Hiring your first employee is an exciting time for your business. It is always a good sign that your business is growing and demand is increasing.
It marks an important transition – from sole operator to employer – bringing formal legal responsibilities.
However, becoming an employer does come with new legal duties that require careful preparation.
Taking the time to get things right at the start will protect your business and hopefully set you up for success.
Decide what role your business needs
Before beginning the recruitment process, you should consider what role will genuinely help you and add value to your business.
Many business owners hire out of panic because they feel overwhelmed.
However, it is important to assess which tasks are consuming your time and what expertise you can benefit from long-term.
You must decide whether the role should be full-time, part-time or flexible and be cautious about employment status.
Incorrectly classifying someone as self-employed when they meet the legal definition of an employee can create tax liabilities and employment law risks.
Can you afford to employ someone?
Salary is only part of the costs of an employee.
Employees are entitled to at least 28 days paid annual leave if they are full-time, as well as Statutory Sick Pay (SSP) and other family-related leave entitlements.
There are also indirect costs such as recruitment expenses, equipment, training, payroll administration and employer’s liability insurance, which is legally required with a minimum £5 million cover.
How should you manage the hiring process?
You must have a fair recruitment process in place. Job advertisements and interview questions should focus on skills and experience and avoid discriminatory language or assumptions.
Decisions should be based on objective criteria and you should document your recruitment process in case any issues arise later.
Once you have selected a candidate, you should confirm the offer in writing and provide them with a formal contract.
What are the legal steps of hiring an employee?
If you have found the right employee for you, there are legal steps you must take before they start their employment.
You must register as an employer with HMRC, operate PAYE correctly and confirm their right to work status.
It is a legal requirement to check and retain evidence that your employee has the right to work in the UK.
Failure to carry out proper checks can result in fines and criminal liability in some cases.
Employees must receive a written statement of employment on or before their first day.
This should be a clear contract that covers pay, hours, holiday entitlement, notice periods, confidentiality obligations and disciplinary and grievance procedures.
From April 2026, the Employment Rights Act will come into effect. Your contracts should reflect the new day-one rights on Statutory Sick Pay (SSP), paternity leave and unpaid parental leave to stay compliant.
What are the risks of getting the hiring process wrong?
Even well-intentioned mistakes can expose businesses to significant financial and reputational risk.
Non-compliance with the recruitment process can lead to HMRC penalties, right-to-work fines, employment tribunal claims and reputational damage.
Even the smallest businesses are not exempt from Employment Law obligations.
Disputes over pay, holiday entitlement or dismissal can quickly become expensive and time-consuming and you should seek legal support to get the process right.
How can we support you when hiring an employee?
Proactive legal advice ensures compliance, protects your business and allows you to focus on sustainable growth.
With the upcoming Employment Rights Act approaching, you must be aware of your obligations when hiring and managing employees.
Our expert team can help draft and review your contracts and provide advice on any employee disputes if they arise.
We want to protect your business interests and provide you with peace of mind that you have taken the right legal steps to grow your team.
For further advice or support on the hiring process, contact our Employment Law team today.
