Hiring Your First Employee
Hannah is Head of Employment Law at MBM Commercial LLP and their Holistic HR service. Advising on all aspects of employment law for employers and employees, Hannah is passionate about empowering entrepreneurs, business owners and managers to make sound HR decisions.
Do you feel like you're ready to make your first hire? Whilst a flourishing business that is ready to scale is a real achievement it can also be a daunting concept, particularly if you haven't done it before, and comes with a lot of responsibility. The following article will help you navigate your way through the process with six tips for best practice.
1. Don't leap into the recruitment process
Before hiring someone, think carefully before employing someone:
- Are you really ready to take on someone new? Is there a fully developed job to be carried out at this point in your company's development? Sometimes companies can be too early in taking someone on: for example, sales people when your product isn’t actually at the point where it is marketable. Think long and hard about whether your business has reached this stage. It costs a lot of time, effort and money to bring someone on – it's important that it is successful rather than bringing someone in too early and then have a costly departure.
- Can you outsource the work to a contractor or consultant? Some roles are so key and integral to an organisation that they really have to be an employee – e.g. CEO, CTO, CFO (they need to be fully committed and this is the impression that you’ll want your clients and investors to have) but other support roles may be done just as well done by contractors, which can be a lot more flexible and requires less commitment from both parties.
- Remember your commitments when hiring: staff accrue employment rights from day one, you need to deduct tax from them and you need to give them paid holidays and sick pay. Make sure you consider absolutely everything before starting the hiring process.
2. Search for the right candidate
So you've decided that you do need to bring someone else in. Recruiting is a big step for a small business but taking on your first staff member is a special milestone. It’s a cliché, but good people can be your most valuable asset. You need to find the person with the necessary skills, knowledge, expertise & qualifications to deliver business objectives. It’s also crucial to have the right person in the right place at the right time. Employing the wrong person or the right person at the wrong time can be disruptive and costly!
To find the right person, you need to recruit effectively. This can also be positive for your employer brand, creating a positive image of the business. Think of your applicants as customers, treat them in the way in which you would like to be treated.
- Get started by writing a comprehensive a job description which really pins down exactly what the role is and if this is specifically defined there’s a better chance that you’ll find someone who really understands the full remit of the role and is able to do it, meaning that there will be less scope for disputes later on. List the main tasks, responsibilities and objectives as well as wages, hours, location and basis ( ie full time, part time, fixed term or temporary).
- You should also write a person specification but focus purely on the job requirements. Include knowledge, skills and qualifications - essential and desirable.
- Advertise only where you'll reach likely candidates. Advertising online is popular, effective and cheaper than newspapers etc (although local newspapers remain popular) . Recruitment agencies are another option and can save you a lot of time and leg work. Make sure that the agency has experience in your sector before engaging them.
- Think carefully about your selection process. How are you going to do it? Will it be a series of interviews? If so, have you prepared the questions? It’s important to be consistent. Compare applications against the post’s requirements and person specification. Shortlist candidates whose experience, knowledge and skills match those you seek. Invite shortlisted candidates to interview.
- When making a decision be objective, systematic & fair . Will there be more than one selector? Is there a scoring process? Think about feeding back to unsuccessful candidates and maintain records so you can explain why you chose one candidate over another.
3. Register your business as an employer with HMRC
Once you’ve found the right person you should then register with HMRC (in good enough time before you have to give them their first pay cheque). You normally need to register as an employer with HMRC when you start employing staff and you meet certain conditions. Remember that you must register before the first pay date. Registration can be done online on HMRC’s website.
4. Set up Pay As You Earn (PAYE)
You’ll also need to set up PAYE (Pay As You Earn). This is the system used by employers to handle tax and National Insurance contributions due on employees’ pay. Detailed PAYE tax calculations and processes can be complex, but payroll services or software can make things much easier for you so may want to outsource PAYE to a payroll service provider (your accountant may offer this, often on a fixed fee basis).
5. Making the offer and creating a contract
So, you’ve written the job description, advertised, interviewed, registered with HMRC and set up PAYE. You now need to decide on a successful candidate, offer them the job and then send them a written job offer. What information has to go into that offer?
- The job title of the job that is being offered, any particular features of the job such as it being for a fixed-term or a part-time position, and the starting salary.
- The terms of employment either as set out in the offer letter and/or in an enclosed contract/Statement of employment particulars and/or in an enclosed staff handbook- Holistic HR can help prepare job offer, standard contracts and handbooks for you.
- If there have been any discussions or negotiations about the job, in order to avoid any confusion, the employer may wish to state that the offer on the terms provided supersedes any previous discussions.
- Any conditions to which the offer is subject, for example, receipt of satisfactory references, right to work in the UK, disclosure checks .
- Any time scale within which conditions need to be satisfied and the employee needs to confirm acceptance of the offer (often by returning a signed copy of the letter and/or enclosed employment contract).
Remember that the Statement of employment particulars must be given to employee within 2 months of them starting. The statement must contain the specific information such as pay, hours, holiday entitlement, job title, place of work, sick pay etc.
As mentioned above, taking on an employee is a significant commitment. Once the applicant has accepted the job, this is just the start of the relationship. It’s then important to carry out a comprehensive induction and ensure that the employee is properly managed and developed in order to make the most of their potential. I’ll leave this subject for my next blog!
Thanks to Hannah for her guest post. If you're looking for a recruitment partner who is committed to supporting Scotland's flourishing start-up community, our TalentSpark service can help you.