When starting a business, you’ll have a lot of responsibility, especially if you want to hire staff to work for you. Taking on employees is both a great opportunity and a challenge as you become responsible for someone else and their livelihood. There are a range of staffing options available for you, including employing someone directly, zero hour contracts and freelancers.
Employ someone directly
When thinking about employing someone, this is probably the first option that comes to mind. The advantage of this is that you would have direct control over the employee. As they work for you, you’ll be able to set out exactly what and how you want them to work. In return, you are more likely to get a greater commitment to your business and loyalty as you will be paying their wages. It will give you the opportunity to train and develop them as the business grows.
If you do employ someone, there are a few things you need to remember:
- The cost is more than just their salary. You will need to add on employers NI, possible pension costs with auto enrolment plus any benefits you may wish to provide.
- You will need a contract of employment to make sure they are employed on the terms which work for your business. Remember, everyone is entitled to a statement of their Main Terms and Conditions of Employment within 8 weeks and this should include: name of employer and employee, place of work, job title, pay, holidays, hours etc., where to find disciplinary, grievance procedures etc. More info can be found at www.acas.org.uk
- If someone is employed, they will accrue employment rights after 2 years’ service which include the right not to be unfairly dismissed. However, there are some employment rights which start from day 1 or even before, e.g. the right not to be discriminated against on the grounds of race, sex, age, disability, marriage/civil partnership, gender reassignment, sexuality, pregnancy, religion etc. An employee has redress through an Employment Tribunal if they feel you have broken their employment rights.
- You will need to have the skills and confidence to make sure your staff are managed properly and fairly.
Zero Hour Contracts
These contracts have been publicised negatively but they can offer a small business some flexibility to cope with fluctuating demands. A fully employed person, who is does 40 hours a week, even if you have no work, you are contractually bound to pay them for those hours (unless you have a layoff clause in their contract of employment). With a zero hours contract, there is no employment relationship unless they are working for you. So, you can bring them in when you are busy and not when things are quiet. The important thing is that you cannot guarantee the work and they have the right to turn it down. Recent legislation has also made exclusivity clauses in zero hours contracts illegal. These types of contracts work well in retail, hospitality, cleaning etc. but can be adapted for other types of work.
The disadvantages of this arrangement are that they don’t provide a level of security for the employee and can be stressful, as they don’t know when the work will be available. In addition, whilst they are working, they still accrue holiday, could be eligible for pension depending on earnings etc.
For more information on these contracts, check out our article on the pros and cons of zero hour contracts.
It is possible to use freelancers or self-employed people when hiring new employees. Care must be taken however to make sure you do not fall foul of HRMC rules or IR35. If you have someone working for you and they are providing services to you as a self-employed person, the revenue will be interested (not in a good way), if you are providing materials e.g. an office, tools, phone etc., the revenue could say they are actually really employed and therefore, you are liable for NI etc. Also, if they only work for you and nobody else and there is no contract in place, or it is a generic one then again the revenue may not be best pleased. If you plan to go down this route, please take advice and make sure you have a good contractor or associate agreement in place.
Taking staff on in whatever form you decide is a sign that your business is growing and successful. However, it does provide you with additional challenges and means you have to develop new skills to successfully manage their performance and your business. When taking on new staff or for the first time, seek advice from your accountant and a HR professional to minimise the risk and so you can enjoy the fruits of your success.