Hiring your first employee as a small business

Here are the steps you need to take before welcoming your first employee to your company

If you are considering taking on a new employee, it’s a sure sign that your business is going in the right direction.

There are varying factors to be considered to avoid unanticipated problems and stress. Small business owners often struggle in the foundation phase to understand the real cost of bringing their first employee onboard.

With that in mind, here’s what to consider.

Posting the job advert

Depending on your potential talent pool, you may want to do the interview yourself or hire an agency to do it for you. The latter is particularly useful if you’re not familiar with the day-to-day intricacies of the role that you’re advertising.

This checklist of what to include in a job advert will be handy if you’re doing the hiring yourself. Once your ad is finished, publish it for free on the government’s JobCentre website, create an online or print ad or post it on social media.

Calculating the salary

In addition to ongoing business costs, the salary needs to be calculated to ensure that fair wages are met. Small businesses can deal with cost limitations by hiring an employee part-time or hiring someone on a fixed-term contract to determine the viability of the position. If they’re on shifts then you need to make sure that they’re paid at least the National Living Wage (or the National Minimum Wage if they’re under 23).

Struggling to come to a figure? Check out Payscale, Glassdoor and Indeed to get a better idea of your industry’s standard. A candidate’s salary expectations can be a steer too, especially if they have some experience in their field.

The interview

Set the date and time with the candidates in writing and either give them the workplace address or a link if it’s going to be a video interview.

Before the interview, have a good look over the CVs you’ve received and make notes on each candidate. Roughly figure out how long each interview will take, leaving time at the end for questions they may have.

On the day, make sure there are no interruptions. Have a quiet spot to do the interview and turn your phone and email notifications off. If you’re doing the interview online, ensure you’ve got the latest version of your video chat software downloaded so that you’re not held back by update delays.

>See also: Zoom tips and techniques when doing video job interviews

Do background checks

So, you’ve selected a candidate. Firstly, check that they have the legal right to work in the UK. They’ll need to present one of the following documents:

  • Biometric residence permit number
  • Biometric residence card number
  • Passport or national identity card

Find out how to check that the document allows someone to work in the UK at the government website.

Roles which involve working with children or other vulnerable people or are in the security sector will need a Disclosure and Barring Service (DBS) check. More detailed checks are available for jobs such as childcare and healthcare. Note that there are different check processes in Scotland and Northern Ireland.

You can request:

  • A basic check, which shows unspent convictions and conditional cautions
  • A standard check, which shows spent and unspent convictions and cautions
  • An enhanced check, which shows the same as a standard check plus any information held by local police that’s considered relevant to the role
  • An enhanced check with barred lists, which shows the same as an enhanced check plus whether the applicant is on the list of people barred from doing the role

If you carry out criminal records checks, you must have a policy on employing ex-offenders. You’ve also got to present it when asked by an applicant.

A DBS only applies to the time a person has lived in the UK. You’ll need to check the rules in the countries that the candidate has previously lived in if you want to know more.

Insurance and income tax

Now that you’re hiring an employee, you need the right kind of employer insurance. As soon as you become an employer, you need employers’ liability insurance. It will help you pay compensation if an employee is injured or becomes ill because of the work that they do for you. You may not need it if your employee is a family member or someone who is based abroad. If you do need it, your policy must cover you for at least £5m. Cover is crucial as you can be fined £2,500 for every day that you’re not properly insured.

The law requires that national insurance is paid for, as if it is unpaid it can lead to serious penalties. This also applies to PAYE income tax, which will be deducted from the salary. You’ll receive your PAYE employer reference number when you register as an employer with HMRC – more on that in a minute.

The job offer

Send confirmation of the job offer in writing to your new employee. You need to give your employee a written statement of employment if they’re going to be working for you for more than one month. It should include the key conditions of employment, but it’s not their contract. It should include a principal statement and a wider written statement.

The principal statement should include:

  • The employer’s name
  • The employee’s or worker’s name, job title or a description of work and start date
  • How much and how often an employee or worker will get paid
  • Hours and days of work and if and how they may vary (also if employees or workers will have to work Sundays, nights or overtime)
  • Holiday entitlement (and if that includes public holidays)
  • Where an employee or worker will be working and whether they might have to relocate
  • If an employee or worker works in different places, where these will be and what the employer’s address is
  • How long a job is expected to last (and what the end date is if it’s a fixed-term contract)
  • How long any probation period is and what its conditions are
  • Any other benefits (for example, childcare vouchers and lunch)
  • Obligatory training, whether or not this is paid for by the employer

Bear in mind that on the first day of employment, you must give your employee or worker information about sick pay and procedures, other paid leave (such as parental leave) and notice periods. This can either be included in the principal statement or a separate document. If it is in a separate document, then the employee must have reasonable access to it like being in a shared online folder.

The written statement must be given to your employee within two months of the start date of employment. It must include information about pensions and pension schemes, collective agreements, disciplinary and other grievances and any other right to non-compulsory training provided by the employer.

Register as an employer

You must tell HMRC that you’re now an employer. Do this before you pay your first member of staff but no more than two months before you start paying. It can take up to five days to get your PAYE reference number so be mindful about timing around that. The process of registering can be done on the government website.

Do I need to enrol my staff member in an employee pension scheme?

As you’re an employer, yes you do. As for the staff, they’re eligible to be enrolled if they are:

  • Aged between 22 and the State Pension age
  • Earn at least £10,000 a year
  • Normally work in the UK (this includes people who are based in the UK but travel abroad for work)


Now that you’ve got your first employee, it’s time to get them acquainted with the company. Have all of their tech set up on their first day. Help them understand who their target customer is and what they’re looking for when they use the product or service.

>See also: Onboarding tips: how to help new employees settle in

This is much the same for virtual/online onboarding. Have a chat with them over video call – you might want to go over working hours and any dress code expectations as the standard has changed since the shift to hybrid and remote working. Encourage them to do video calls, even for the first little while to get them used to who they’re working with. You’ll probably need extra platforms like communications and shared documents for ease of work flow. It’s wise that, in the absence of face-to-face, communicate more to make sure they’re getting on OK and clear on what they should be.

Are you ready to hire your first employee?

These are the basics of hiring your first employee, but there are some elements that can’t be explained in an article. For example, pitting qualifications against experience or personality. In these instances, you might ‘just know’ that a candidate is right or wrong for the job.

In the meantime, here are a few other articles to help you hire employees:

How to hire effectively as a small business
7 hiring strategy dos and don’ts for high-growth SMEs
Hiring your first virtual worker: The dos and don’ts

Further reading on employing staff

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Anna Jordan

Anna is Senior Reporter, covering topics affecting SMEs such as grant funding, managing employees and the day-to-day running of a business.

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