Self-Employed Tax
Find out how to be tax efficient, read expert tips about Self Assessments and tax year end, and learn about the importance of digital record keeping.
The legal factors to consider when employing staff
- 23 Jan 2023
As your self-employed business develops, you may get to a stage where the work is too much for you alone and decide to consider employing a new member of staff. With someone else on board, your business can begin to expand and take on even more work.
While finding someone new to join your team can be an exciting process, there are some legal considerations that are worth familiarising yourself with firstly.
From creating a job description to interviewing candidates and them potentially leaving your employment in the future, there are laws to consider each step of the way. These laws help to ensure that the recruitment process is both fair and equal, without discrimination against protected characteristics. They also ensure that if an employee is injured during the course of their work with you, they can receive compensation. Without following these legalities, your business could face a fine or court case.
In this article, Markel Direct explain what exactly the legal implications of employing staff are and how to comply with employment law during the recruitment process and once you have an employee working for you.
Be honest in the job advert
When it comes to advertising the job, try to be honest rather than overselling the role. This will prevent any allegations from the employee that they were misinformed and also ensure that you employ the right candidate to further your business – not someone who will after a short period of time leave the role because it’s not the job they were led to believe it was.
As well as providing a job title for the role, include a full breakdown of the job avoiding a vague, generic or misleading job description. State the expected responsibilities so that everyone is clear on what is required of the new employee.
Consider your interview questions
While you may want to find out as much as you can about the interviewee, you’ll need to ensure that you treat candidates equally and avoid being biased. Inappropriate comments or asking personal questions that have no bearing on the job role, for example whether the candidate plans to have children, should also be avoided.
It’s also important to be aware of the laws around asking candidates questions about disability or health before a job offer has been made. Guidance from the government’s equalities office under The Equality Act 2010 states, “An employer cannot ask an applicant about sickness absence in previous jobs until the applicant has been offered a job”. Only after a job offer has been made can you ask an applicant about sickness absence in previous jobs. You can find out more information on this in the government’s guide on questions about health and disability during recruitment here.
Complete the relevant checks
When considering a candidate, always complete the right checks to make sure they are legally allowed to work in the UK. If the government investigate and discover you didn’t properly complete the necessary checks, your business can be fined up to £20,000 for each illegal worker.
If you knowingly employ an illegal worker, you could be jailed for up to five years and face an unlimited fine.
If the job role involves working with children, vulnerable adults or in a position of trust, carrying out a Disclosure and Barring Service check (DBS check) on the candidate is essential. Insurance policies often have this as a condition of cover, so completing this check is vital. Without it, your firm could be left uninsured.
Get the right insurance
If you have one or more employees, whether they are part time, full time, temporary or permanent, it is a legal requirement under the Employers’ Liability Act 1969 to have a minimum of £5 million employers’ liability insurance cover. This is to protect you financially against liability for injury or disease caused to an employee as a result of their employment with you. If an employee does sustain and injury or develop a disease because of their work with you, they could make a claim against your business. This is because, while someone is in your employment, you are responsible for their health and safety while they are at work.
Once you’ve purchased cover, your insurer will provide you with an employers’ liability insurance certificate. This will declare the level of cover you have and the business name covered under the policy. You may want to display this certificate in your office, where your employee can read it. Alternatively, if you and your employee work remotely, you can display the certificate electronically. If you can't prove that the certificate is displayed to staff, or are unable to show it to HSE inspectors when they request it, you could be fined up to £1,000.
Without employers’ liability insurance, the Health and Safety Executive can fine your firm up to £2,500 for every day that you are uninsured.
Review your tax duties
When employing someone new, you must check whether you need to operate PAYE (pay as you earn) on their earnings. If it's your first employee, you’ll need to consider registering as an employer with HMRC. If this isn’t your first employee, you simply need to make sure they are added to your payroll system. Bare in mind that if you don’t manage to submit payroll information on time, HMRC could enforce a late filing penalty. You can find out more on PAYE and payroll for employers here on the gov.uk website.
Are you an IPSE member? Enjoy 10% off* on professional indemnity insurance from Markel Direct. You can get a quote or sign up for a renewal reminder here.
*IPSE 10% member discount terms and conditions
The discount will be applied to the net policy premium before insurance premium tax is applied. All quotations provided will be subject to meeting underwriting and claims criteria acceptance. All cover will be subject to full policy terms and conditions which are available upon request.
This blog is just one of many resources IPSE provides for those seeking guidance and support on tax as a self-employed person.
To find it all in one place, visit our Self-Employed Tax advice page.
Self-Employed Tax
Tax and legal helplines
IPSE provides you with all the advice and guidance required to ease the burden of tax, delivered by knowledgeable and friendly taxation experts at Markel.
Markel Direct
IPSE have partnered with Markel Direct, a specialist insurer of contractors, freelancers, self-employed professionals and micro-businesses to offer a 10% discount* on contractor insurance to IPSE members.
Meet the author
More on