Taking on your first new employee is an exciting milestone for any business. It means not just that help is on the way but also that the business is taking another step in its growth. And fresh blood means new ideas and energy.
However, it is worth pointing out that, for UK companies at least, employing someone does come with a set of obligations that must be met in order to comply with the relevant UK laws. Following this simple step-by-step guide can help you ensure you are on the right side of the law as your company welcomes each new hire.
First, decide how much to pay someone
In the UK, each employer must pay the employee at least the National Minimum Wage. As of April 2019, National Minimum Wage stood at £8.21 an hour for people aged 25 and older – the government refers to this main rate as the National Living Wage. In addition, there are four minimum wages below this amount for younger workers and apprentices:
- 21-24 years old: £7.70
- 18-20 years old: £6.15
- Under 18: £4.35
- Apprentice: £3.90
Make sure your new hire has the legal right to work in the UK.
It is your legal obligation as an employer to ensure the “right to work checks” have been completed and documented. Here is a great checklist to follow.
Check whether you need to apply for a DBS check (formerly known as a CRB check)
If you work in a field that requires one. This can include anything from working with vulnerable people or children, or anything in the security or law enforcement fields.
Get employment insurance up to date
As an employer, you need employers’ liability insurance as soon as you become an employer. You can usually obtain a joint employer and public liability insurance policy from a UK provider.
Send details of the job (including terms and conditions) in writing to your employee.
Under UK law, they will need to be furnished with a Contract of Employment within two months of their start date. If you miss this deadline, an employee can work during that time provided they are working to the terms of the offer letter and the employer is paying them correctly.
Get registered with HM Revenue and Customs (HMRC)
By registering as an employer - you can do this up to 4 weeks before you pay your new staff. As your accountants, when a payroll scheme is registered we will send the new employee a starter form and ask for their P45. If they do not have a P45, we will require an HMRC starter checklist completed.
Check if you need to automatically enrol your staff into a workplace pension scheme.
You must have an appropriate scheme in place when the first payroll is processed.
There are two main basis for contributions:
Qualifying Earnings (all including overtime, bonuses, commission) current contribution rates from April 2018 to April 2019 Employer 2% and employee 3%; from April 2019 Employer 3% Employee 5%.
Basic Earnings rates 6th April to 5 April 2019 Employer 2% and Employee 3% (Total 5%). 6th April 2019 onwards Employer 3% Employee 5% (Total 8%)
If an employee opts out of pension you don’t have to contribute but all employees, if they are eligible, must be enrolled in a pension scheme (Eligible workers are those aged over 22 to State Pension Age working in the UK and earning over £10,000.00 pa.).
Other areas to consider are:
Get your allowances right: As a UK employer, you have a £3,000.00 Employment Allowance that can be offset against Employers National Insurance.
Think about your statutory obligations. Under UK law, employees are entitled to maternity or paternity pay if they take time off to have a baby. So you need to consider whether these costs will apply to your employees at some point. For maternity leave, employers must pay 90% of the employee’s earnings (before tax) for the first six weeks; thereafter you must pay £148.68 (or 90% of the person’s average weekly earnings – whichever is lower) for the next 33 weeks.
Male employees are entitled to paternity leave. The current rules demand that you must pay £148.68 or 90% of the person’s average weekly earnings (whichever is lower) for the duration of their paternity leave – which in the UK is a maximum of two weeks.