Taking on staff – the options
If you’re running a business and you want to expand, you’ll need to consider the best options for meeting your new needs – these could include outsourcing or training existing staff or taking on new staff.
Taking on people – whichever way you choose to do it – will always mean some form of investment for your business.
If you decide to take on new staff, or replace someone who has left, this guide will help you understand the different ways of taking on people to work for you – and how to choose the methods that best meet your needs.
Recruiting new staff and the alternatives
Before spending time and money on employing someone new, you should weigh up whether you really need to recruit new staff. To do this, look at your staffing needs in relation to the wider objectives of the business.
You may need extra help immediately or you may simply be thinking about your future staffing requirements. In both cases it’s valuable to plan as far ahead as you can.
You should consider why you’re looking for extra help and how long you will need it for.
Ask yourself the following questions:
- Are you considering taking on your first employee to help you grow your business or handle an increasing workload?
- Are you replacing an employee who has left? If so, why did the previous employee leave and what skills and experience have you lost?
- Do you need to bring in a new skill to your business that none of your existing employees has?
- Has your workload increased? If so, is the workload likely to continue or is it just a temporary increase?
- What will be the impact of taking on a new staff member? Do you have somewhere for them to sit? Will you need to buy new equipment for them?
- Do you need cover for yourself in the long term?
If you are taking on your first employee you may be required to register as an employer with HM Revenue & Customs (HMRC). You can find information to help you decide whether you need to register in the HMRC information pack for prospective employers, ‘Thinking of employing someone?’ Alternatively, you can call the HMRC New Employer Helpline on Tel 0845 60 70 143.
Alternatives to taking on new staff
Since recruitment can be expensive and time consuming, other options you could consider include:
- re-organising the company structure
- sharing work among existing employees
- promoting existing staff
- asking part-time employees if they would consider full-time work
- improving the efficiency of the business, perhaps by rearranging tasks
- offering overtime
- adopting flexible working arrangements, eg allowing some staff to begin earlier/later to provide cover for a longer part of the day
- hiring temporary workers from an employment agency
- offering short-term graduate internships through Graduate Talent Pool
The best ways to take on extra people
You have to consider the type of worker you wish to employ, depending on factors such as:
- how constant the work is
- how long the work will last
- the number of hours of work each week
You have a number of options:
- Permanent employees can be full-time or part-time. They have an open-ended employment contract with you. You have obligations to them but they will be an investment in your business.
- Fixed-term contract employees have an employment contract with you for a predetermined time or until a specific task has been completed.
- Employment agency – temporary staff are engaged by the agency and supplied to you. Your contract is with the employment agency to supply you with staff, but you still have certain legal responsibilities towards the agency worker. For example, any agency worker that started working for you on or after 1 October 2011 that is continually employed in the same role for 12 weeks or more is entitled to the same employment and working conditions as employees in comparable roles.
- Using self-employed freelances, consultants and contractors gives you the minimum of employer obligations. But you need to be sure that the people are legally defined as self-employed.
- Zero-hours contracts allow you to have people on-call to work whenever necessary and mutually convenient. Generally, you are not obliged to offer work, nor is there a responsibility for the worker to accept any work. Look at the terms of any zero-hours contract carefully as it may affect the employment status of the worker and your responsibility towards them.
- If you plan to employ children or young people, you should keep in mind that there are restrictions on the hours and types of work that they can legally carry out.
Full-time or part-time employees
Regardless of whether your employees are full time or part time you will haveresponsibilities to them. Some apply straight away, others after a minimum period of continuous employment.
- You must give them a written statement of the main terms and conditions of their contract of employment.
- You must give them an itemised pay statement at or before the time of payment.
- You’ll have to make sure the working environment is safe and secure.
- You must also have insurance to protect against claims for any illnesses, injuries or diseases your employees may pick up as a result of working for you.
- You’ll need to register as an employer with HM Revenue & Customs (HMRC) to set up a payroll, deducting tax and National Insurance contributions from your employees’ pay and forwarding the money to HMRC.
- Your employees will be entitled to a minimum level of paid holiday, a maximum length of a working week and minimum levels of rest breaks.
- They must also be paid at least the national minimum wage.
- If members of your staff are off sick for more than three days, they will be entitled to statutory sick pay.
- If your employee is pregnant, or is about to or has recently become a parent, they’ll be entitled to maternity, paternity or adoption leave and parental leave during the first five years of their child’s life (longer for a disabled child). You must also seriously consider any requests from parents with children sixteen or under to work more flexibly.
- You must treat your employees fairly and avoid discrimination. If things do go wrong, all employees are entitled to fair treatment, whether you have to dismiss them, make their position redundant or if you’re selling your business.
- If your employee is disabled, you must make ‘reasonable’ adjustments to reduce or remove the impact of physical features of your premises if they put the employee at a substantial disadvantage compared with non-disabled employees.
