One of the first major milestones for any growing small business is hiring its first employee. If you get this right, it can help kickstart your growth but if you get it wrong, it can cause a lot of headaches.

However, meeting employee number one doesn’t need to be daunting. Here are a few recruiting tips to help you manage your transition from sole trader to employer…

The recruitment process

Getting this stage wrong could saddle you with an unsuitable employee or a costly legal case from an unsuccessful candidate. First, define what you require by writing a detailed job description setting out the role’s purpose, key responsibilities and day-to-day tasks. You can then outline desirable skills or qualifications in the person specification.

Job hunters will want to know the salary, so ensure that you do your research to calculate a competitive rate of pay for the skillset and experience that you’re looking for. Depending on the role, take into account what other companies are offering for similar positions, as well as the National Minimum Wage and National Living Wage. Will you offer your first staff member an annual bonus or commission?

Create a job advert that will appeal to your ideal candidate, including details about the role and your company. They will want to know about the working hours, employee benefits and flexible working arrangements. Set a deadline and ask them to either complete an applications form or send a CV and covering letter.

Once the deadline has expired, the next stage is to shortlist candidates based on their skills and experience. Interviewing is time consuming, so keep the shortlist to a manageable number. It can help to offer a two-step process with a shorter telephone or online meeting first. Most interviewers will use a set of questions to ask every candidate to then score them on their answers, but as your first employee, you should also take into account how well you think you would work with them.

The legal stuff

Once you select your preferred candidate, you can make a conditional offer subject to references and pre-employment checks. Unconditional offers are fraught with danger as the candidate will be employed immediately upon acceptance, so if they fail any checks they will need to be dismissed with any notice paid.

Legally, employers must also check that every employee has a right to work in the UK. Failure to do so can lead to a civil fine or criminal sanction. For more information on this process, please visit the Government website. The other important check is with the Disclosure and Barring Service (DBS), which can show whether the candidate has a criminal record. Some businesses also require a medical check, and even look at a candidate’s social media accounts.

When your candidate has passed all the checks, you can send them a formal job offer setting out the terms of employment along with a contract of employment. The contract can simply cover the legal minimum, or it can specify other terms such as confidentiality, leaving for a rival business and location. Finally, don’t forget that you are legally required to get employers’ liability insurance as soon as you become an employer.

Finance and payroll

If you’re not already paying yourself a salary, you’ll need to register your business with HMRC as a new employer for PAYE purposes. This means setting up a Government Gateway account at least a month before the employee’s first payday. The PAYE reference number will be supplied within five working days of registration.

Then when it comes to the actual payroll, HMRC require you to submit ‘RTI’ (Real Time Information) submissions every month to confirm any employee payments, deductions and the amount the business owes in income tax and National Insurance. Supplying payslips to the employee and other payroll services can either be handled in-house or externally by a payroll expert like The Smart Accountants.

Employers also have a legal obligation to enrol employees into a workplace pension scheme, which is known as automatic enrolment. This applies to all workers aged between 22 and retirement age who earn at least £10,000 per year. The employee is required to contribute a minimum of 8% of their earnings, while the employer must pay at least 3%.

For many businesses, they choose to outsource both the payroll and pension admin to minimise any payroll errors and to avoid needing to stay aware of all the statutory requirements and changes.

Need advice?

Here at The Smart Accountants, our expert payroll team offers a full range of payroll and pension services for growing businesses. Call us on 0845 606 9632 or email