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Becoming an employer


Deciding to become an employer is a significant milestone for
any business. It marks a phase of growth and the need for
additional support.
In this guide, we will explain what becoming an employer entails, the
steps required, the key considerations, and the changes that come
with this decision. We’ll also consider the pros and cons to help you
make an informed choice.


For many businesses, the transition to an
employer signals growth and expansion.
However, it also introduces new
challenges and responsibilities.

Becoming an employer means managing
staff, including hiring, ensuring their wellbeing,
handling wages and tax deductions,
and complying with employment laws.


When you decide to become an employer,
one of your primary responsibilities is hiring
the right people. This process involves
advertising job vacancies, conducting
interviews, and selecting suitable
candidates. Businesses increasingly focus
on hiring employees with the right skills
who fit the company culture well. This
approach helps reduce turnover and foster a positive work environment.


Employee wellbeing has become a
significant focus for UK employers.
Recent legislative changes, such as the
Employment Rights (Flexible Working)
Act 2023, allow employees to request
flexible working arrangements from day
one. This flexibility can include part-time
work, remote working, or compressed
hours. Employers must respond to these
requests within two months and provide
valid reasons if they deny any request.

These changes highlight the importance
of considering employee well-being
and maintaining a supportive work


One critical consideration of becoming an employer that often gets
overlooked is the importance of employee training and development.
Investing in your employees’ growth enhances their skills and
improves your business’s overall success.

According to a 2023 study by LinkedIn, companies that provide
extensive training opportunities see a 24% higher profit margin than
those that spend less on employee development.

Training can range from onboarding sessions that help new hires
understand their roles and company culture, to ongoing professional
development programs that keep employees up-to-date with industry
trends and technologies. It’s essential to create a structured training
plan that includes mandatory and optional courses catering to the
different needs of your workforce.

Moreover, building a culture of continuous learning can improve
employee engagement and retention. A report by the Chartered
Institute of Personnel and Development (CIPD) found that 94% of
employees would stay longer at a company if it invested in their
career development. Therefore, as an employer, prioritising training
and development boosts productivity and builds a loyal and skilled
workforce, driving your business towards long-term success.

As an employer, you are responsible for calculating and distributing
wages, including making the necessary tax and NI deductions.
The Government has introduced significant changes to the National
Minimum Wage (NMW) and National Living Wage (NLW) rates,
effective April 2024. The top rate of NLW will now apply to workers
aged 21 and over, representing the largest-ever cash increase to the
minimum wage.

Ensuring compliance with these new rates is crucial to avoid legal
issues and financial penalties.


Compliance with employment laws is a
critical aspect of becoming an employer.
The UK has seen a flurry of changes in
employment legislation set to take effect
in 2024. For instance, the Carer’s Leave
Act 2023 entitles employees to one week
of unpaid leave per year to care for a
dependent, starting from April 2024.

Additionally, the Protection from
Redundancy (Pregnancy and Family
Leave) Act 2023 extends redundancy
protection for employees on family
leave to 18 months.

Employers must stay updated with
these changes to ensure they meet their
legal obligations. Non-compliance can
result in significant penalties and
damage to the business’s reputation.
Therefore, regular training for HR and
management teams on the latest
employment laws is essential.


Taking on the role of an employer
brings a host of new responsibilities.
You must ensure a safe and productive
work environment, manage payroll
efficiently, and handle various aspects
of employee relations. Effective
management includes hiring the right
people, providing necessary training,
and addressing any issues promptly.

Becoming an employer involves
significant responsibilities and
challenges. However, the right
preparation and understanding of your
obligations can also drive business
growth and success. Staying informed
about the latest employment laws
and maintaining a supportive work
environment are key to becoming a
successful employer.


  • Register as an employer with HMRC:
    The first step is registering with
    HMRC. This should be done before the
    first payday. You’ll receive an employer
    PAYE reference number and accounts
    office reference number, both of which
    are essential for managing payroll and
    reporting to HMRC.
  • Set up payroll: Setting up a payroll
    system is crucial. This system will
    help you calculate and distribute
    wages and ensure correct tax and
    NICs. HMRC offers a free payroll tool
    called ‘Basic PAYE Tools’, but many
    businesses use payroll software which
    can significantly simplify this process.
  • Check employment rights: Ensure
    you understand and comply with
    employment rights, including
    minimum wage, working hours, and
    workplace safety. This protects both
    you and your employees.
  • Draft employment contracts:
    Every employee should have a written
    contract outlining their job role, salary,
    working hours, and other terms of
    employment. This document is a
    legal requirement and sets clear
    expectations for both parties.
  • Consider pensions: Employers
    must provide a workplace pension
    scheme and automatically enrol
    eligible employees, although this can
    be deferred until the employee’s third
    month of employment. This is part of
    your responsibilities and is essential
    for UK law compliance. The employer
    also has an obligation to submit a
    ‘Declaration of Compliance’ to the
    Pensions Regulator.
  • Maintain records: Keep accurate
    records of employee details, pay,
    and tax information. This helps in
    managing payroll, and it’s also a
    legal requirement.


