HR

What You Need To Consider When Employing Staff For The First Time

Bryan Brown | 18 March 2022 | 2 years ago

What you need to consider when employing staff for the first time

When it comes time for your small business to take on headcount, it can be thrilling and daunting at the same time. Finally, you will be freeing up some of your time so the business can operate faster, but what if you get it wrong? The ‘what if’ factor might delay your decision, but if your turnaround time is affected by your work volume, then it’s time to make that move.

With ‘making that move’ comes accountability, so here is an overview of what you need to consider when employing staff for the first time. In addition to the need for choosing the right candidates, you have no doubt heard of your peers mentioning legal responsibilities regarding staffing.

Let’s look at the whole process from start to finish as well as some of the costs and the contractual obligations (which are informed by the legal obligations) when you launch into the sphere of ‘boss’ in the United Kingdom.

Officially becoming an employer

There is an important step to take before hiring headcount regardless of whether you are a:

  • Sole trader
  • Private company limited by shares
  • Public limited company
  • Private company limited by guarantee
If you are a limited company, you would have registered as an employer already to pay yourself even if you are the one and only director.

The registration with HMRC can be done online and must be before the first payday. Take note that the registration for your employer PAYE reference number might have a turnaround time of five working days which can equal seven to ten calendar days if you have weekends on either side of it.

Statutory payments and deadlines

It goes without saying that with headcount comes admin, but most of it can be automated. You just need to be aware of your financial and deadline obligations, for example:

  • Your payroll software can calculate tax contributions based on the tax categories you apply to your employee (get advice from an accountant) and will be automatically deducted from relevant salaries.
  • National Insurance (NI) contributions can also be calculated by your payroll software and will be deducted automatically from salaries.
  • You, or your bookkeeper or accountant, need to do the payroll reporting, tax and NI submissions according to HMRC deadlines.

Making the right choice

There are so many things to think about when taking on a new headcount. There are personality aspects, soft skills, competencies, training, etc. However, the first thing you should write down is the answer to this question:

  • Why does your business need this person?
Perhaps sales are increasing and you need more admin support for the sales team, or you need a bigger sales team to service the growing customer base. Or perhaps you need backroom support for getting those wonderful orders out the door. The business need might be that you need PA support so that you can spend more time being strategic, or perhaps your marketing coordination needs to be done after your marketing consultant has handed over the plan of action.

Put it on paper

Write up the business need clearly and this will inform the job description, personality type, skillsets, etc. that each hopeful candidate should have. Having this knowledge assessed and laid out clearly will make “filtering” the candidates vastly easier. By writing up the need in detail, you will probably have pictured the new team member working in that position. When you meet the candidates, you will have a better gut feeling for the person who will suit the position.

You will also have a clearer idea of the skillset, experience and drive required to meet the needs of the new position daily.  In fact, before even getting to the interview stage, it will help you write up a clearer advert posting describing the needs of the position.

Clarity on what you want and why

HR experts support a planned, researched approach to taking on headcount. They advise that having a crystal clear idea of the business needs is vital for a successful candidate selection.

To be even more on top of your game, go through a gap analysis process on the current skills within the company versus what the company needs. This will help especially if an almost-ideal candidate is on a particular skill’s learning curve but the business is well skilled in that area already. You could then make a judgement call on that learning curve factor.

Laying out the role clearly will also inform the job title and, on that topic, get professional help with the job title.

  • ‘General Marketing Helper’ will get you a particular resource pool, and
  • ‘Marketing Assistant’ will attract another resource pool.

The interview meeting

Don’t walk into the interview meeting distracted. Take a minute or two to collect your thoughts. Some of those thoughts should be dedicated to the values that your business stands for. Look at all the candidates through the filter of those values because they are everything your company stands for. If there is a hint of a clash of values, the candidate should not be shortlisted. Values include attitude towards work. A highly skilled person with the wrong attitude can bring down the engagement of an entire team – and that is an expensive mistake to make.

