How to hire your first employee

Congratulations! If you’ve stumbled upon this article, you’re either thinking about hiring your first employee or you’re putting the feelers out there to see if it might be a viable option for the future. Either way, this is an exciting time and it’s great to get yourself prepared.

Whether you’re a freelancer who’s ready to start growing their business, or a sole trader looking to share the workload, hiring your first employee can be just what you need to give you and your company that extra bit of oomph. And with many companies making the move to hybrid or remote working, knowing the ins and outs of how to hire remotely is essential to stay ahead of the curve.

Below, we’ve created this handy guide to help you hire your first employee, with practical tips and advice to get you where you need to be. We’ll look at:

• Working out costs of recruitment

• Choosing the right type of employee

• Looking into legislation

• Starting to recruit

• How to write a contract

• Employee onboarding

Disclaimer: The information in this guide is for your reference only; it is not a legal document. We recommend that you seek your own legal advice when it comes to hiring your first employee, as well as utilising GOV.UK’s plethora of documentation and legislation.

Knowing when you’re ready to start hiring

For many freelancers, being a lone wolf is the dream – but when workloads become too heavy, or you start craving more time off, it can be tempting to think about hiring someone new.

However, choosing to employ someone too soon can lead to cash flow issues – but leaving it too late can make you feel overwhelmed and overworked. So when is the right time to hire your first member of staff?

• You’ve taken on a project that needs a specific skill set – and not one you possess. You could use a freelancer, but this is an ongoing retainer and requires someone on the job part or full time
• You’re having to turn down work because you’re so busy (go you!), but you really want to maintain relationships with those clients
• Maybe you don’t have enough work (but cash flow is strong) and want someone dedicated to driving sales
• You’re just too busy and need an extra set of hands that you can trust and rely on.

Whatever reason you have for wanting to take on your first employee, the most important step is to make sure you can afford it. Which brings us on to our first step:

Working out costs of recruitment

Recruitment doesn’t have to be expensive – but in order to do it properly, you might want to consider outsourcing it to the experts. Even if you do decide to recruit by yourself, it’s important to work out your own costs, as it will take up time – time that could be spent on client work.

You can use a straightforward formula to work out what your cost per hire might be:

Cost per hire = (your time costs + any external recruiting costs) / the number of people you’re hiring

So for example, if your time is worth £50 per hour and you need a week to write a job description, post on LinkedIn, Indeed, Monster etc., then sift through applications, then contact applicants, THEN conduct interviews, and finally, create a watertight contract, that will be around £1,875. Add external recruitment costs to the equation, it all starts to add up.

Salary

You then need to decide on salary for your new hire. If you’re using an external recruitment agency, they’ll have data to help you decide on a fair wage. For your own research, use job board websites or LinkedIn to view similar roles. Ultimately, you will know how much you can afford to pay an employee – and what the value of their work to your company is.

National Insurance, pensions, and PAYE

This guide might seem overwhelming, but it’s so important to ensure you’re not missing anything essential when it comes to hiring your first member of staff. You want to get it right, so you don’t get any nasty surprises down the road.

Aside from salary and recruitment costs, you’ll also need to look at the cost of National Insurance, your employee’s pension, and then PAYE fees. You must provide a pension, regardless of the size of your business (currently just you!), if your new member of staff is over the age of 22 and earning at least £10,000 per annum.

Choosing the right type of employee

Now you’ve worked out your costs of hiring and are satisfied with the results, you now need to decide whether you should hire a freelancer or an official, part time or full time employee.

Benefits of hiring a freelancer

• You don’t have to worry about pensions or PAYE. You simply pay the freelancer when they invoice you for the work completed, as if you were paying a supplier
• It may be more cost effective initially, as you might have small projects for them to work on, or you simply want to free up some of your workload
• There’s a huge talent pool of freelancers out there

Disadvantages of hiring freelancers

• They can be unpredictable in their hours – some freelancers work a full-time role alongside their freelance work, which means they might not be contactable during regular working hours
• Like you, they’ll have other clients to deal with, meaning you’re not getting their dedicated attention.

Benefits of hiring someone part-time or full-time

• You know they’ll be on hand during the hours you set to help grow your business – not theirs
• They’ll be completely immersed in your vision and hopefully have the passion and drive behind them to match yours. They’ll also have a solid knowledge of the business – something not all freelancers can get to grips with right away
• Adding new talent to your team means you can continue to grow it and attract even more great employees
• You’ll always have someone on hand to help with workloads, with a consistent person tied to the business
• With a regular income to pay, there’ll be no nasty surprises when it comes to payroll each month – with a freelancer, their costs can go up and down without much warning.

Disadvantages of hiring permanent employees

• All the fun finance stuff we went through earlier? Yup, you guessed it – it needs paying. Your permanent employee will need a salary, a pension, and any other benefits you see fit
• You’ll need to manage them, which may add to your workload – and if that was what you were trying to alleviate by hiring them, this could be a problem
• You might go through the expensive hiring process and then they turn out not to be the right fit for you.

Looking into legislation

If you’ve made it this far, you’re serious about hiring your first employee. You’ve weighed up the pros and cons and it’s looking like you could really grow your business with a fresh set of eyes – and a full-time salary. But before you go any further, getting clued up on legislation and legalities around hiring someone is extremely important.