Fixed-term contracts
There may be times when it’s best for your business to take on somebody on a fixed-term contract. This is one which either:
- lasts for a specified time, set in advance
- ends with the completion of a specified task
- ends when a specified event does or does not take place
For example, if you’re a shopkeeper you may want to take on someone for just three months to cover the busy run-up to Christmas. Or you may wish to employ someone specifically to cover for another person who is on maternity, paternity or adoption leave.
Pros and cons
Fixed-term contracts give you the advantage of bringing in specific skills and labour as and when they are needed.
It’s important to remember that unless there are special circumstances that can be justified, you must treat fixed-term employees the same as comparable permanent employees. This means you must give them:
- the same pay and conditions
- the same or equivalent benefits package
- the same or equivalent pension scheme
- the same opportunity to apply for vacancies for permanent posts in the business
Fixed-term employees also have access to the same employment rights as their permanent equivalents.
Under the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations, any employee who has been on a fixed-term contract for four or more years (excluding any period before 10 July 2002) will usually be classed in law as a permanent employee if their contract is renewed, or if they are re-engaged on a new fixed-term contract.
The only exemptions to this are when employment on a further fixed-term contract is objectively justified to achieve a legitimate aim, eg a genuine business aim that can be objectively justified, and is also a necessary and an appropriate way to achieve that aim, or the period of four years has been lengthened under a collective or workplace agreement.
These regulations do not apply to apprentices, students on work experience of a year or less or people on certain training courses and temporary work schemes.
Tax matters
You will need to make the same tax arrangements for fixed-term employees that you would for permanent employees.
Taking on agency workers
Using agency staff can be ideal, especially when you need emergency temporary cover. It can cost more than employing a temporary staff member directly, but a big benefit is that all of the administration is handled by the agency.
You usually pay the agency and the agency pays the worker. The rate the agency charges you could include elements of National Insurance payments, holiday and sick pay, as well as an administration fee and profit margin.
It is the agency’s responsibility to ensure agency workers receive the rights they are entitled to such as those under the Working Time Regulations and national minimum wage law.
However, rules changed on 1 October 2011 and agency workers are now entitled to access to the same on-site facilities as comparable employees and information on relevant job vacancies within your business from day one. After 12 weeks’ continuous employment in the same role agency workers become entitled to the same terms and conditions as comparable employees. This includes terms relating to pay, working time, night work, rest periods and breaks, annual leave and pregnant workers.
You should provide the agency with information on your terms and conditions so that the agency can ensure agency workers receive the same terms and conditions as if they had been employed directly by you.
You should also do some research before using an agency to ensure you are happy with the agency’s reputation. Any poor experience the worker has – such as not getting paid on time or the right amount – could reflect badly on your business.
By law, employment agencies must comply with the Employment Agencies Act 1973 (as amended) and the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (as amended). These regulations stop them, for example, from charging workers fees for finding jobs. They must also ensure a worker has any qualifications legally required to do the work.
Even though agency staff do not work directly for you, you are still responsible for their health and safety. In fact, they are likely to be at greater risk because they don’t know the business well.
Freelancers and outside contractors
One way your business can take advantage of extra skills and labour without taking on many of the responsibilities of an employer is to use freelancers or outside contractors. These are workers who are self-employed or belong to separate outside companies.
For example, you might use an outside IT contractor to build your business web pages, or hire a freelance PR consultant when you want a promotional push for your business.
Pros and cons
An advantage of using freelancers and outside contractors is that in many cases they look after all their own income tax affairs and National Insurance contributions. But it’s always a good idea to check that you won’t be responsible for deducting tax and National Insurance from their payments.
People who are genuinely self-employed may not be entitled to the same rights afforded to employees. However, depending on the contract under which they are providing services, they may qualify as workers. Under these circumstances they would be entitled to workers’ rights such as holiday pay. If you are in any doubt about a person’s employment status, you should seek professional advice.
Freelancers and contractors still have a right to the National Minimum Wage. But if they are being paid by their own firms, this will not affect you.
As an employer you still have responsibilities for the health and safety of freelancers and contractors. And check whether your insurance is affected by having non-employees working on your premises.
Remember too that you should avoid discrimination against anyone who carries out work for you, whether they are employed by you or self-employed.
Directors and managers
Every limited company must have at least one director. Directors are appointed by the shareholders as the people who can best run the company on their behalf.
Directors have a range of responsibilities in areas such as health and safety, tax and employment law. There are serious penalties for not meeting these responsibilities which makes appointing the right director very important.
There are also restrictions on who can become a director. People who may not become directors include anyone who:
- has been disqualified by the courts from becoming a director
- is an undischarged bankrupt, unless they have permission from the courts
- is under the age of 16
Managers
You may wish to take on someone to cover you while you’re away or so that you can spend more time growing the business. Consider whether it would be a good idea to appoint someone to whom you can delegate day-to-day running. When preparing the job description, the advert and the interview questions, you will need to keep in mind the additional qualities, experience and skills the candidate will need to take on the managerial role.
Acas Helpline
08457 47 47 47
HMRC New Employer Helpline
0845 60 70 143
Pay and Work Rights Helpline
0800 917 2368
Institute of Directors Enquiries Helpline
020 7766 8866