Choose based on the value first and then on the skills, and you will be saving yourself a lot of time and money in the long run. Attitude cannot be taught, but skills can be

On another soft observation point, despite what the qualifications say and the 5-star reviews, if your gut says something is off with a candidate, trust that little voice. You are in your current position because you have trusted your instinct. It is not scientific; however, it is most likely based on data you have absorbed through your years of experience, and that experience is sending you red flags. This is not to say that you should throw all other data out the window:

  • Check references,
  • Assess experience,
  • Test the attitude,
  • And listen to your gut.

The shortlist

Now that you have worked through the above points, you might have reached a shortlist of promising runners for the position. At this point, you can take them through another screening with pertinent questions about details that you have prepared – the nitty-gritty, so to speak.

For example:

  • How are they going to get to work?
    • Will it be difficult to get to work on time, all the time?
    • Do they have a driver’s license and a mode of transport?
  • How do the hours of work suit them?
  • If needed, are they able to work remotely?
  • If there is an emergency rush to get work done for whatever reason, could they be flexible with working hours?
Not only will the answers to the questions be information, but how they answer them.

Next, move on to technical queries and watch out for Google-type or high-level not-committal answers.

Using this methodology will get you through to a final candidate with a good chance of making it through the next phases.

Check, check and check again

Congratulations on reaching the point of a carefully selected POTENTIAL probationary period candidate. You are not at the finish line yet. Two more laps to go, but you can do it – the success of your business depends on your stamina through this course.

The penultimate lap to selection is the checking, checking and checking again lap.

You must investigate and verify:

  • The potential probationary period employee’s identity – use your lawyers.
  • Whether they are legally allowed to work in the UK.
    • There are serious fines and lots of business complications if you get this wrong. You can use this government site or use your lawyers.
  • There is no criminal record via a DBS check if the work involves interaction with children. A DBS check is generally a good idea.

The test run

Now you are into the last lap – the test run. This is done via a probationary period, which is an important tool for managers and business owners. Usually set at around ninety days, the probationary period gives you a legal opportunity to end the relationship if things don’t pan out.

It would be prudent to not get the new team member deeply involved with key clients while they are on their probationary period. Otherwise, ending their contract, if necessary, will be more inconvenient for you, or it might cause you to avoid ending it altogether, which is a long-term headache for you.

Take the ninety days as a serious commitment from you for observing the candidate and testing them. It is a gift on a platter and is one of the most vital parts of onboarding staff. The candidate must prove:

  • They have the experience listed on their CV
  • They are as capable as “advertised”
  • They fit in well with the team and the ethos of the company
  • They suit the company
If not, end the relationship. It is not going to get better in the long run. It has more chance of becoming worse. You may have lost three months plus hiring time, but it is better than years of managing a bad apple in your team.

[Sub-Header] Signed, sealed and delivered

Whether you’re installing a new kitchen, renting a hot-desking spot or hiring headcount:

Always. Use. A. Contract. 

No matter how small your company is, use a contract. It protects you, the employee, the business and ensures there were no honest, unintentional misunderstandings.

The responsible party for issuing a contract is always the employer. You must give the candidate employee the opportunity to:

  • Read, review and comment on the contract
  • Receive responses from you or amendments to the contract
  • Sign, date and return it
This must be done before they are told they are employed verbally or in any form of written correspondence, e.g. email, and before they arrive on their first day of work.

What should a contract cover?

