5 Legal Steps for Hiring Employees (UK)
So, your business has expanded and you’re ready to hire your first employee. You’ve found the perfect person for the job, they’re excited about being a part of your venture, and you’ve worked out details like expected hours and pay. Now all that remains are your legal obligations. Here are five steps for new British business to take when hiring:
1. Register as an employer with HM Revenue & Customs
Use the online tax registration service to get employer status with HMRC, and simultaneously get signed on for the Pay As You Earn (PAYE) system. This is necessary even if you are only employing yourself, but once you’ve done it once, you don’t need to do so subsequent times.
2. Make sure that your employees can legally work in the UK
Check legal documents such as passports and driver’s identifications before hiring anyone, or you risk being prosecuted for employing illegal workers. If a potential employee is from another country, check that their visa permits them to do the work that they are applying for. If names on different documents don’t match, make sure that there is a good reason (marriage or divorce, for example).
3. Deal with the P45 form
Employees should be given a P45 form when they leave a job, and present it before their first payday to a new employer. If your employee doesn’t have a P45 for any reason, you can find the P46 form online and provide it to them to fill out, with more or less the same result. This information is necessary for determining what tax code the employee will be paid under. Payroll software may determine this for you, or go to the HMRC website to find out where they fall on the table. Give the information to HMRC by submitting the form online.
4. Inevitably, deal with a new tax code for your employees
HMRC has mystic powers over the code under which each employee is paid, and they will often inform you to change the tax code with a P6 form. This form will not tell you why, only that you must. The P6 may come in the mail, or online if you have registered with PAYE (which is recommended).
5. Select a work-based pension scheme
This requires finding a provider, selection one of the several types of schemes, and enrolling in it, which can be done online. The UK is shifting to an auto-enrolment plan that should streamline the process, but you must ensure that your employees understand the terms. The pension money withheld from the salaries of your employees must be kept in a separate trustee account from the company’s.
There may be additional steps required in the process, so I recommend further research. An excellent resource is the free Taking on an Employee toolkit from the Department for Business Innovation and Skills, which will walk you through the process. You are now well on your way to growing larger and more successful. The satisfaction your employees have with you as a boss is an integral part to the functioning of your business, but don’t neglect the paperwork aspect as well.