As the MD of a small business myself I completely understand the peaks and troughs in workload and the ongoing debate about when might be the right time to hire an employee and grow my business, but of course as an experienced HR Consultant I have a bit of a head start on most of you. That doesn’t mean I don’t find it a daunting prospect, it’s a really big step to take and not something that should be entered into lightly. It will take money, time and commitment and if managed well will reap many rewards. If not managed well or not well set up, employing people can be very time consuming, stressful, challenging but also costly.
Here are my thoughts on things you should consider if you are thinking of taking that next step and becoming a team.
How much you want to pay someone is probably the first thing you think about. Carrying salaries in your cash forecast is a big consideration, but salary isn’t the only cost, there are many other costs and commitments associated with employing people which you will need to factor into your forecast and diary:
- Insurance – You will be legally required to have Employers Liability Insurance for even 1 employee, this covers you and your business for compensation costs if an employee becomes ill or injured as a result of their work.
- Employer NI – as an employer you are required to pay 13.8% of an employee’s monthly salary to HMRC as National Insurance contributions.
- HMRC Registration – You will need to register with HMRC as an employer and get a Company PAYE reference number to set up your company payroll.
- Employer Pension Contributions – If your employee is eligible you will be required to auto enrol them to a ‘Qualifying Pension Scheme’ such as Nest and pay a contribution of 3% of their monthly salary to their pension pot.
- Other Rewards and Benefits – you may decide to offer other benefits to employees which may have a cost attached, life cover, access to an employee assistance programme, or a bonus.
- Equipment – you will need to purchase various equipment for your new employee(s) depending on their job role such as a laptop/desktop computer, mobile phone, tablet, desk, chair, stationery, any uniforms or personal protective equipment etc.
- Payslips – All employees should be provided with an itemised payslip, you can set your own payroll up through an HMRC portal, but many businesses prefer to outsource managing a payroll to an accountant, there will be a small monthly charge for this, but in my view it’s worth it.
- Recruitment Costs – if you use a recruitment agency you will pay a placement fee which could be anything from between 10-20% of the employee’s annual salary. The CIPD’s Resourcing and Talent Planning Survey 2020 suggests the cost of recruitment per hire is between £2,000 and £5,000 – over and above recruitment agent’s fees and the salary. This becomes a big extra spend if employees don’t stay with you and you end up re-recruiting. However, each time you replace someone the hidden cost increases because you also lose valuable knowledge and experience which takes time for a newbie to develop.
- Your Time – You will need to spend time engaging with and helping your employees learn about their role, your business and how things need to be done, discussing workloads and priorities, but also managing, supporting and checking in with them.
- What’s your strategy? If you help your team understand your business strategy and goals and what their role is and how it fits into the bigger picture they will have clarity and will be able to help you move your business towards its goals.
- Documentation – You will need certain documentation in place to protect you and your employees such as a legally sound contract of employment and some core policies and procedures to get you started.
- Health and Wellbeing – You will be responsible for providing a safe and appropriate working environment for your employees which includes looking after their health, safety, welfare and mental wellbeing.
If that hasn’t put you off, and you are ready to take the plunge and recruit your first employee, here are my top tips for doing it well:
- Create a job description with a person specification for the role which clearly sets out the roles, responsibilities, and accountabilities for the job.
- Go through a proper recruitment process and assess applicants equally and consistently against the job description.
- Search for similar jobs yourself to benchmark the salary you are offering to make sure it is a fair wage and think about ways to add to the reward package to attract good candidates and retain people.
- Make a formal offer of employment in writing (beware – a verbal offer is still legally binding).
- Ensure you offer the statutory minimum entitlements in terms of pay and holiday.
- Carry our pre-employment checks to make sure they have the right to work in the UK and have the qualifications they say they have, ask for referees you can contact.
- Start someone with a probationary review period (a trial period) and give them an in-depth induction to the role and the company.
- Provide a comprehensive contract of employment from day 1 (a legal requirement) or ahead of their start date to ensure terms are agreed – if the relationship breaks down it will be the contract that will be relied upon. Seeking assistance from an HR Consultant would be advised.
- Set up a core suite of policies and procedures to help manage expectations on both sides.
- As a founder/owner you will naturally set the culture and tone for your business but it would be better if you could lead by example and live and breathe the values you expect your team to demonstrate.
- Communicate with your team – continuous ongoing performance and progress conversations that check in to see how someone is, ask what’s going well and what support is needed, and give and ask for feedback on how things are going are far more beneficial than a yearly appraisal.
- Get some advice tailored to your business to ensure you meet your legal obligations – don’t guess, particularly if this isn’t your area of expertise. Getting your legal obligations wrong can be a costly mistake.
If you follow these guidelines you will be well on your way to meeting your legal obligations and protecting your business from costly claims and high employee turnover. You will also free yourself up to get on with doing what you do best – running your business. I believe if you have happy people you will have a happy business. Engaged employees that feel well rewarded and valued love doing great work, they will embrace change, be accountable, motivated, and productive, will be open to learning and development, and they will be innovative and creative – what’s not to love about that?
Managing Director and Senior HR Consultant
Metro HR Ltd