So you’ve always dreamed of being your own boss? But are you ready to be someone else’s?
Picture the scene. Your startup is flourishing, work levels are on the rise and you find yourself in need of another pair of hands... it’s time to hire your first employee!
It is a great moment in any startup’s life, but it is also a time when the weight of responsibility upon you as a founder gets considerably heavier. Becoming an employer means much more than agreeing to a simple contact of ‘cash for services rendered’.
In hiring staff you are acknowledging a willingness to assume a multitude of responsibilities and legal requirements.
Without wishing to sound unnecessarily dispiriting, being an employer is a minefield of red tape, bureaucratic loopholes and potential pitfalls. If you don’t keep a watchful eye on the details from the outset, you could find yourself in a rather difficult situation down the line.
This is our handy reference guide on six essential employment issues. We'll also point you in the right direction should you have any more questions.
If you are going to employ someone, you and the chosen person need to have a contract of employment which clearly and unambiguously states the conditions of their employment, as well as your duties and responsibilities as an employer. The basics that you must include within the contract are;
- Their duties and responsibilities.
- The hours of work.
- The pay.
- Details of sick pay, holiday pay entitlement, maternity and paternity leave.
Of course there’s lots more that needs to be taken into account when creating a contract of employment, check out the official government guidelines for more details.
It is a criminal offence to pay less than the minimum wage, so be sure to know the salary each of your employees is entitled to, and that you adjust their payslip to reflect any overtime / changes of circumstance.
Running a Payroll
Your payroll covers three main objectives which need to be completed for each person you employ.
- Paying your staff their salary in accordance with their contract of employment
- Using the governments PAYE (pay as you earn) system to deduct taxes and national insurance owed by both you and your employee. Making sure than any other necessary deductions are also made, these might include; pension contributions or student loan repayments.
- Providing your employees with a written copy of their payslip, explaining the breakdown of their wages and the amounts which have been taken in taxes, charges and payments.
This is the part of being an employer that most people find rather trying, and quite frankly we don’t blame them. It is a very convoluted system, but to the credit of the government they have provided quite a good explanatory guide here, which should help to answer any further questions you may have.
Luckily there’s a number of free HMRC approved software packages which can handle the vast majority of payroll for you. Whilst daunting at first, most people find that payroll becomes progressively more straightforward each time they complete it and is eventually something which requires little thought or effort.
Working Hour Regulations
Working time regulations, sometimes called the ‘working-time directive’ is a law put into place to ensure that no employee is ever forced to work an excessive number of hours.
At the moment, this law states that no employee can be asked to work more than an average of 47 hours per week over an average of 17 weeks, unless they are given the option to sign an ‘opt out agreement’. This agreement removes the restriction of the working time regulations but can be revoked by the employee at any time. Employees under the age of 18 are restricted to a maximum of 40 hours work per week - find out more here.
Employee Sick Pay
There’s a huge number of ifs and buts associated with sick pay (read the official document here), most of which apply to only a very small minority of people and make the whole thing seem far more complicated than it really is.
Statutory sick pay must be paid to any employee who has an employment contract and is incapacitated through illness for more than 4 days, up to a maximum of 28 weeks.
This is your minimum legal obligation as an employer, you may offer more if you so wish, but you cannot offer less.
The most relevant provisos attached to this legislation are; that the person must have earned at least £111 per week, and that they must have completed at least some work under the terms of their contract. A full list of the ‘ins and outs’ can be found here.
All employees, full-time and part-time are entitled to paid holiday leave. The amount of time that they are allocated is dependent upon the number of days that they normally work in a week.
There’s a really simple calculation that you can use to work out an employee’s entitlement.
Average number of days worked per week x 5.6 (Because full-time employees are entitled to 5.6 weeks paid leave per year)
So for example, someone working 4 days per week would be entitled to 22.4 days paid leave in a twelve month period.
NB. In October 2014 the Employment Appeal Tribunal (EAT) Ruled that overtime pay (rather than basic salary alone) must now be taken into consideration when calculating the level of pay a person receives during annual leave.
The recent changes in Holiday pay in respect of overtime demonstrate a very important point… employment legislation undergoes regular changes. It is vital that you keep up to date with any changes by paying regular visits to HMRC.
Eoin is the business developer at Startacus.net and you can follow him on Twitter @StartacusEoin.