So what do you need to do to ensure you’re following protocol and can legally employ someone in the UK?

• First off, actually check they have the right to work in the UK! This is a legal requirement and you can follow all the guidance on how to do this via GOV.UK. If in doubt, you can speak to a recruitment and hiring professional
• Register with HMRC. Without a payroll number, you can’t start paying your staff and no one will be happy about that. You’ll also find out whether you actually need to pay your employee through PAYE. If they’re earning more than £120 per week from you, it’s more than likely you’ll need to register and pay through PAYE
• Once you’ve registered, you’ll be able to work out their tax code and other employee information, such as student loan repayments etc.
• Unsure how much to pay your employee? The one thing you MUST do is pay the National Minimum Wage – it’s the law. However, a Living Wage is far more beneficial to you and your employee, so consider this as an option instead.

This section could be its own guide, so to keep as informed as possible, make sure you check GOV.UK’s website and follow the guidelines closely.

Starting to recruit

Now you’ve got to grips with the legalities and financial side of hiring your first employee, it’s time to start thinking about recruiting. Here comes the exciting part! Meeting potential recruits can be in equal parts enthralling and anxiety-inducing, but the most important thing is to take it in your stride and ensure all candidates are given a fair interviewing opportunity.

• First things first, write an appropriate job description. You can find free templates all over the internet – just make sure you adapt and change it to the role you really want to hire. You want your company to come across well so you attract the best talent. A boring, stale job description won’t bring you that
• Always include the salary on your job postings. It can be frustrating for candidates to apply for a role that’s either below or way above their expectations, and ultimately miss out on the opportunity
• Choose the right places to post your job listing. If you’re hoping to save on costs, you can use your social media channels to promote your role for free, or put a small budget behind it on Indeed, Monster, or Reed. LinkedIn is a great place to find quality candidates – without extortionate recruitment fees
• Start sifting through CVs. If your job description is appealing enough, you’ll probably be inundated with anxious candidates looking for their next (or first) role. It can be a lengthy process, but make sure you spend quality time looking through them to ensure good candidates don’t get missed. You know what you’re after, so make sure their CV reflects that
• Once you’ve shortlisted CVs, start inviting candidates to interview – this can be in-person or on a video call. Make sure you know the questions you want to ask them and how you’d like them to respond. Keep things lighthearted and calm – your candidate doesn’t deserve to be grilled and they need the opportunity to showcase their skills.

How to write a contract

All that interviewing time was worth it – you’ve found a candidate that you feel will really add value to your business and help achieve that growth you’ve been craving. They’re happy with the salary offer (after a bit of negotiation), and now you need to formalise the deal. So what exactly should you include in an employment contract for your first member of staff? (Again, we would advise seeking legal input from a solicitor before you create a legally binding contract!)

• • Names: Include your business name, your name, and your new employee’s name
  • Job title and start date: This is important for notice periods or even insolvency
  • Normal working hours: Of course, flexible working is now the norm, especially with remote working, but ensure you outline what regular hours of business are, in case you need your employee to work these

• Salary: Inform your new employee what their agreed salary is, as well as any bonus schemes. You also need to inform them when they will be paid and by what means i.e. direct debit each month

• Sick and holiday pay: Both equally as important, but you need to inform your employee of these before they sign the contract. It’s ultimately up to you how much sick pay you provide (after Statutory Sick Pay) and how much holiday time your employee is entitled to (statutory minimum of 28 days)

• Notice period: We briefly touched on this in a previous point, but your employee must be made aware of their notice period, which is up to you to decide

There are a number of other items you could consider including in a contract, but from a legal standpoint, this is the bare minimum.

Employee onboarding

Congratulations – your new employee is due to start! They’ve signed the contract and it’s almost time to onboard them. But how do you do this? 

Employee onboarding can be tricky in an age of remote working, but having a checklist and outline will ensure nothing gets missed and your employee feels comfortable – no matter where they’re working in the UK.

• Ensure all equipment and software is ready and with them in time for their start date. A welcome pack including stationery and treats makes a nice touch
• Arrange a welcome call with them on their first day – or even a meeting in a shared co-working space. A virtual office location can be a great way to do this
• Introduce yourself and the business – you could even create a welcome booklet with all the information they might need
• Outline their tasks for the first week, so they don’t feel overwhelmed and can settle in easily.

And there you have it! There’s a lot to consider when hiring your first employee – but it’s well worth the steps to ensure you can relieve yourself of additional duties, and grow your business. 

Handy links

Guide to creating high-performance remote teams

Employing staff for the first time – GOV.UK

National Minimum Wage – GOV.UK

Checking the legal right to work in the UK – GOV.UK

Check someone’s criminal record – GOV.UK

Employer’s liability insurance – GOV.UK

Employment contracts – GOV.UK

Register with HMRC – GOV.UK

Workplace pensions – GOV.UK

Having a virtual office can ensure you can attract better talent, with a credible business location, and ensures you have the chance to meet your employee in person, in a professional building to really create a great first impression. You can even conduct interviews in pay-as-you-go meeting rooms, helping your potential recruits feel more at ease than on a video call. Discover our range of virtual office locations here.