Hiring someone for your business

Bringing someone into your business is a big step. It can be exciting and it usually means your business is growing, taking on more work, or needs extra support and skills.

Whether this is your first hire or one of many, it helps to pause and get the basics right from the start.

A good hiring process is about more than finding the right person. You also need to think about the type of working relationship, the paperwork, insurance, and whether the arrangement works for your business in practice.

Are you hiring an employee or contractor?

One of the first things to work out is the person’s legal status.

There are two main groups: employees, workers and contractors. Each group has its own rights, responsibilities, tax treatments, costs and flexibility.

An employee is someone who works under the business’s control. They will have regular duties and/or hours and are typically more permanent. They have the widest range of rights, such as holiday entitlement, statutory sick pay, redundancy rights and, once they qualify, protection from unfair dismissal. They will be set-up on your PAYE system, and as an employer you will make payments such as national insurance, income tax and pension contributions.

A contractor is self-employed, and they may run their own business and sell their services to your business. They will have more control over how work is done, and when it is done, they may work for multiple businesses as well as yours, they are expected to supply their own equipment and may have their own staff, or substitute, who can do the work. In turn, as they are self-employed they will not typically have employment rights like an employee. Unlike an employee, a contractor will be responsible for their own income tax (via self-assessment), as well as national insurance and pension contributions.

It is important to understand that a label on a contract is not definitive, and the reality of the working relationship determines what they are. In practice, if someone is a contractor but they work solely for your business, you expect them to work routine hours, and have control over how the work is done they may be an employee, and therefore have the rights expected of an employee.

Contract and agreement

Once you know what the working relationship is, the paperwork should reflect it clearly.

An employee will expect a Contract of Service, whereas a contractor would expect a Contract for Services. The employee must receive a written employment contract from day one, and will also potentially mean that you need to have certain policies and protections in place too.

For a contractor, a consultancy or services agreement is usually more appropriate. This should set out the services being provided, fees, invoicing, tax responsibility, insurance requirements, confidentiality, intellectual property and how the arrangement can end.

A side note: when you are hiring someone who will create “intellectual property” such as content, then ownership of this content will vary between who creates it. Where an employee creates work during the course of their employment, the company will automatically own this. However, a contractor creating this will not automatically assign this to the company, and this must be covered in a written agreement.

What employment policies do you need?

There are some policies which are essential and mandated by law, and there are others which are best for your business and ensuring consistency. With policies, they do not need to be long or arduous, and in practice the best policies are simple, practical and explains how things work.

There are three mandatory policies to have in place when you hire someone:

• Disciplinary and Grievance Procedures;
• Health and Safety Policy; and
• Data Protection Policy.

You must have a disciplinary and grievance procedure from day one of hiring someone. This document details how an employee may raise an issue they have at work, and how this is handled (Grievance), as well as handling how you will handle issues you may have with an employee (Disciplinary).

A health and safety policy is mandatory once you have five or more employees, but in reality it is best practice to have this as soon as you have one employee. The purpose of this is to ensure staff can remain safe and healthy in the workplace.

Whilst not strictly a policy related to employees, where your business handles personal data, it will be an expectation that you have a policy guiding the team with how to handle this, and advises the team on what is lawful and what is not.

As well as this, some other core policies you really should have in place are:

(a) Equal Opportunities and Anti-Harassment, which is to ensure staff are protected from claims under the Equality Act 2010.

(b) Family related Leave, which usually handles what a staff member is entitled to in terms of maternity or paternity leave, or parental leave, as well as potentially handling compassionate leave.

(c) Flexible Working and Remote Work Policy, where you have staff who may be remote or working from home you should have a policy in place to ensure this is done lawfully, and protects the staff and your business. Equally, employees can be entitled to request flexible working arrangements which you will consider, and this should be in a written policy for certainty.

If you run a small business, a short and clear staff handbook may be more useful than a long document that nobody reads. The aim is to set expectations, help managers make fair and consistent decisions, and give staff confidence that concerns will be handled properly.

Whilst it is not a policy, you must also ensure that anyone you hire has the right to work in the UK.

Employers’ liability insurance?

In most cases, if you employ staff in the UK, you must have employers’ liability insurance. This helps cover claims if an employee becomes ill or is injured because of their work.

The legal minimum cover is usually £5 million, and the policy must be taken out with an authorised insurer. If the correct cover isn’t in place, you could risk a fine.

Hiring someone can also be a good time to review your wider insurance cover. Depending on the business, that might include public liability, professional indemnity, cyber insurance, directors’ and officers’ insurance, or cover for equipment and premises.

Commercial considerations

Hiring is not just a legal decision. It is a business decision too, so it is worth thinking carefully about the full impact before making an offer.

That includes more than salary or fees. You may also need to factor in employer National Insurance, pension contributions, holiday pay, training, equipment, software, workspace and the time needed to manage and support the person properly.

It also helps to think about the role itself. If it is needed for a one-off project, then a contractor may be more appropriate, whereas if it is a long-term need, such as extra capacity, then an employee may make more sense.

When it comes to hiring, you will also want the right cultural fit, so a great question to ask is what culture you want, and how do you find the right person for this.

Final thoughts

When hiring someone it is usually an exciting time because you are doing well, but it is important to be aware of what your business needs from the new hire, and then ensuring you have in place your legal requirements as an employer.

Getting these foundations right early on can help you avoid confusion, reduce risk and start the working relationship on a stronger footing.

If you would like to discuss structuring your business, then you can reach out to Chamber Member Acumen Law, who can be reached through their website here, or by calling 01273 447 065.

If you want to contribute to the Chamber blog, contact us on hannah@brightonchamber.co.uk