A contract should generally include:

  • An outline of the job (which you will have from your first step in the process)
  • Their job title
  • The name of the department they will be working in (if applicable)
  • The job title of their superior
  • The start date of their employment
  • The expected salary or wage or hourly rate as was agreed.
  • The terms of employment
  • Holiday leave, maternal/paternal leave, compassionate leave, etc.
  • A clear definition of the probationary period, the start and end date of it, what they will be expected to achieve during this time, what will happen at the end of the probationary period
  • Notice period
  • Job appraisal schedules
  • Disciplinary procedures and a reference or link to the full staff handbook
Onboarding a new staff member is complex and time-consuming, and it needs to be done very well for your company to get the maximum benefits long term. The chance of getting the best hiring outcome is always improved with the use of an HR professional. Whether a large company or a small niche consultancy, use them and feel the weight of worry lifted off your shoulders. The process will be infinitely easier, correct, and nothing will fall between the cracks to leave you exposed to legal risks in the future. Sounds like a great idea, yes?

Payroll, pensions and cashflow

Hiring to ease the pressure off your workload and give yourself at least 6 hours of sleep at night is a great idea, but you must be absolutely sure that your business can afford it. If the pressure is on in your business, then it is usually a good indicator that things are going well and the growth path is positive. But that doesn’t always mean that cash flow is consistent and that the business pressure is from sales and income.

When you are committing to the employ of an individual, you are making a long-term commitment to monthly paying of a salary PLUS additional costs, and you must be aware of the total annual cost, the monthly commitments and the deadlines versus your cash flow.

Check with your accountant that you can afford the total cost and deadlines of a new headcount.

Hundreds of SMEs get into hot water soon after opening because of poor financial planning, lack of awareness of total costs or statutory obligations and a business plan that looks like Emmental.

The responsibility of hiring a new employee includes:

  • Consistently sticking to the agreed salary or wage payday, whether once a week, every month or another stipulate.
  • The timely reporting of this and submission of payments to HMRC.
  • Supplying payslips, with each payday, that details the total pay, the deductions and the final amount paid to them.
As an employer, you are legally obliged to submit your employee to a pension scheme if:

  • They are older than twenty-two years of age.
  • The gross salary amount is more than GBP9,400 per annum.
This pension scheme will require payments from you as the employer, not only payments from the employee. You can investigate further regarding this topic here.

Remember, you will be accountable for the payment of:

  • Salaries
  • Pensions
  • Employer’s liability insurance
  • Increased:
    • Equipment costs
    • Equipment insurance costs
    • Increased public liability costs
    • Increased telephone costs
    • Increased stationary costs
  • Etc.
You should be very confident that you can cover these costs on time, regardless of whether or not you are having a growth month. If you lose a key client or it is an off-peak season, can you still meet all these commitments? Talk to your accountant about contingency funds to tide you over for a period of three to six months or longer if that is what your accountant advises. It should at least be sufficient to tide you over for a strategic period and cover retrenchment costs.

Conclusion

Expanding your business and headcount is an exciting time. It can take your business to the next level when it is done well. Work through this guide, meet with your accountant and an HR consultant and take the next step when you are in a strong position.

Topic

HR

Related Topics

Performance Appraisals Reimagined, How to Modernise Your HR Reviews
4 September 2023

Performance Appraisals Reimagined, How to Modernise Your HR Reviews

Read More →
Which Employee Benefits Are Tax Free?
10 August 2023

Which Employee Benefits Are Tax Free?

Read More →
What is the Peter Principle and How Can You Avoid It?
7 August 2023

What is the Peter Principle and How Can You Avoid It?

Read More →
Getting the Most Out of Employee Engagement Surveys
24 July 2023

Getting the Most Out of Employee Engagement Surveys

Read More →
What is Payroll Flow? How Companies Such as PayFit are Streamlining Payroll Processes for SMEs
21 July 2023

What is Payroll Flow? How Companies Such as PayFit are Streamlining Payroll Processes for SMEs

Read More →
5 payroll mistakes that HR teams in the UK need to avoid
19 June 2023

5 payroll mistakes that HR teams in the UK need to avoid

Read More →

If you enjoy reading our articles,
why not sign up for our newsletter?

We commit to just delivering high-quality material that is specially crafted for our audience.

Join Our Newsletter