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24 May 2022

Taking on your first employee – key considerations

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Posted by: Charlotte Allfrey

Things To Consider When Looking to Recruit Your First Employee

A common discussion thread in the HR Independents Facebook group and community explores the reality of being an independent practitioner.  The peaks and troughs of workload.  The need to stay visible with your clients that you have worked so hard to build great relationships with and when might be the right time to get some help – potentially your first employee.

As the MD of a small business myself I completely get it.  I revisit this debate on a regular basis, usually when the workload is high and demanding and I haven’t got the time to focus on it properly and proactively.  As an experienced HR Consultant, like many of our HRi members, I have a good head start on recruiting either an associate, VA or my first employee.  But that doesn’t mean I don’t find it a daunting prospect.  It’s a really big step to take which will have an impact on your time, commitment and finances.  If managed well it will reap many rewards. If not managed well or not well set up, engaging or employing people can be very time consuming, stressful, challenging but also costly.

 

Recruiting your first employee

If you are thinking of taking that next step and becoming a team and recruiting your first employee, here are some key considerations.

Carrying salaries in your cashflow forecast is a big consideration, but salary isn’t the only cost.  There are many other costs and commitments associated with employing people.  All which you will need to factor into your forecast and diary.

first employee

Photo by SaiKrishna Saketh Yellapragada on Unsplash

 

Legal Requirements

Insurance

You will legally need to have Employers Liability Insurance for even 1 employee.  This covers you and your business for compensation costs if an employee becomes ill or injured as a result of their work.

 

Employer NI

As an employer you will pay HMRC National Insurance Contributions.  This is currently set at 15.05% of an employee’s monthly salary.  This was increased from April 2022 until April 2023 when rates return to 21-22 levels, but a new levy is to be introduced instead.

 

HMRC Registration

You will need to register with HMRC as an employer and get a Company PAYE reference number to set up your company payroll.

 

Employer Pension Contributions

If your employee is eligible, you will have to auto enrol them to a ‘Qualifying Pension Scheme’ such as Nest.  As an employer, you will need to pay a contribution of 3% of their monthly salary to their pension pot.

 

Other Key Considerations

Other Rewards and Benefits

You may decide to offer other benefits to employees which may have a cost attached. Examples are life cover, access to an employee assistance programme, or a bonus.

 

Equipment

You will need to purchase various equipment for your new employee(s) depending on their job role and working structure/location.

 

Payslips

All employees should be provided with an itemised payslip. You can set your own payroll up through an HMRC portal, but many businesses prefer to outsource managing a payroll to an accountant.  There will be a small monthly charge for this, but in my view it’s worth it.

 

Recruitment Costs

If you use a recruitment agency you will pay a placement fee.  This could be anything from between 10-20% of the employee’s annual salary. The CIPD’s Resourcing and Talent Planning Survey 2020 suggests the cost of recruitment per hire is between £2,000 and £5,000 – over and above recruitment agent’s fees and the salary. Therefore, this becomes a big extra spend if employees don’t stay with you and you end up re-recruiting.

 

Your Time

You will need to spend time engaging with and helping your employees learn about their role. Also, your business and how things need to be done, discussing workloads and priorities, but also managing, supporting and checking in with them.

 

What’s your strategy?

If you help your team understand your business strategy and goals, what their role is and how it fits into the bigger picture they will have clarity .  Hence will be able to help you move your business towards its goals.

 

Documentation

You will need certain documentation in place to protect you and your employees such as a legally sound contract of employment (with good restrictive covenants) and some core policies and procedures to get you started.

 

Health and Wellbeing

You will be responsible for providing a safe and appropriate working environment for your employees. This includes looking after their health, safety, welfare and mental wellbeing.

 

Working with an Associate

If you aren’t fully committed to recruiting an employee – consider working with an associate.  This will give you more flexibility but may cost you a little more than a salaried employee.  Associates can flex with the workflow, but you can’t always guarantee they will be available.  Remember to pre-screen associates in the same way as an employee and ensure they are happy to work under your brand.  A comprehensive associate agreement is a must.

A key consideration needs to be how an employee can consistently add value to your business.  Therefore, consider playing to your strengths and structure the role you give someone else on taking away the things that don’t make the best use of your time, skills and knowledge.  So freeing you up to get on with things that do, and things that help you bring in more business to keep that person employed.  It’s difficult to let go and trust that someone else can help you in a meaningful way, but they can.

 

Ready to take the plunge?   Here are 12 tips.

So, if you are ready to take the plunge and recruit your first employee, here are my top tips for doing it well:

  1. Create a job description with a person specification for the role.  It should clearly set out the roles, responsibilities, and accountabilities for the job.
  2. Go through a proper recruitment process and assess applicants equally and consistently against the job description.
  3. Benchmark the role salary to ensure you are offering a fair wage. Think about ways to add to the reward package to attract good candidates and retain people.
  4. Make a formal offer of employment in writing.  Beware, a verbal offer is still legally binding.
  5. Ensure you offer the statutory minimum entitlements in terms of pay and holiday.
  6. Carry out pre-employment checks to make sure they have the right to work in the UK. Have the qualifications they say they have; ask for referees you can contact.
  7. Start someone with a probationary review period (a trial period) and give them an in-depth induction to the role and your business.
  8. Provide a comprehensive contract of employment from day 1 (a legal requirement) or ahead of their start date to ensure terms are agreed. If the relationship breaks down, it will be the contract that will be relied upon. 
  9. Set up a core suite of policies and procedures to help manage expectations on both sides.
  10. As a founder/owner you will naturally set the culture and tone for your business.  But it would be better if you could lead by example and live and breathe the values you expect your team to demonstrate.
  11. Communicate with your team.  Have continuous ongoing performance and progress conversations that regularly check in to see how someone is.  This is far more beneficial than a yearly appraisal.
  12. Get some advice tailored to your business to ensure you meet your legal obligations.

 

If you’re an HRi member, you can get your first employee and remote onboarding check lists from HRi resource centre.

Join HRi >

 

Author: Charlotte Allfrey