Navigating your first hire: What startups need to know

Embarking on your first hire? It’s a huge milestone. Equal parts exciting and equal parts “Oh my god, are we doing this?”. You’re in good company, though, as small businesses are the backbone of the UK economy, with 5.47 million enterprises employing less than 50 people, making up a whopping 99.2% of all businesses. For these entrepreneurs, the journey to expansion often begins with the critical decision of hiring their first employee—a step that requires careful planning and more paperwork than you can shake a stick at. 

Here’s what you need to know to ensure your startup or small business gets it right.

A Critical Responsibility: Hiring Your First Employee

Hiring your first employee is no small task. How we engage them, the opportunities we offer, and the work we give will have lasting impacts throughout their career. It’s crucial to get it right and it’s more complex than just interviewing candidates and choosing one you like. There are specific steps and considerations to keep in mind.

Talent Tent is here to guide you through the essentials for hiring your first employee. Here are 9 vital elements for any small business or startup making their first hire that cover the minimum legal and compliance requirements. (Note: This isn’t an exhaustive list for becoming an employer of choice, but it’s a good start).

Checklist for Making Your First Hire

• Register as an Employer
• Employment Contract
• Statutory Benefits
• Right-to-Work Checks
• Set Up a Payroll System
• Workplace Pension
• Employer’s Liability Insurance
• Health & Safety
• Data Protection

Register as an Employer

Before the first payday, you must register with HM Revenue & Customs (HMRC). You’ll then receive an employer PAYE (Pay As You Earn) reference number. You have to be registered before the first payday (and it can take up to 15 days to go through) but no more than 2 months before. 

Head on over here to get started.

Employment Contract

Offer a written statement of employment particulars as a minimum but ideally offer a full contract to your new employee. The statement of particulars has to be done no later than the first day of employment and must contain at least the following;

• The employer’s name
• The employee’s or worker’s name, job title or a description of work and start date
• How much and how often an employee or worker will get paid
• Hours and days of work and if and how they may vary
• Holiday entitlement (and if that includes public holidays)
• Location of work
• If an employee or worker works in different places, where these will be and what the employer’s address is
• How long a job is expected to last (and what the end date is if it’s a fixed-term contract)
• How long any probation period is and what its conditions are
• Any other benefits (for example, childcare vouchers and lunch)
• Obligatory training, whether or not this is paid for by the employer

A quick note on contracts… This is where the majority of startups and small businesses decide to get some external support when looking at their first hires. There are a lot of misconceptions about employment contracts, what goes in them and importantly, what doesn’t. Putting a clause in a contract does not automatically make it enforceable and likewise, not having something in your contract does not mean it isn’t a legal requirement. Be really careful with any template contracts you get online. That’s not to say they are inherently bad but because they are generally designed to suit everyone, they end up not really suiting anyone.

Statutory Benefits

Certain benefits are non-negotiable and must be offered to all employees. These are;

• Holiday Entitlement – at least 28 days’ paid annual leave a year, which can include bank holidays if you wish
• Statutory Sick Pay
• Maternity, Paternity and Adoption Pay and Leave
• Statutory shared parental pay and leave
• The right to request flexible working (check out our blog on flexible working to learn more)
• Statutory Redundancy Pay

Right to Work

Ensure that you have a right-to-work check process in place. It’s something you will need to do before anyone can legally work so it’s best to be sure of your requirements now. Government guidance on right-to-work checks is pretty exhaustive and it can feel like a lot but it won’t just apply to your first hire, it will apply to all of them. 

You can check the full guidance here but broadly, you are able to check manually and it requires 3 stages.

1. Obtaining acceptable documentation
2. Checking the documentation
3. Copying the document

Set Up a Payroll System

This will allow you to report to HMRC on the wages you pay, and the National Insurance and tax you deduct. You can either do this yourself using payroll software (take a look at any accounting software you use as it’s something you can do with many of them) or pay for an external payroll provider to do it for you. 

Workplace Pension

If your employee meets certain criteria, you’ll need to provide a workplace pension, known as ‘automatic enrolment’, something that was enshrined in law in the Pensions Act 2008. Who exactly needs to go into an automatic enrolment? 

• aged between 22 and up to state pension age
• and earns more than £833 per month (£192 per week)

Again, there is an abundance of information that you should carefully consider available on The Pensions Regulator website.

Employer’s Liability Insurance

It’s a legal requirement to have employer’s liability insurance in place if you become an employer and it must cover you for at least £5 million and come from an authorised insurer. The fine for not having this in place is £2500 a day which for many startups and small businesses, could quickly spell disaster. 

Health & Safety

You have a moral, ethical and legal obligation to protect your employees. Your Employers Liability Insurance goes some way to meeting this requirement but you don’t actually need a documented policy until you employ 5 or more people. With that said, even if you only have one employee, you still have health and safety responsibilities to make sure the working environment you are providing is safe. It’s worth taking the time to do a risk assessment of all working locations. 

The CIPD fact sheet gives a good overview of some of your responsibilities in relation to health and safety at work. 

Data Protection

If you’re storing and processing personal information about your employees, you’ll need to be compliant with the Data Protection Act and the General Data Protection Regulation (GDPR). This is another area where if you start as you mean to go on, it will put you in great standing for less work in the future. 

Start by making sure you have a privacy policy that will be relevant through your hiring process that includes what information you will be collecting, where it will be stored and how long you will be keeping it. Then make sure this information is readily accessible to any potential candidate. An ideal way of not falling foul of any data protection rules is to make sure you are working with a robust applicant tracking system (ATS) which can take the administrative burden of managing a lot of this. By the way, did we mention that we bring an ATS for you to use should you partner with us? 

The other side is similar in that you will need to have secure and well-thought-out data storage measures to ensure that the information as it relates to your new hire, and especially the personal information, is stored securely.

Check out the ICO website for an in-depth look at what you can expect.

Summary

Hiring your first employee is a monumental step, filled with excitement, challenges, and legal obligations. Whether you’re a startup or a small business, this guide outlines the nine essential components to ensure your hiring process is not just compliant but also effective. From registering with HM Revenue & Customs to setting up a payroll system and understanding data protection laws, these steps are indispensable in creating a smooth hiring experience.

Remember, these nine aspects are just the minimum to keep you legal; going beyond can make you an employer of choice. Invest in getting them right, explore further insights on Talent Tent for more comprehensive guidance, and don’t hesitate to reach out for personalised support. The right first hire can set a positive tone for your company’s growth, and with this guide, you’re well on your way to making that impactful first hire.

Happy hiring!