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The First Time Employer – How to Knock the Nervousness from HR in SMEs!

Small businesses are the backbone of the UK economy. According to the Government there are 5.2m small companies in the UK in 2015. Around 76% of these are micro businesses. The increase in micro businesses is beneficial for gender equality, innovation and regeneration but large parts of the self-employed community are highly reluctant to take on a first recruit. Research carried out by the British Chambers of Commerce found that employment legislation including pension requirements, dismissal rules and sickness absence rules deter sole traders from taking on first employee

But if businesses are to grow and the business owner is ever to take any time off, you need to build your team.

Business owners are concerned about cost of employing and managing people without the guarantee of the income to cover it. There’s a risk that things won’t be done in the way that you want. If things go badly wrong you might end up in an employment tribunal – a recurring employer nightmare. For some, the risk of employing someone is a barrier they can’t get past. For others, it’s a challenge, but one they have to get over if they want their business to grow

Before you rush off to post your advert, ask yourself the following questions:

  • Do you want to stay a small business or do you intend to grow?
  • Do you really need to employ someone or could you do just as well with outsourced workers or agency staff?
  • Why do you need another pair of hands? Is there anything you could pass on a new employee and if so, what skillset do you need to look for?
  • Can you manage people? Warren Bennis famously (and accurately) said that managing people is like herding cats. What have your past experiences taught you?
  • Can you afford to recruit an employee? Consider the costs your business will incur as a result of employing someone. It’s not just salaries – add in taxes, NICs, holidays, the cost of uniform, training, equipment etc. Once you’ve got a realistic picture of the potential cost of a new employee, compare this with the benefits you think you’ll get, your work pipeline and cash flow. Will you be able to live with low (or no) profit in the short term or will this damage your business?

If you do decide to recruit your first employee, make sure you have all the correct documents and systems in place to comply with employment law. You can find a lot of information online, but outsourcing is often the quickest and most cost-effective way of discharging a business’s HR and employment obligations, as opposed to getting the hard pressed MD to add yet another job to his or her “to do” list. Make sure you set and communicate your procedures to all employees from day one.

Checklist for first time employers

  • Before you advertise your first vacancy, be clear about the type of person you’re looking for and the role you want to fill.
  • Ask probing interview questions that will help you determine the applicant’s skills. Build in testing to acquire more relevant information.
  • Only make an offer to someone who meets you minimum requirements.
  • Look for the right attitude. You can train in skills if they’re not there, but it’s much harder to encourage the right outlook.• Send an offer letter clearly setting out the position and terms of the job.
  • Make sure you get everything ready for the new employee’s start date.
  • Provide a short induction covering safety, toilets, kitchen area etc, work rules and a bit about the business and its customers. Give the employee his or her terms and conditions of employment early on. Tell the employee to come back to you with any questions if there is anything he doesn’t understand.
  • Inform HMRC that you are taking on your first employee so they can provide you with a PAYE ref number. Keep full records for payroll. Employees must be paid at least the National Minimum Wage.
  • Keep notes of the employee’s performance. Meet with your employee regularly to provide feedback, recognition of good work, guidance where necessary and encouragement. Keep communication channels open so the employee can discuss any issues with you.

Are you ready for your first employee? Take our HR quiz.

Russell HR Consulting provides expert knowledge in HR solutions, employment law training and HR tools and resources to businesses across the UK.

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