Self-employment : Employing people

Employing people is one of the biggest steps you can take when growing your business and it should not be taken lightly. Seek independent advice before making any key employment decisions.

Be aware that there are regulations around subjects such as minimum wages, hours of work, sick pay, flexible working, annual leave, maternity/paternity/adoption and parental leave, employers’ liability insurance, repayment of staff members’ student loans and redundancy. Induction programmes and formal pay scales and promotion structures may need constructing.

The rules surrounding all this are extremely complex, so it is vital to seek professional advice from your accountants, solicitors and HM Revenue & Customs (HMRC) before setting up a payroll system and maintaining necessary records.

Making job offers

If you are advertising a post or deciding who to employ, you must pay due regard to anti-discrimination laws. With few exceptions, and outlined in the Equality Act (2010), it is illegal to deny anyone a job on the grounds of their gender, race, religion or belief, disability, sexual orientation, gender reassignment, marriage and civil partnership, pregnancy and maternity or age. Guidance on receiving and acting on references can be found in Employment Practices Codes of the Information Commissioner's Office (ICO) .

Pre-employment checks

Before you confirm a job offer, you should take up references and check that both these and the candidate’s CV/qualifications are valid and truthful. Their previous employment history and any convictions may also be followed up. Care is also needed to make sure that you are within the law when employing children under 16, young people under 18 or workers from outside the EU (including students), who will require work permits and visas.

If any member of your staff is likely to come into contact with children or vulnerable adults, a Criminal Records Bureau (CRB) check is mandatory.

Job contracts

When you do find the right candidate, they should be given a formal contract of employment, clearly laying out the terms and conditions under which they are employed, including pay, annual leave, hours, sick pay, pension, notice and any probationary period. Most solicitors can advise on this and draw up a standard or customised document. The Law Donut  and Lawyers for your Business (LFYB)  websites are useful tool for legal issues.

PAYE and National Insurance

If you are paying anyone for the work they do, it is your responsibility to ensure that their tax and National Insurance (NI) obligations are met. Staff on your payroll must be covered by the Pay As You Earn (PAYE) system by which tax and NI are deducted at source from their wages. They are entitled to an itemised pay slip, as well as other documentation, such as a P60 at the end of the financial year. If you employ freelancers, you should advise them that they are responsible for making their own arrangements for this.

Pensions

A range of options is currently available to employers and their employees regarding occupational pensions. You should advise any employees of your business about the arrangements you have in place for them or discuss their entitlements to make their own arrangements. There are different types of schemes and various levels of employer/employee contributions to these. You will receive tax benefits for making contributions to your employees’ pensions. 

Workplace pension reforms from 2012 will require all employers to contribute to pensions for their eligible job holders. The Pensions Regulator and the Department for Work and Pensions (DWP)  can advise on provision, registration and other issues.

Disputes and dismissals

If you have selected your staff wisely and treated them well, it is unlikely that major problems will arise. If there are disagreements or if you need to discipline or dismiss one of your employees, there are rules in place to ensure that this is done justly and properly. The Advisory, Conciliation and Arbitration Service (ACAS) can provide support on this and may also mediate to prevent matters from escalating. Both ACAS and the Chartered Institute of Personnel and Development (CIPD) have useful tips on employing people and on what constitutes a model workplace.

Business Link provides an extensive range of guides and checklists for anyone looking to employ people, and more help is available from the Employment pages at the Department for Business, Innovation and Skills (BIS) .