Any business owners here that can give advice?

Some of you may remember that a few months ago I made a post about my girlfriend becoming self-employed and starting her own business.

When we first started we did all the essentials and got a decent amount of business come in for her pretty quickly and she's now working 36 odd hours a week every week and is turning down people every couple of days as she can't take anyone else in.

We're now looking at the potential of taking on her first employee. The issue is, we have no idea what to do/what to be aware of etc and need as much advice as possible.

Has anyone done this kind of thing before where you've had to take on your first employee? Any advice anyone can share from when you've done it yourself?

Hey Joer, I work as a recruiter and help people set up limited companies reasonably often. It's rarer that my temps employ people, but I've helped people through the process a few times

You'll need to do the following essentials

- register with HMRC as an employer
- set up a company autoentrollment workplace pension scheme at the statutory minimum
- pay for employer's liability insurance
- have a written contract for your employees covering: working hours, pay, annual leave entitlement (stat min is 20 days + bank), mat/pat leave, etc.
- given her business, you'll need to set yourself up as a business who can process DBS checks


Optional would be

- invest in a payrolling system to help you record your Employers National Insurance etc.
- invest in a secure external server to hold company records and personal data about employees (in order to be GDPR compliant)

Best wishes and good luck!

Clarky you little beauty.

Thanks for that, i’ll go through all this with her tomorrow and see what we’re missing.

I've never employed anyone but I've sought various advice and observed in the past how probably taking on too many employees grounded the company I was in. You might what to consider hiring a freelancer because the liabilities for employment are high and the sense of responsibility is huge. Having to turn down work isn't necessarily a bad thing because it makes you look in demand and allows you to charge more to rush jobs and have your time wasted less. Can't you make the same money by increasing prices for existing clients? What's the business return on employing? Also remember when there isn't work to be done the employee still has to be paid their contracted hours, resulting in higher overheads and probably lower net profits some months. This is why so many people are on zero hours contracts. But since that's wrong you can outsource work and just charge whatever it cost, plus a margin, then raise your prices also because you will still have to spend time managing it. It might be more sustainable in the short term to avoid turning down work. Sure you'll have to check the quality of the output and maybe patch up some stuff but what you don't have is this long engagement with somebody relying on that income and dependent on you. Financing a company payrol is risky unless you know you will have a reliable stream of excess work for at least 3 months and you also have to train/manage this person meaning the overal time available to serve customers and collect revenue might end up about the same, at least initially. You'd definitely want to know you have the right person. If the work is seasonal, you might have to borrow money some months just to pay the payroll, and non paying customers can become more of a problem, so the system for that needs to be really tight or bad cash flow. Tracking and projecting cash flow in something like Xero or a spreadsheets, upcoming bills and revenue projections for the next 30 days etc would be necessary.

Also, remember you can't hire a freelancer who is only working for you, as that will end up being treated the same as employment and HMRC will sting you for nonpayment of NI's and pension under current rules.

Edit: I just saw this is cleaning, but I wouldn't wasn't to assume that makes it less of a rather big step. Employing anybody in just months after starting up is quite earnest. It might be worth seeking some advice from a chamber of commerce, sometimes there are local events and workshops and things. HMRC probably have some webinars too.

My first thought on reading this was consider sub-contracting the extra work out to someone else as that would remove a lot of the liabilities you'd have as an employer but GG summarised it better than I could. Clarkman's post was very interesting to me as I'm looking at something similar in the next few months. Thanks.

Joer wrote:When we first started we did all the essentials and got a decent amount of business come in for her pretty quickly and she's now working 36 odd hours a week every week and is turning down people every couple of days as she can't take anyone else in.

Just checking: Are you aware how much this makes you sound like a pimp?

Sorry, if this type of post is unacceptable then please remove it mods.

We've literally just increased prices from £12 an hour to £14 an hour starting from the 1st of October which should bring in about an extra £300 a month which is a good start. The way we look at it though is that if we took someone else on, paid then £9 an hour, we make £5 every hour they work once we've paid off their insurance costs etc. It's just a case of working out what other extra costs there will be.

Joer wrote:Sorry, if this type of post is unacceptable then please remove it mods.

We've literally just increased prices from £12 an hour to £14 an hour starting from the 1st of October which should bring in about an extra £300 a month which is a good start. The way we look at it though is that if we took someone else on, paid then £9 an hour, we make £5 every hour they work once we've paid off their insurance costs etc. It's just a case of working out what other extra costs there will be.

Not quite that simple - you will owe Employers National Insurance for a start. Check out this True Cost of an Employee calculator as a rough guide.

Have you considered taking on a partner/director instead of an employee? Obviously with a much lower share of the business. Directors aren't subject to the same employment conditions I believe.

Edit: Clarkman's post confirmed something I always thought, that a good rule of thumb would be to double the salary to get a true cost for an employee. Also, bear in mind your admin will be more for the 1st one.

Also do you have an accountant? It's mandatory that you run PAYE to report the income and pay the NIs and income tax etc directly to HMRC. Afaik it's not that hard to set up but both accountants and accounting packages charge extra per month for this.

You'll also need company policy documents for things like sick pay, absence, equality, data protection and all that stuff.

Clarkman wrote:

Joer wrote:Sorry, if this type of post is unacceptable then please remove it mods.

We've literally just increased prices from £12 an hour to £14 an hour starting from the 1st of October which should bring in about an extra £300 a month which is a good start. The way we look at it though is that if we took someone else on, paid then £9 an hour, we make £5 every hour they work once we've paid off their insurance costs etc. It's just a case of working out what other extra costs there will be.

Not quite that simple - you will owe Employers National Insurance for a start. Check out this True Cost of an Employee calculator as a rough guide.

I believe that there is an exemption on employers NI for the first £2k or so due (which I would have thought someone being paid £9 per hour would full under)- exactly to encourage people to hire that first employee. But this isn't my area of expertise so could well be wrong.

Just go to an agency. You can hire and fire as you please then.

A contractor seems the best way to me to start with, you can then "see if it works" before having to take on all the crap that comes with a "proper" employee