Whether you want to improve day-to-day operations management, bring your business growth strategies to fruition, or simply relieve some of the pressures you face as a solo entrepreneur — hiring employees can be a great next step for your business.
But it’s not without its challenges.
First, you need to make sure that you’re legally compliant. Then you need to find the right candidates. And, once you’ve hired employees, you’re responsible for their well-being and future success.
To help you navigate the somewhat complex task of growing your team, we’ve put together this all-encompassing guide. In it, you’ll find everything you need to know about how to hire employees, divided into three parts:
Part 1: Preparing your business legally
Part 2: The recruiting process
Part 3: Ensuring a positive start (and continued success) for new team members
Bear in mind that hiring employees is a huge responsibility. Before you take on new staff, make sure that you have the means to do so. Check that your cash flow is relatively stable, and that you’re confident in your ability to manage and support additional team members. This will help you avoid unnecessary financial strain, and ensure that both you and your employees are set up for success.
How to hire employees — part 1: Preparing your business legally
You’ve navigated the legal requirements for starting a small business. Now, as you transition from solo entrepreneur to employer, there are some additional steps to complete. Here’s how to prepare your business legally for employee hiring.
Register as an employer with HMRC
Before you can officially hire employees, you must register as an employer with HMRC. This ensures that you’re compliant with UK tax laws, and that you’re able to pay your staff.
You can register online via the GOV.UK website. Upon successful registration, you’ll receive your PAYE reference number. You’ll need this for running payroll, submitting reports to HMRC, and setting up a workplace pension.
Note that this is separate from the process of how to register a business (you’ll have done this as soon as your business started generating over £1,000 in income per tax year).
Aim to register as an employer at least four weeks before you intend to pay employees for the first time. It can take up to 30 days to receive your PAYE reference number, so register in good time to avoid delays.
Get Employers’ Liability insurance
As a UK-based employer, you’re legally required to have Employers’ Liability (EL) insurance. This protects your business if an employee makes a claim for injury or illness caused by their work.
Your insurance policy must cover you for at least £5 million, and it must be issued by an authorised provider (check the Financial Conduct Authority register to see if your insurer qualifies).
Note that you must have an insurance policy in place before your employees start — you can be fined up to £2,500 for each day that you’re not properly insured.
Employers’ Liability insurance is an unavoidable expense, but it does qualify as one of the many possible tax deductions for small businesses. You can include it as a business expense when managing your small business accounting and preparing your year end accounts.
Set up a workplace pension scheme (if applicable)
If you employ anyone who is aged between 22 and State Pension age, earns over £10,000 per year, and is based in the UK, you must enrol them into a workplace pension scheme and make an employer’s contribution.
The Pensions Regulator provides an official tool that will guide you through the process step by step. Complete the tool’s questionnaire to determine exactly what you need to do and when.
As with Employers’ Liability insurance, you must have your pension scheme set up before your employees start.
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Prepare for payroll
When thinking about how to hire employees, you must also consider how to pay employees. This includes setting up a payroll system and deciding how you’ll issue staff wages.
Set up your payroll system
In order to pay employees, you first need to set up a payroll system, as follows:
Register as an employer with HMRC via the GOV.UK website (refer back to the very first step in our guide, where we cover this in more detail).
Set up payroll software. Check the GOV.UK website for a list of HMRC-approved software. Every time you hire a new employee, you’ll add their details to the system.
Once your payroll system is in place, learn how to do a payroll. This is the end-to-end process of calculating and paying employee wages, generating payslips, and reporting employee pay and deductions to HMRC.
You must run payroll consistently at regular intervals — be that weekly, bi-weekly, or monthly, depending on your chosen pay frequency.
Decide on a payment method
As you prepare for payroll, think about how you’ll issue employee wages: by manual bank transfer, BACS (Bankers’ Automated Clearing System) — an automated transfer process that allows you to schedule multiple payments ahead of time — or cash (most suitable for cash only businesses).
Whichever payment method you choose, make sure you have the necessary tools and systems in place. If you’re paying via BACS, for example, you’ll need to set up BACS within your payroll software.
Ensure that your workplace is safe and accessible
As an employer in the UK, you are legally required to provide a safe working environment. This includes:
Physical health and safety in the workplace
If you’re focusing on small business ideas with a brick-and-mortar venue or on-site premises, you must ensure compliance with health and safety regulations. This includes things like conducting regular risk assessments to identify hazards, providing health and safety training, installing fire alarms and extinguishers, and providing clearly-marked evacuation routes.