Legal obligations: Understanding
and complying with employment
laws is vital. This includes everything
from fair hiring practices to ensuring
a safe working environment. Noncompliance
can result in legal issues
and financial penalties. For instance,
you must obtain Employers’ Liability
(EL) insurance as soon as you become
an employer. The policy must provide
coverage of at least £5 million and be
issued by an authorised insurer.

EL insurance assists in covering
compensation costs if an employee
is injured or becomes ill due to their
work for you.

Failure to have proper insurance can
result in a fine of £2,500 for each
day you are uninsured. Additionally,
you can be fined £1,000 if you do
not display your EL certificate or if
you refuse to make it available to
inspectors upon request.

Financial impact: Becoming an
employer has financial implications.
You’ll need to budget for wages, NICs,
pensions, and possibly additional
costs like recruitment and training.

Management skills: Effective
people management is essential.
This includes hiring the right people,
training, and handling issues.

Good management fosters a positive
work environment and improves
employee retention.

Time commitment: Managing
staff takes time. From payroll
processing to addressing employee
concerns, be prepared for an increased
time commitment.


Increased responsibilities: You’ll be
responsible for your employees’ welfare,
including ensuring a safe and productive
work environment.

Regulatory compliance: You must
stay current with employment laws
and regulations. This includes keeping
records, filing returns, and ensuring
workplace compliance.

Payroll management: Managing payroll
becomes a significant part of your
routine. This includes calculating
wages, deducting taxes, and handling
employee benefits.

Employee management: You’ll need to
manage various aspects of employee
relations, from recruitment to performance
appraisals and conflict resolution.



Business growth: Hiring staff
allows you to scale your business
and take on more work, potentially
increasing revenue.

Skill diversity: Bringing in new
employees can introduce fresh
skills and ideas, enhancing your
business’s capabilities.

Workload distribution: Delegating
tasks to employees can free up
your time, allowing you to focus on
strategic planning and growth.

Employee loyalty: Providing jobs
can build loyalty and a strong
team culture, which is beneficial for long-term success.


Increased costs: Hiring staff means
additional costs, including wages,
taxes, and benefits. This can be a
significant financial commitment.

Administrative burden:
Managing payroll, compliance,
and employee relations adds to
your administrative tasks.

Risk of disputes: Employment
relationships can sometimes lead
to disputes, which can be timeconsuming
and costly.

Training and development:
Investing in employee training
and development requires time
and resources.


Managing staff, ensuring compliance with ever-evolving
employment laws, and handling payroll are just a few of your many
responsibilities. This is where the expertise of an accountant or
professional advisor becomes invaluable.

Professionals can set up and manage your payroll system, ensuring
that wages, tax deductions, and NICs are accurately calculated and
compliant with current laws.

They provide essential guidance on legal requirements, such as
drafting employment contracts and setting up workplace pensions,
and help you stay updated with legislative changes, such as those
coming into effect in 2024.

Additionally, accountants offer strategic financial planning, advising
on budgeting for new expenses like wages and benefits and
optimising tax efficiency. Their insights can help you make informed
decisions that align with your business growth objectives.

By leveraging their expertise, you can focus on your core business
activities, confident that your employer responsibilities are managed
professionally and efficiently. This support fosters a thriving work
environment and ensures your business’s long-term success.


Becoming an employer is a major step in driving business growth and success.
However, it comes with significant responsibilities and challenges.

By understanding the steps, legal requirements, and considerations, you can make
an informed decision that aligns with your business goals. Balancing the pros and
cons will help ensure you are ready for the transition and can manage the new
responsibilities effectively.

Remember, thorough preparation and understanding of your obligations are key to
becoming a successful employer.

If you’re considering becoming an employer,
contact us for support to ensure a simplified transition.

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