Becoming an employer

WHAT DOES BECOMING AN EMPLOYER ENTAIL?

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.

HIRING AND MANAGING STAFF

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.

ENSURING EMPLOYEE WELLBEING

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
environment.

TRAINING AND DEVELOPMENT

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.

HANDLING WAGES AND TAX DEDUCTIONS
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

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.

INCREASED RESPONSIBILITIES

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.

STEPS TO BECOMING AN 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.

KEY CONSIDERATIONS

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.

WHAT CHANGES WHEN YOU BECOME AN EMPLOYER?

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.

PROS AND CONS OF BECOMING AN EMPLOYER

HELP IS AVAILABLE

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.

WRAPPING UP

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.