Preventing discrimination
Under the Equality Act 2010, you are legally obligated to prevent discrimination in the workplace. Create an inclusive environment by implementing fair hiring practices (more on that in Part 2 of our guide), fostering a culture of mutual respect, and establishing clear anti-discrimination policies.
Accessibility for employees with disabilities or health conditions
Employers must make reasonable adjustments so that workers with disabilities and/or physical or mental health conditions are not disadvantaged when doing their jobs. This includes things like providing wheelchair-accessible bathrooms, providing assistive technology, and allowing flexible working arrangements.
Protecting employee data
Last but not least, you must protect your employees’ personal data in line with GDPR. This includes safeguarding sensitive information such as employee contact details, payroll records, and health data. Ensure robust security measures such as passwords, access controls, and secure storage.
Health and safety in the workplace is a huge topic, and we’ve given just a brief overview here. As you prepare for employee hiring, read up on each pillar in detail and make sure you understand exactly what’s required of you as an employer. It may be worth making a checklist of tasks and action points you can work through, such as “install fire alarms”, “print health and safety posters”, “create an anti-discrimination policy”, and so on.
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How to hire employees — part 2: A guide to the recruiting process
To kick off the employee hiring process, you must be very clear about what you’re looking for — and then proactively source candidates who fit the bill. Follow these steps for effective employee recruitment.
Understand the different types of employment
There are three main types of employment status in the UK, and they each have different legal implications for you as an employer. So, before you start recruiting, think about what sort of contractual relationship(s) you want to pursue.
The three types of employment status are:
Employee: Employees have a formal contract with their employer and are entitled to the full scope of employment rights and protections — such as National Minimum Wage, statutory sick pay, holiday pay, and protection against unfair dismissal.
Worker: Workers have fewer rights than employees, but they’re still entitled to basic protections such as minimum wage, holiday pay, and rest breaks. This category includes zero-hours contract workers, seasonal staff, and agency workers.
Self-employed: Those with self-employed status run their own business and have full control over how they work. They’re not entitled to employment rights such as holiday pay or sick pay, and they are responsible for their own taxes and financial management.
At the same time, think about whether you want to hire staff on a full-time, part-time, or ad-hoc basis. This will help you to clearly define the role and prioritise the tasks and responsibilities to be included in the job description.
Note that our guide is focused on how to hire employees (and all the legal implications that come with it). If you choose to work with self-employed professionals, you can bypass many of the administrative steps we covered in Part 1 — such as registering as an employer with HMRC, running payroll, and paying into an employee pension scheme.
Determine a pay range
Next, establish a pay range for each role you want to fill. Similar to how you’d weigh up different pricing strategies when deciding how to price a product or how to price a service, there are several strategies you can use to calculate a fair employee wage.
First, take into account the National Minimum Wage and the National Living Wage (which applies to workers aged 21 and over). Then do some market research to establish a benchmark for the role in question. Use sites like Glassdoor, Indeed, and Payscale to find average salary data — and remember to account for different seniority levels and years of experience.
Based on your research, come up with a suitable range that’s legally compliant, in line with the market average, and feasible within your small business budget. Bear in mind that the range you establish now doesn’t have to be set in stone; you can decide a more precise figure once you’re ready to hire a specific candidate.
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Write a job description
Recruiting great candidates is a bit like customer acquisition; you want to sell both the role and the company to prospective employees.
When writing a job description, don’t just list your requirements. Highlight what’s in it for them, too — such as the opportunity to make an impact at a small start-up, or the chance to develop new skills.
With that in mind, craft a job description based on the following framework:
Job title and role overview: Start your job description with a clear job title and a brief summary of the role. For example:
Senior Hair Stylist We are seeking a full-time Senior Hair Stylist for a busy local salon in the Kent area. The ideal candidate will have at least 5 years’ experience in a similar role, demonstrating advanced technical skills in cutting, colouring, and styling. This is a great opportunity for someone who is passionate about hairdressing to join a growing salon and play a key role in shaping our future direction. |
About the company: Describe your company in more detail and paint a picture of what employees can expect. You might talk about company culture and values, and mention key details such as company size and location. If you’ve been through the process of how to write a mission statement and how to create a USP for your business, refer back to these for inspiration.
Key responsibilities: List all the main responsibilities included in the role, in bullet-point form. Be as clear and specific as possible to give candidates an accurate impression of the job.
Main skills and requirements: Specify any necessary skills, experience, and qualifications that the ideal candidate should have. Again, use a bullet-point list for clarity and readability.
Job specifics: Mention whether the role is full-time or part-time, specify shift patterns or working hours, and state where the job will be based (here it’s important to note whether the role is in-house, remote, or hybrid).
