Outsourcing and subcontracting
If you’re not confident your business can support a permanent employee, or need some temporary short-term help, then using contractors and freelancers can be a lifesaver.
While it may be more expensive on an hourly basis than taking on an employee, you should be able to find a specialist in whichever roles you need help with (the IPSE member directory could be a good place to start). And that reduces the amount of training and instruction which might be required.
A lot of employment laws and regulations don’t apply when you’re hiring freelancers, so it’s less complicated to bring someone in. But you will need to ensure you comply with the rules regarding IR35 to avoid any potential issues. And you may have to register as an employer with HMRC if you’re using subcontractors for construction work.
And if your business suffers a sudden drop in demand, then you don’t have an ongoing commitment to pay wages and other staff costs. It’s always good to try to be upfront and honest with any freelancers or subcontractors if you’re going to be reducing their hours or pausing any work, especially if you hope to use them again in the future. But most will understand that revenue can ebb and flow over time, and will try to be flexible.
Aside from the higher hourly costs, the only downsides of freelancers compared to permanent employees is that they will typically only work in their specialist area, and flexible employment works both ways. They might have other client commitments once a project has ended, leaving them unable to work for you.
Laws and regulations when becoming an employer
When you become an employer, there are specific legal requirements and obligations that you will need to cover. These can seem intimidating, but aren’t any more complicated than running a solo business or outsourcing.
The first requirement is to register as an employer with HMRC. You may already have done this as the sole director of a limited company.
You’ll also need to decide how you’ll pay your staff, either by using a payroll provider or doing it yourself to operate PAYE. Salaries will need to be at least the National Minimum Wage or National Living Wage depending on the age and status of your staff. And you can find the latest figures from the UK Government, here, along with more guidance on how they are applied.
As an employer you’ll need to provide a minimum of 20 days holiday plus bank holidays (28 days total) for a full-time employee. You also need to offer the required amount of Statutory Sick Pay and Maternity Leave, along with providing a workplace pension after 3 months with a minimum contribution of 3% of the employee earnings. Staff are eligible if they’re aged between 22 and the state pension age, earn at least £10,000 per year, and normally work in the UK.
It’s also pretty much guaranteed that you’ll need to take out employer’s liability insurance, as there are very few exemptions (for example, a family business which isn’t a limited company). You’ll also need to make sure the certificate of your insurance is displayed to your employees physically or digitally. You can be fined up to £2,500 for any day which you don’t have suitable insurance, so it’s worthwhile getting qualified legal advice if you have any uncertainty.
You also need to ensure you comply with all relevant health and safety laws. While businesses with less than five or ten employees aren’t required to necessarily have a written policy or an accident record book, every workplace needs to have a suitably stocked first aid kit and adequate facilities such as toilets and running water. You can find detailed information on the Health and Safety Executive website.
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