Employing people as a sole trader

By Henry Williams on Small Business UK - Advice and Ideas for UK Small Businesses and SMEs

The fastest way to start a business is as a sole trader. You can start trading straight away and have three months to tell HM Revenue and Customs (HMRC) of your self-employed status before you incur a fine.

It’s easy to start this process: you simply have to tell them you are paying tax through self assessment. You can find the self assessment form to register as a sole trader from here.

What’s more, borders should be no barrier to hiring the best talent – an EOR can do all the hard work for you. Find out more below.

Can a sole trader employ staff?

Yes. Once you get going as a sole trader you can employ people just as you would do in a limited company, but you have to tell HMRC that you are doing so. The process of setting up as an employer is the same for sole traders as for limited companies:

• Step 1 is to register as an employer. You can find more information about registering as an employer here or call the New Employer Helpline on 0300 200 3211.
• Step 2 is to register for PAYE, and this should ideally be done before the first payment of any salaries (but no more than two months in advance).

Once registered for PAYE. HMRC will issue you with reference numbers allowing you to enrol for PAYE online. Payroll or small business accounting software will be your friend here. Much better than doing it by hand so worth the cost.

Remember that you’ll need to factor in employee benefits like sick pay, holiday pay and maternity/paternity pay. Enrol them in a pension too.

Will need employers’ liability insurance. Find out what insurance you need by reading Business insurance everything you need to know.

Make sure you judge salaries right too. the salary needs to be calculated to ensure that fair wages are met. Small businesses can deal with cost limitations by hiring an employee part-time or hiring someone on a fixed-term contract to determine the viability of the position. If they’re on shifts then you need to make sure that they’re paid at least the National Living Wage (or the National Minimum Wage if they’re under 23).

Check out Payscale, Glassdoor and Indeed to get a better idea of your industry’s standard for salary figure. A candidate’s salary expectations can be a steer too, especially if they have some experience in their field.

Ensure they have a legal right to work in the UK and there may be background or Disclosure Barring Service (DBS) checks involved depending on the role.

Read more over at Hiring your first employee as a small business.

Using an Employer of Record as a sole trader

As a sole trader, you might think you don’t have the resources to manage overseas talent. But with an Employer of Record (EOR), you can hire anyone, no matter where they are in the world.

An EOR is a third-party company that takes on all the legal responsibilities of employing an overseas worker, including onboarding, payroll, tax, and compliance with local employment laws. That means you don’t have to deal with the expense, hassle and legal issues that can come with employing someone in a different country, but you can still take advantage of the best global talent.

Deel

Deel’s self-serve HR platform manages onboarding, payroll, time off and expenses, and even termination for overseas workers. Deel also has a dedicated employee experience team who are on hand to deliver a seamless experience for your remote talent, as well as over 200 in-house legal experts, who ensure you don’t fall foul of local regulations.

Features:

• All-in-one platform manages every part of the employee lifecycle on your behalf
• Dozens of software integrations for accounting, productivity and more
• Over 200 in-house legal experts and an employee experience team provide dedicated support

Rippling

Rippling helps you manage every aspect of your global workforce, with automated compliance to flag potential risks, seamless onboarding and an auto-payroll function that ensures you can pay your overseas workers within days.

Features:

• Seamless onboarding handles everything from benefit enrolment to assigning training
• Automated compliance runs continually in the background to alert you to risks
• Expert advisors on hand can provide local knowledge and support

Velocity Global

Velocity Global’s EOR solutions allows you to work with talent in more than 185 countries, with support for compliant hiring, payroll and employee management wherever they might be based. Velocity also provides immigration support for relocating talent and human support that’s available to both businesses and workers around the clock.

Features:

• Accurate payroll that makes it easy to comply with local regulations
• Reporting and analytics provide key insights
• Integrations with applicant tracking and human resources information systems

The importance of contracts

A contract of employment should be made as soon as the job offer is accepted. This is not a ‘legal’ requirement, but it will will save you a lot of bother going forward. Remember, the key difference between being a sole trader and limited company is ‘liability’ – because you will be ‘personally’ responsible for any debts or compensation arising from any disputes.

The term ‘contract’ can be a bit misleading and is often misused as it doesn’t refer to a piece of paper – initially, it doesn’t have to be in writing. However, your employee is entitled to a written statement of the main terms of the contract within two months of starting work. This applies to employees who are working for you for more than a month.

You can get more information about employment contracts here and you can buy a standard written statement here.

Starting as a freelance? Make sure you are on top of your finances with one these accounting systems:

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