Salary and benefits: Include the salary range or pay rate candidates can expect, and list any additional benefits and perks such as paid holiday, pension contributions, and a yearly training budget.
When writing a job description, use job sites such as Indeed and Totaljobs for inspiration. Search the job title(s) you’re recruiting for to see how similar employers position the role and market their company.
Advertise the role
You’ve written the job description — now it’s time to advertise the role. Besides posting on online job boards, consider how to use social media for small business recruitment. Sharing your job ad on platforms like LinkedIn, Facebook, and Instagram is not only cost-effective; it’s also a great way to expand your reach.
At the same time, leverage small business networking to spread the word. Attend local business events and meetups, and share the job ad with anyone in your network who might know someone suitable for the role.
Screen applications and conduct interviews
This is, without doubt, one of the most challenging parts of employee hiring. The process of screening applications and conducting interviews is not only time-consuming — it also requires a great deal of care and self-awareness.
As with most things in business, preparation is key. Here are some tips to help you along the way.
How to hire the best employees
When it comes to growing your team, it’s not just a question of how to hire employees, but rather, how to hire the best employees.
Of course it’s important to look for specific skills and experience that align with the requirements of the job — but it’s also necessary to look beyond that.
Besides on-paper credentials, look for candidates who demonstrate genuine enthusiasm for the role, strong communication skills, and a tendency towards proactivity and problem-solving. These are all critical qualities within a small business, and they’re often what separates great candidates from good ones.
During interviews, ask open-ended questions that encourage candidates to share anecdotes and examples that demonstrate such skills.
For example, if you want to evaluate a candidate’s communication skills, you might ask something like: “Tell me about a time when you had to work as part of a team to solve a problem. How did you make sure that everyone was on the same page, and how did you handle any misunderstandings?”
By planning such questions in advance, you can actively seek out great candidates who are likely to thrive in a small business environment.
How to avoid hiring a toxic employee
Hiring the wrong person can be a costly mistake, especially for small businesses. Toxic employees can affect team morale and workplace culture, your day-to-day productivity, and even customer loyalty. As such, avoiding toxic hires can be considered a crucial part of small business risk management.
If you’re worried about how to avoid hiring a toxic employee, pay attention to how candidates answer questions about teamwork, problem-solving, and conflict resolution. To be on the safe side, you may also wish to request references from previous employers.
How to avoid discrimination and ensure a fair recruitment process
Earlier in our guide, we mentioned the Equality Act 2010 — a law that protects employees from any kind of discrimination related to characteristics such as age, race, gender, religion, and disability.
As you navigate the task of employee hiring, you must ensure that the process is as fair and free from discrimination as possible. This includes being aware of and mitigating unconscious bias, and following a uniform process for each and every candidate.
Consider anonymising CVs during the initial screening phase to remove all personal information. This encourages you to focus solely and objectively on each candidate’s skills and experience.
At the same time, draw up a set of criteria you’ll use to evaluate each CV, and write a standard set of interview questions that will apply to all applicants. This way, you can ensure an even playing field for every candidate throughout the process.
You’ll find lots of additional information about how to prevent discrimination in the recruitment process on the GOV.UK website — including questions you cannot ask when interviewing candidates.
Check that candidates have the legal right to work in the UK
Before you officially hire anyone, you must first check that they’re legally permitted to work in the UK. To do this, you’ll need to see proof such as a valid passport, visa, or work permit. The GOV.UK website has a questionnaire that will take you through the process step by step.
Depending on your business and the nature of the job, you may also need to run a DBS check (Disclosure and Barring Service, formerly known as a CRB). This is most common in roles that involve working with vulnerable people, or in security. You can request this online via the GOV.UK website.
Extend an offer and create an official employment contract
Once you’ve found a suitable candidate, it’s time to make things official. Here are the final steps you need to go through to hire an employee.
Extend a job offer
Extend a formal offer of employment to your chosen candidate, either by phone, video call, or email. Your initial offer should outline key details such as the job title and role, salary or hourly rate, start date, working hours/shift patterns, and any additional terms and benefits.
Give the candidate time to review the offer before they get back to you with a decision.
Create an employment contract
After a candidate accepts your offer, you’ll need to provide a formal contract of employment. This is a legally binding document that specifies all the terms and conditions of employment — including working hours, salary, job responsibilities, and notice periods.
Issue a written statement of employment particulars
In addition to an employment contract, employers in the UK are legally required to issue a written statement of employment particulars. This includes:
A principal statement — the main document which must be provided on the first day of employment. This gives a summary of the key terms of the employment contract, including details such as job title, start date, holiday entitlement, and benefits. Check the GOV.UK website for a full list of what to include.
