HR · 28 March 2017

Definitive guide to hiring your first member of staff: Registration and insurance

Guide to hiring
Since 2015, you no longer have to pay employer’s National Insurance on the wages of any staff members who are under 21

There are a whole host of different things you need to think about when you become an employer. Among other responsibilities, you’ll have to comply with tax legislation and employment law, and report to HMRC how much you pay your staff and deduct from their salary.

Over the course of this guide, we’ll be outlining the key procedures that you’ll need to follow to ensure a smooth transition into employerhood. First up is everything you need to know about registering new staff and your insurance responsibilities as an employer, before we take a look at the relevant aspects of employment law. Finally, we will guide you through benefits and salaries.

Registering as an employer

Unless you’re going to pay all your employees less than the Lower Earnings Limit for National Insurance (£112 per week), you must register as an employer with HMRC before you take on any members of staff.

If your business is a limited company and you’re taking a salary, you may well have already registered the company as an employer. If this is the case, you won’t need to register again when you take on your first employee.

Employer’s liability insurance

As an employer, you are likely to have a legal requirement to have employer’s liability insurance. However, you may not need this if:

  • You only employ a family member
  • You employ someone who is based abroad (a few restrictions apply to this rule and your insurance provider will be able to advise you of these)

Employer’s liability insurance covers you if an employee makes a compensation claim for injury or illness that they attribute to the working environment.

If you’re legally obliged to have an employer’s liability policy, you could be fined up to £2,500 for each day that you are without one. To find out more, check out the advice from gov.uk.

Some business insurance policies have employer’s liability insurance built in, so it’s a good idea to check your existing policy documentation. If you don’t already have employer’s liability insurance in place, your existing insurer may be able to add it to your current policy or you may wish to shop around for a new one.

Employer’s National Insurance

If your employee’s total salary is above the Employer’s National equivalent of £156 per week, you will have to start paying employer’s National Insurance to HMRC. As of 6 April 2015, you won’t have to pay employer’s National Insurance on the wages of any staff members who are under 21, unless you pay them more than £827 per week.

You may be able to reduce your employer’s National Insurance bill through the Employment Allowance, which the government introduced on 6 April 2014 and increased on 6 April 2016. The Employment Allowance reduces the amount of employer’s National Insurance by £3,000 a year for many employers, but companies employing only their directors are not allowed to claim it.

Don’t miss the next instalments in our definitive guide to hiring your first staff member:

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ABOUT THE EXPERT

Emily Coltman is chief accountant to FreeAgent, provider of cloud accounting software for freelancers, micro businesses and accountants. She is passionate about helping the owners of small and growing businesses to escape their “fear of the numbers” and she translates small business finance and tax into practical common sense speak.

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