As soon as a business hires its first employee, it becomes an employer. That brings significant legal and ethical responsibilities. It’s therefore in everyone’s best interest to approach the hiring process in the best possible way. Here is a quick guide to help.

What is an employee?

Before starting the process of hiring your first employee, make sure you’re clear on what an employee is. The UK recognises three ways a person can exchange labour for money. These are as employees, as workers or in the course of self-employment.

Both employees and workers are engaged under a contract of employment. The key difference between them is that employees are required to work under the direction of their management. Workers have a much higher level of control over how they perform their work. They are required to perform the work themselves unless specifically agreed otherwise.

The self-employed are engaged under a contract for the provision of services. This means that the hiring company simply defines what they need and the service provider takes full responsibility for ensuring that it is delivered. The service provider does not have to do the work themselves. This is the key differentiator between a worker and a self-employed person.

Do you actually need a new employee?

Taking on employees is a major commitment. For everyone’s sake, only make it if you’re totally sure that you can follow through with it.

If you can’t, you still have the option to use agency staff or freelancers. Alternatively, hire a new recruit on a fixed-term contract. This could be extended or converted to a permanent contract if all goes well.

There are three main factors to consider before deciding whether you are ready to take on your first employee: costs, the law and the necessary infrastructure.

The cost of making a new hire

The most obvious cost is your employee’s salary or wage. Also think about employer’s National Insurance and your pension contributions. Remember that some employees have the right to join a workplace pension scheme, even if they’re not required to be automatically enrolled in it.

Also allow for paid leave and cover for unplanned absences. It can be advisable to get insurance to limit your exposure to these.

Last but not least, think about what the new hire needs to succeed in their job. This probably includes some training, even if it’s just on in-house procedures.

You also need to provide equipment and pay for the cost of running that equipment, which may include providing support for its use (e.g. IT support).

The implications of employment law

At a very high level, becoming an employer means assuming a duty of care to your new employee, the public and the crown (represented by the government).

Your employee

You must keep your employee healthy and safe at work and give them a fair chance to succeed in their role. All employment laws essentially spring from this principle.

For example, GDPR helps to keep your employees safe by preventing their personal data from being abused. The Equality Act 2010 helps to give your employees a fair chance to succeed by protecting them from unfair discrimination (even when it’s unintended).

Both employees and workers have statutory rights such as protection against unfair dismissal, and the right to sick leave and paid holidays. You may also choose to specify additional rights in the employment contract.

The public

You must ensure that your employee does not pose a threat to the general public. For example, for certain positions, you may be required to run background checks.

The crown

You must ensure that any member of staff you hire is legally permitted to work in the UK. Also ensure that their pay is correctly recorded and all mandatory deductions made from it.

The necessary infrastructure

As an employer, you must put infrastructure in place that you do not need when you hire service providers. In particular, you need someone with a robust knowledge of employment law to ensure that the entire hiring process is run as it should be.

Keep this person (or a replacement) on your team for as long as you have employees. This is because even the smallest of small businesses need to ensure they fulfil all their legal obligations to their employees.

One of those obligations is to pay them in full and on time. You therefore need to register with HMRC as an employer and put a payroll system in place.

All of this may sound intimidating but in reality, it’s generally quite simple to meet these requirements. Many small businesses just hire a third-party HR firm to guide them through employment law. Modern payroll software can deal with day-to-day payroll requirements, and an accountant can supervise the process.

How to go about hiring your first employee

The process of hiring your first employee can be divided into three main stages:

1. Creating the job description
2. Finding the right person
3. Onboarding your new recruit

Creating the job description

The more thoroughly you create your job description, the easier it is to get interest from high-quality applicants. The key to success is creating a clear and accurate description of the role and the working conditions.

In particular, be clear about whether you are looking for an on-site employee or a remote employee. If you’re planning to offer hybrid work, be clear about how often the employee is expected on-site. This is key information for any potential applicant.

Also, be clear about how the person should apply. For example, will you provide an application form or request CVs? If you’re using an application form, how do candidates get it and how do they submit it? If you’re requesting CVs, where should they be sent? In either case, remember to specify a closing date.

Finding the right employee

Unless you are in a real hurry, always start by advertising your vacancy on your website and social media platforms. This means that it is seen by people with some sort of interest in or connection with your company. If this does not deliver enough high-quality applicants, then start using other channels such as agencies and paid adverts.

Alternatively, if you find yourself with more applicants than you can reasonably interview, work your way down to a shortlist. This process needs to be done transparently both for fairness and in case you are challenged later. Your job description is your key reference point here.

It’s strongly advisable to interview any job candidate before you hire them. Even if you’ve brought your shortlist down to only one serious contender, still confirm whether or not they’re really a good fit for the role. Again, it’s important to ensure that the interview is conducted fairly and legally.

Onboarding your new hire

If you need to conduct pre-employment checks, be clear that any job offer is dependent on these checks being favourable. Also, remember that right-to-work checks need to be completed before your new staff member actually starts their work.

When your new recruit turns up for their first day, have a plan to help them adapt to their role. Creating a staff handbook is often key to this. It can also be reused as you hire more new employees.

Useful resources

• Once you’ve hired your new employee, you need to hold on to them. Get some tips to help here.

• Learn about the differences between employees, workers and the self-employed here.

• Register as an employer for PAYE here.

• Learn more about health and safety at work here.

• Learn about the Equality Act 2010 here.

• Learn more about GDPR here.

• Learn more about right-to-work checks here.

• Get detailed information about workplace pension rules here.