming an employer can seem daunting and there's a lot of extra admin to be on top of, so if you're thinking of employing somebody here are some of the things you should keep in mind.
1. Are they self employed or are they an employee?
If this is the first time you've taken on some help, particularly if it's a part time role such as an admin support person, somebody to help you occasionally or temporarily, you might be thinking about whether you want them to be an employee on payroll or whether the contract is for them to work for you on a self employed basis. Be very careful about this. There are rules about whether a freelancer really is a freelancer or whether they should really be employees and these are called the "Off Payroll Working Rules" also known as IR35.
There have been stories in the press of high profile cases where businesses have taken on staff and treated them as self employed when HMRC would really see them as being employed. If you get it wrong and if you as a would be employer are caught out, you could be liable for penalties to HMRC, so make sure you're absolutely certain that your staff are truly freelance before you treat them as such.
As a rule of thumb, the difference between an employee and a freelancer come down to whether the individual can work for other employers at the same time, the regularity of their work, whether they use your equipment (for example computers) or supply their own, and whether they can send a substitute for themselves should they be unable to work, but if you're not clear, you should speak to HMRC. There is a helpful checking tool on HMRC's site which you can use to assess the status of your member of staff if you're unsure in any way.
So, you've decided that the person you're taking on is going to be an employee. If you're not already an employer, you need to register with HMRC to tell them you're taking on staff. This is the case whether you're self employed or running a limited company both of which can be employers, but keep in mind that if you're self employed you can't put your own pay through payroll as you'll be taxed through self assessment.
Once you're registered as an employer, you'll need to run monthly payroll to calculate your employee wages and the correct deductions, pay your staff's wages, issue payslips and make a monthly return to HMRC called a Full Payment Submission on or before payday. You also need to pay any PAYE and National Insurance deductions to HMRC by their deadline the following month.
3. Insurance and policies
As an employer you will have new responsibilities for welfare of your employees, so you'll need to make sure you have the correct health and safety policies in place. You'll also need employers liability insurance should anything happen to your staff while at work.
It is now compulsory to enrol many employees into work place pension schemes, and when you register as an employer, the Pensions Regulator will get in touch with you to make sure you're aware of your duties. Each time you take on a new member of staff, you will need to assess whether they should be enrolled into a work place pension, make that scheme available to them, and even if they do not qualify for a pension, you will need to write to them to explain why.
HMRC have a great guide to walk you through the steps when you first employ somebody and this is definitely worth a read for more detail and links if you need to explore any of the topics above in more detail.