A wider written statement which must be provided within 2 months of the employee’s start date. This includes information about pensions, collective agreements, and disciplinary and grievance procedures.
Make sure you have all the necessary documents prepared in advance. This not only helps to set clear expectations; it also ensures that you’re meeting all your legal obligations as an employer.
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How to hire employees — part 3: Ensuring a positive start (and continued success) for new team members
Once you’ve gone through the process of employee hiring, it’s important to think about what happens next. Here’s how to set your staff up for success when they join your company.
Provide thorough employee onboarding
A positive employee experience begins with onboarding. On their first day at work, take the time to show new hires the ropes. Give them a tour of the workplace (if you have a brick-and-mortar venue) and introduce them to relevant tools and systems.
At the same time, talk through their role and discuss how they can contribute to the company’s overall success. Just as managing client expectations is crucial for customer satisfaction, setting clear expectations with your employees helps to foster job satisfaction.
Plan ahead so that the onboarding process is structured and well-organised. Your goal is to help new hires settle in, get them ready to start working as soon as possible, and lay the foundation for long-term employee retention.
Equip new hires with the tools they need to succeed
As an employer, you’re responsible for setting your staff up for success. Before new employees start, make a list of everything they need to succeed in their role.
If you’re hiring staff to work in your café or restaurant, for example, you’ll want to provide the necessary tools to serve customers efficiently — including things like card machines and POS technology to facilitate cashless payments.
Likewise, if you’re hiring staff to support one of your online business ideas, make sure they have access to all relevant software and tools.
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Provide relevant training
The benefits of training employees are manifold. Training and development is not only crucial for the success of your business. It’s also a key factor in how to motivate employees, helping to boost employee confidence, engagement, and overall job satisfaction.
Offer job-specific skills training that’s immediately relevant to your business. If you run a customer-facing business, for example, and are looking at how to improve the customer experience, it would make sense to train new hires in areas such as what is good customer service and how to deal with difficult clients.
For a more structured approach to employee training and development, consider using performance management techniques such as setting SMART goals and holding regular check-ins. This helps to track progress and fosters a sense of accountability and accomplishment.
Create a positive working environment
If you’re thinking about how to hire employees, you must also think about how to create a positive working environment. You want to build a workplace that feels safe, collaborative, inclusive, and respectful — an environment where each and every employee feels valued.
Go beyond the legal requirements of workplace health and safety (which we discussed earlier in this guide) and consider additional factors that shape company culture — such as communication, leadership style, recognition and rewards, and work-life balance.
Think about small yet impactful measures you can take to create a pleasant workspace. You might hold an informal coffee catch-up once a week, for example, to encourage employees to share ideas, feedback, and concerns.
Even in the very early stages of employee hiring, it’s important to start thinking about the kind of environment you want to create. This will help you to build a workplace where your employees feel valued and supported from day one.
Key takeaways and next steps
As you can see, there’s lots to think about when it comes to employee hiring. You must:
Make sure that you’re checking all the legal boxes (covered in Part 1 of our guide)
Navigate the recruitment process to find suitable candidates — and make sure that you’re recruiting fairly (covered in Part 2)
Set new hires up for success with proper onboarding and training, and create an environment where everybody can thrive (as covered in Part 3)
The task of how to run a business is already a huge challenge, and adding hiring into the mix can make it seem even more daunting — but don’t be deterred. The time and effort you put into employee hiring right now will pay off in the long run — helping you to boost productivity, operate more efficiently, and achieve your business goals.
Next steps
We’ve covered a lot of ground in our guide on how to hire employees. So where to begin?
Here are some next steps to get you started:
Break it down into manageable action points. Go back through our guide and create a checklist of everything you need to do. If you’re hiring employees for the first time, start with Part 1 — preparing your business legally — and work your way up from there. This will give you a clear and practical list to work with, and helps to ensure that you don’t miss anything out.
Create processes and templates as you go. As you go through the process of how to hire employees, think about how you can make it scalable for the future. When writing a job description, for example, create a template that you can use and adapt for future roles. Even if you’re not yet thinking about how to scale a business on a major level, it’s worth establishing a foundation that can support future growth.
Refine, adapt, and improve continuously. Hiring employees for the first time offers a great learning curve. As you navigate each step, reflect on what works well and what needs improving. During the recruitment phase, for example, you might find the need to change some interview questions or rethink the interview format. Likewise, gather feedback from new hires about the onboarding process and seek to improve it for future candidates.
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