Starting your own business is always an exciting time. So much to do and so much to think about. Also, having started your own business and with things going well, you want to expand but not sure what options you have to take on people.
Taking on staff is both a great opportunity and a challenge as you become responsible for someone else and their livelihood, so what options are there?
- Employ someone directly
When thinking about setting on people, this is probably the first option that comes to mind. The advantages of this option are that you would have direct control over the employee in that they work for you so you are able to set out exactly what and how you want them to work. In return, you are more likely to get a greater commitment to your business and loyalty as you will be paying their wages. It will give you the opportunity to train and develop them as the business grows. If you do employ someone there are some things you need to remember:
- The cost is more than just their salary. You will need to add on employers NI, possible pension costs with auto-enrolment plus any benefits you may wish to provide.
- You will need a contract of employment to make sure they are employed on the terms which work for your business. Remember, everyone is entitled to a statement of their Main Terms and Conditions of Employment within 8 weeks and this should include: Name of employer and employee, place of work, job title, pay, holidays, hours etc plus where to find disciplinary, grievance procedures etc. More info can be found at www.acas.org.uk ideally, also a company handbook with all your relevant policies in.
- If someone is employed, they will accrue employment rights after 2 years service which include the right not to be unfairly dismissed. However, there are some employment rights which start from day 1 or even before eg the right not to be discriminated against on the grounds of Race, Sex, Age, Disability, Marriage/Civil Partnership, Gender Reassignment, Sexuality, Pregnancy, Race, Religion, and Belief etc. An employee has redress through an Employment Tribunal if they feel you have broken their employment rights.
- You will need to have the skills and confidence to make sure your staff are managed properly and fairly.
- Zero Hours Contracts
These have been in the news recently, usually for the wrong reasons but they can offer the small business some flexibility to cope with fluctuating demand and peaks and troughs. Whilst a fully employed person who is employed for 40 hours a week, even if you have no work, you are contractually bound to pay them for those hours (unless you have a layoff clause in their contract of employment). With a zero hours contract, there is no employment relationship unless they are working for you. So, you can bring them in when you are busy and not when you are not. The important thing is that you cannot guarantee the work and they have the right to turn it down. Recent legislation has also made exclusivity clauses in zero hours contracts illegal. These types of contracts work well in retail, hospitality, cleaning etc but can be adapted for other types of work.
The disadvantages of this arrangement are that they don’t provide a level of security for the employee and can be stressful as they don’t know when the work will be available. In addition, whilst they are working they still accrue holiday etc could be eligible for pension depending on earnings etc.
It is possible to use freelancers or self-employed people. Care must be taken however to make sure you do not fall foul of HRMC rules or IR35. If you have someone working for you and they are providing services to you as a self-employed person, the revenue will be interested (not in a good way), if you are providing materials eg an office, tools, phone, etc the revenue could say they are actually really employed and therefore, you are liable for NI etc. Also, if they only work for you and nobody else and there is no contract in place or it is a generic one then again the revenue may not be best pleased. If you plan to go down this route, please take advice and make sure you have a good contractor or associate agreement in place.
Taking staff on in whatever form you decide, is a sign that your business is growing and successful, however, it does provide the business and you as the owner with additional challenges and means you have to develop new skills to successfully manage the business. When taking on new staff or for the first time, seek advice from your accountant and a HR professional to minimise the risk and so you can enjoy the fruits of your success.