The Practical Guide to Limited Company Tax
If you have chosen to operate your business as a limited com...
By Lynne Gowers on 17th April 2018
Congratulations! The very fact you clicked this far shows you are considering employing staff, and that can only mean one thing – your business is thriving.
Employing staff can have a hugely positive impact on a business by increasing productivity or increasing the scope of services it provides to customers.
Although employees enable businesses to grow, employing staff also presents a number of responsibilities and challenges, particularly for freelancers and smaller firms.
If you are at a point on your business journey where you are considering employing staff, here are 10 things you will need to bear in mind:
1) Avoiding discrimination
When it comes to the recruitment and selection of staff it is unlawful to discriminate on the basis of a number of “protected characteristics”, including age, gender, race, religious belief or sexual orientation.
You must treat everyone equally during the recruitment and selection process, as well as while they are under your employment.
2) Registering as an employer
You will need to inform HMRC of your status as employer. You can do this here.
If you are already a director of your limited company, you will usually be registered as an employer with HMRC and have a PAYE reference number.
If you are not sure about what to do, you can get in touch with our accounting team.
3) Employment checks
Employment checks include verifying that someone has the legal right to work in the UK.
You can find a list of acceptable right to work documents here.
If you work in certain fields, for example with children or vulnerable people, you will have to check the criminal record of the person you are intending to employ.
This is known as a Disclosure and Barring Service (DBS) check (formerly known as a CRB check.) Find out more
4) Deciding what to pay
Setting an employee’s wage is a delicate balance – too high and the costs outweigh the benefits of taking someone on. Set it too low and you risk not attracting the right calibre of candidate.
There is also a legal minimum which you have to pay employees of your business.
This is the National Living Wage for workers over 25, and the National Minimum Wage for those aged 24 and under.
See the rates here
5) Contracts of employment
You will need to provide the employee details of the job in writing.
This can either be a formal employment contract or a written statement setting out start date, salary, hours of work and holiday entitlement.
There should also be information on how you or the employee can terminate the position and what disciplinary and grievance procedures are in place.
Please note these are the minimum requirements.
6) Employment insurance
All employers must hold Employers’ Liability insurance for cover of at least £5 million.
Often this may be covered in a business’s “All Risk” insurance, so it is worth checking if you have that sort of policy.
Employer’s Liability insurance enables a business to meet the costs of damages and legal fees in cases where an employee gets injured or becomes ill because of the work they do for your business.
7) PAYE obligations
Another aspect of employing staff are your obligations under the PAYE tax system.
You will have to deduct tax and National Insurance from their pay and also make Employer’s NI contributions. These must be paid to HMRC and reported under RTI.
These days, this is easily done with accounting software.
All employees will also need to be given itemised pay statements.
8) Statutory rights
You will need at least a basic understanding of pay and statutory leave entitlements, such as sick pay, holiday and maternity/paternity.
You also need to consider the regulations around certain groups of workers, such as young or part-time workers.
9) Health & Safety
Under Health & Safety law, businesses have a duty of care to their employees (and indeed to anyone affected by the business, including members of the public.)
You should assess the risks the business faces and implement good health and safety practices.
You must also have a health and safety policy, and this needs to be in writing if you employ 5 or more people.
10) Pension auto-enrolment
As an employer you have to provide a workplace pension for eligible staff.
Employers have the option of postponing auto-enrolment for 3 months from the start of employment, which is useful if you are employing someone on a temporary basis or short fixed-term contract.
Both you and the employee have to pay into the pension.
From April 2018 the minimum employer’s contribution is 2% of qualifying earnings and this is due to rise to 3% in April 2019.
Read our blog on this
We aim to provide the right accounting support for your business as it grows.
If you are a contractor or freelancer employing staff, your Boox accounting package includes payroll and RTI submissions for up to two staff (including yourself as Director). You can also add up to 10 additional staff for a nominal monthly charge.
If you run a small business, one of our SME packages is sure to meet your payroll requirements as well as your general accounting needs.
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If you need a little help to find the right accountancy service, don’t worry.
Thousands of contractors, freelancers and locums turn to Boox for help and advice with their limited company accounting. They love our personal service and app.
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Our combination of market-leading accounting software and expert personal advice gives you greater financial control and more time to grow your business.