

Hiring your first employee- a UK guide - tomgallard
http://blog.crispyfriedsoftware.com/post/14179700393/hiring-your-first-uk-employee

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Tim-Boss
Very useful for new founders, although as you quite rightly point out if you
pay a half-decent accountancy firm to handle your company finances they should
be sorting most of this out for you!

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tomgallard
Glad it helped- I found the need for Employer's Liability Insurance to be the
biggest surprise, so wanted to flag that up to people.

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Chris_Newton
It's also be worth knowing that some insurance deals aimed at small businesses
bundle up several of the most useful/legally required types of insurance,
including Employer's Liability.

For example, my contracting company took out a policy for the Professional
Indemnity cover, but it also comes with some Public Liability and sufficient
Employer's Liability cover to meet statutory obligations if we take on
employees.

I don't know whether this works out cheaper than finding separate policies for
exactly what you need, so obviously please do your homework if you're in a
position of needing this type of cover.

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pwaring
Often you'll buy what's called a 'commercial combined' policy, which will
usually cover professional indemnity, employer's liability and product
liability (if you sell things), plus extensions such as theft cover.

EL is the only compulsory insurance which applies to all private sector
employers, although in certain industries you will have additional
requirements (e.g. conveyancers have to purchase professional indemnity
insurance).

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polshaw
About PAYE;

What happens if you are employing someone at the limits and then they go out
and get a bar job too? Would I then be liable for the relevant amount of
contributions? Am i responsible for knowing that my employee hasn't gone and
got another job without telling me??

Assuming i would be responsible for PAYE if they got more work, then am I
allowed to make not having other employment part of their contract? If i am
not making PAYE contributions, does the employee have any NI contributions?
(eg. paid by the state?), or are they elligable for any tax credits/benefits?
(IIRC JSA could be claimed if working < 16h /wk -- although IIRC earnings
would count against JSA money, NI would at least be paid, right?)

Finally, How do all these things change if you are employing someone from the
EU, or outside??

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tehwalrus
first, ask an accountant. about everything there.

second, some friendly advice: my approach would be to register them for PAYE
even if they're only close to the threshold; this means they are future
proofed if they step up hours / get a bar job. I know economists will tell you
effort up front is worth more than cheaper effort in the future, but that's
only one opinion!

finally, I believe that EU citizens are treated exactly the same once issued
an NI number - but see my first comment about all matters of tax law!

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polshaw
It's not just effort, avoiding PAYE is saving money.. bootstrapping and all
that.. similarly for the accountant, although i am due a meeting. Still, if
anyone knows, please go ahead and share.

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tiptup
Great guide but I want to highlight the employer's responsibility for home-
working employees (self-employed would cover this themselves) as your first
employee, Hannah, falls into this category.

The employer is still responsible in providing suitable office equipments for
the home-worker, i.e. office chairs, desks, lighting and computers. If the
home-worker is using their personally-owned equipment for work, the employer
is still liable in ensuring the equipment is fit for purpose and get it
test/certified for electrical items.

It is up to the employer to ensure the home office is at the same health and
safety and data protection standards as they would in the office and yes a H&S
risk assessment will have to be carried out.

You may also have to purchase public liability insurance if they receive
business visitors into their homes as well.

I'm not trying to put a downer to home-working (I do some myself) but few SMEs
realise the true implications of offering home-working until they get a letter
from the lawyers demanding compensation for their employees' injury from
tripping on some cable they placed themselves in their home office whilst
working.

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MarkMc
I'm curious: Could you not simply designate the new hire a 'contractor' since
they are working from their own premises? You could then save having to deal
with all the employee paperwork and insurance...?

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tomgallard
You have to be pretty careful with this sort of thing. You can't just say
someone is a contractor and they become so. This is covered by something
called 'IR35'.

What this basically says, is if someone looks like an employee, they're doing
the job of an employee, then they are an employee, whether you like it or not.

Most UK IT contractors will be pretty familiar with this situation, and the
ways to avoid being caught out by it.

However, as my employee is mostly customer service, admin etc, and doesn't
work for anyone else, I don't think there's a way round it for me!

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pwaring
IR35 is not quite the same as whether someone is employed or a contractor -
you could claim to be a self-employed contractor when working from home and
IR35 would not apply. If you did that then it would be a question of whether
you were employed or self-employed, and that would determine which forms of
national insurance contributions were paid (your income tax would remain the
same).

IR35 was introduced to stop contractors from setting up a limited company and
then having the company contracted instead of the individual. The individual
would then take dividends out from the company, which are taxed at a lower
rate and not subject to national insurance.

<http://www.hmrc.gov.uk/ir35/>

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alexchamberlain
Nice concise guide. Thank You.

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Graham24
what would the equivalent be in the US?

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andrewpi
A lot of the equivalent in the US will be dependent on state law, so it will
vary depending on location.

