Many small business owners can start up and function for a while with just the directors and maybe some occasional help from friends or family but eventually, if you want your business to grow you will need to consider taking on an employee. Of course it is relatively easy to employ freelances what with all the online and social networks that can put you in touch with skilled staff but there is really no substitute for a permanent employee who will have a vested interest in helping to grow your business and make it a success.
So have you come to the point where it is time to take on your first employee? For some business owners, this will occur at the very start of setting up their business while some companies are able to function for a while before they need to recruit an employee for assistance. No matter what applies to you, there are certain points you need to bear in mind when taking on your first employee.
One of the first things you will need to do, according to the north London accountants Tuchbands, is register as an employer. You will need to register as an employer with HMRC if you are planning to pay your new employee £112 per week or more, which is the current National Insurance Lower Earnings Level. You will then be provided with different reference numbers you will need to use. You also need to subtract the correct amount of National Insurance and tax from your employee’s wages prior to paying them. This is why it is a good idea to use the services of a chartered accountant to make certain you get everything right, as you may even be subject to additional National Insurance as an employer. You are advised to register as an employer in advance of your first employee payday, as it can take approximately 14 days for the registration process to be complete.
Aside from this, you will also need to collect your employee’s P45 if they are coming to you after leaving a previous job. This form will show some pivotal pieces of information. However, there is, of course, the chance that this is your employee’s first job or that they were self-employed before you. If this is the case, you will need to work through the HMRC’s Start Checklist to make sure you are deducting the correct amount of tax from their wages. Remember, you will not only be deducting income tax through the PAYE (Pay As You Earn) System but you will also deduct National Insurance (NI).
In addition to the points that have already been mentioned, you will need to fulfil HMRC reporting commitments, and it is imperative to do this on time. Again, this is another compelling reason to opt for a fixed fee accountancy service, so you can be sure everything is handled above board so that your business does not suffer. After all, if you are late with your payments, then you will be subject to a fine from HMRC. The electronic report you need to send before or on each pay day will state who you are employing, how much they earn, how much National Insurance you are going to pay and how much PAYE you are going to pay to HMRC.
To conclude, there is a lot to consider when taking on your first employee. It is vital to ensure you handle everything correctly, as you don’t want to cause any problems for your business or your new employee. Use the tips that have been provided in this article and consult a good accountant and tax advisor who can help you set up and manage a good payroll system.