Not Sure How To Employ Staff? Here Is Our Guide To The Key Legal Requirements Around Hiring Your First Staff Members.
There are 6 key requirements when employing staff. These are listed below.
Employers’ Liability Insurance
All employers are legally required to take out Employers’ Liability insurance. This will help you compensate staff who suffer sickness or injury in the line of duty.
You can be fined up to £2500 per day you are not insured.
This insurance can often be obtained in combination with public liability insurance and, given the relatively low costs, this is often worth considering for small businesses.
Employment Contract
Your employment contract should clearly outline the terms of employment and role responsibilities of your employee. Not only does this avoid future legal fallout but lays the foundation for a clear work culture with well-understood expectations of both the employer and the employee.
A basic contract should include;
- Company Name
- Employee Name
- Job Title and a detailed description of the role
- Start Date
- State whether this is a permanent or fixed contract
- Location of employment, approach to remote work, days required at the office
- Whether the employee can remotely work from abroad. (This may have tax implications for the employee and employer)
- Number of leave days per year
- Probation period if applicable
- Notice Period (for both parties)
- Bonus structure
- Sick Pay
- Sick Day Protocol and Contacts
- Pension Scheme Details
- Collective Agreement/trade union details
- Disciplinary procedures
Mercantile Accounting provides free basic templates to clients for employment contracts and offers services drafting more complex employment contracts from £25.
Proof Of Right To Work
You need to check all employees have a right to work in the UK. For British and Irish Employees this is as simple as viewing their British or Irish passport. It is still acceptable if this passport is expired.
You must view these documents in person with the employee present. Photocopies of these documents must then be kept.
When employing foreign citizens, they will need to provide you with a share code via the government portal in order for you to confirm they have a right to work in the UK. This portal can be found here.
You can view their right to work by inputting their share code and date of birth here.
Pension Schemes
You are legally required to provide a pension scheme for your employees. A pension provider can provide this. Generally, you will be required to pay a start-up fee upon set up. Thereafter you will only be required to pay monthly contributions.
This will include the amounts contributed by you as well as the amounts withheld by you on behalf of the employees. In total at least 8% of their salary must be contributed to your employee’s pension fund each month. You are required to contribute at least 3% of this 8%, with the remaining percentage being withheld from the employee.
Register For PAYE
The Employer needs to register for PAYE with HMRC. This can be done via the government gateway.
This is the same gateway you would have used to register and file for Personal or Corporation Tax. This should ideally be done 2-4 weeks in advance of the first employment as this can take time to process.
Payroll Software
You are required to obtain payroll software recognised by HMRC in order to submit your payroll data for each pay run you make to your employees. This software is available with any reputable accounting software.
We recommend using Xero payroll software in conjunction with Xero accounting software. Chat to us about discounts we can arrange for you on Xero software.
You can however find a full list of software accepted by HMRC here.