Jade is the in-house copywriter for online business insurance broker Simply Business. When not working in the marketing team, she enjoys cooking, reading, and exploring new cities.
Whether you’re just putting the wheels in motion to recruit employee number one or you’ve already hired your first employee, it’s time to consider the implications of being an employer. It can seem like a maze of complex tax, insurance, and health and safety considerations, but … take a deep breath. There’s plenty of help out there - starting right here – and plenty of ways to enjoy your new ‘employer’ status without sinking under a pile of paperwork and additional costs.
PAYE and payrolls
As soon as you employ someone, you need to register as an employer with HMRC. You can do this online here. You will need to give personal and contact details, and certain information about your business. Once registered as an employer, you will be sent your Employer PAYE reference number and you will also be able to use the PAYE Online system.
This tool is handy for taking you through the steps of calculating deductions and setting up a manual or electronic payroll. Also remember to ask your employee for their P45 from their previous employer.
It may seem a while off yet, but at the end of the tax year you need to submit an Employer Annual Return for HMRC, which you can usually do online. There are other tax returns and assessments that you may also need to complete during the year.
National Insurance Contributions
As an employer, you need to pay National Insurance contributions (NICs) on the earnings – including the benefits – that you pay to your employees.
Class 1 Contributions are payable by both your new employee and you as an employer. They are collected through your payroll via the PAYE system, and are charged as a percentage of your employees’ earnings, as long as these are more than the threshold (which is £107 per week for 2012-13).
The other National Insurance contributions you may need to pay are Class 1A. These are paid on any taxable benefits that you provide to your employees. They are charged as a percentage of the cash equivalent of the benefits, and you need to pay them at the end of the tax year.
If you take on staff for the first time, you'll need to make sure you have employers’ liability insurance in place. Business insurers such as Simply Business can build you a singly policy that includes employers’ liability cover alongside other covers such as public liability insurance.
Employers’ liability cover is important as it can pay out if an employer needs to be compensated for work-related injury or illness. It is also a legal requirement for most employers (a notable exception is if you’re only employing close family members), with a fine of up to £2,500 for every day that you are uninsured.
When you take out an employers’ liability policy, you will receive a certificate from your insurer. You need to display a copy of this so that your employees can see it. This can be in hard copy or electronically, for example on your server or intranet.
There are also a host of legal responsibilities that come with being an employer. Sick pay and maternity leave must be available to your employees, and you are responsible for providing a safe working environment.
You will have to carry out regular risk assessments and consult your employees on health and safety issues. You can read a guide to complying to health and safety regulations here. One of the requirements is that you appoint someone ‘competent’ to be responsible for your health and safety policy. As you run a small business, it’s likely that this will be you, but you can get external help if you need it. You don’t need a written health and safety policy unless you have five or more employees, but even if you only have a single employee (for now!) you have to have first aid facilities such as a first aid box.