Taking on an employee, whether as an individual or as the owner of an SME, can be somewhat of a daunting experience the first time you go about doing so, as there are numerous points you have to take into account to ensure you remain on HMRC’s good side.
We should note that you don’t have to be in business to be an employer. You may work a salaried position at a large corporation, but if you employ a housekeeper, nanny, or any other form of domestic staff within your home, you will be considered their employer.
Below we’ve compiled a condensed list of the core responsibilities you have when taking on a new employee, in a basic order of consideration:
Registering as an Employer
If you’re about to take on your very first employee you must first register as an employer by heading over to: http://hmrc.gov.uk/payerti/getting-started/register.htm
This page will also tell you if you even need to register as an employer, by requiring you to answer a number of questions to determined your true status. If you’ve already started out in business and have taken on your first employee, be sure to tell HMRC as soon as possible to avoid a fine.
Paying Employers’ Liability Insurance
As their employer, you are deemed fully responsible for the health and safety of your employees while they’re at work.
For this reason, The Employers’ Liability (Compulsory Insurance) Act of 1969 requires all employers to have at least the minimum level of required insurance to cover any potential claims by current, or former employees.
Ensuring You’re Paying Reasonable Remuneration
In order for your new employee’s position to be deemed reasonable from a corporate taxes point of view, you must ensure you’re paying a reasonable rate of remuneration (including bonuses, pension contributions, and benefits in kind) that’s not seen to be above the general market level for a position of this kind, and the work being completed on your behalf.
Calculating and Deducting PAYE TAX and NICs
When you take on an employee you’re responsible for calculating and deducting Pay as You Earn (PAYE) tax and National Insurance Contributions (NICs) at each pay period (monthly or weekly periods being the standard).
You’ll also be required to pay employers NICs (Employer Class 1 NICs), whereby you pay NICs for each of your employees the same way they do, as well as making any statutory payments as and when they’re needed, and making student loan deductions should they become necessary.
Keeping Your Accountant Updated
Every point mentioned in this article can be handled by your accountant, including us here at Tax Agility, so long as you update them as and when you hire a new employee.
If you keep your accountant consistently updated, they will promise to always pay HMRC on time on your behalf, keep your records accurate and up to date, and send all PAYE and NICs information to HMRC every time you pay your employee(s).
Professional Advice When Hiring an Employee
To speak with a professional to discuss your upcoming responsibilities when hiring your first employee, and how we can ease the stress of these responsibilities, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no-obligation meeting.
This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.