When you take on your first employee, you move into an area of additional obligations and a lot of red tape. You have to make sure you have the money to pay the wages, perhaps before your customers pay you.
You have to operate a PAYE scheme to deal with the tax and national insurance on their wages.
The national insurance includes the employees national insurance which is deducted from their wages but the additional cost to you is employers national insurance which you have to bear.
You will also find you have other obligations…
- To adhere to the minimum wage legislation.
- To adhere to the Working Time Regulations that control how many hours a worker can work. Generally, most employees cannot work more than 48 hours per week and must have one whole day off, although the employee (not the employer) has the option to opt out of this. Employees are entitled to 28 days annual paid holiday.
- Redundancy pay if you have to lay off any of your employees.
- The employee has a right to a written statement of the terms and conditions of their employment.
- To provide itemised pay statements.
- To take out compulsory employers liability insurance.
- You must not dismiss the employee unfairly.
- The employee has the right to join a trade union.
- The employee must be given time off for certain public duties.
- You must operate a PAYE system to collect tax and national insurance from the employee and pay it over to the Inland Revenue.
- You must also deal with statutory sick pay and statutory maternity pay.
- You have to administer the repayment of student loans and stakeholder pensions as well as payment of Tax Credits through the PAYE system.
With all this you may be tempted to do away with employees and just use self-employed contractors to work for you. However, you need to ensure they are properly self-employed. Just because you say they are does not make them self-employed and the Revenue are wise to this. There are ways of improving your chances but if you get it wrong, the consequences can be substantial including the Revenue demanding from you all the tax and national insurance that you should have deducted and your chance of now reclaiming it from your employee may be minimal.
You can create a system that your employees are capable of following but only if the employees are motivated to do so, will they actually do so. You can lead a horse to water but you can’t make it drink.
You must create an environment in which the employees want to follow the rules and are motivated to achieve their full potential. People work harder when they are motivated. Just imagine the impact you can make if you change the attitude of your employees from “I have to go to work “ to “I get to go to work”. You don’t want people whose spirit dies as they enter the office door.
People’s basic needs have to be met first which comes from the cash you pay them. However after that, it’s all down to motivation.