Deciding to become an employer is a significant milestone for any business. It marks a phase of growth and the need for additional support. Let’s take a look at what becoming an employer entails, the steps required and the key considerations and changes that come with this decision.
What does becoming an employer entail?
For many businesses, the transition to an employer signals growth and expansion. However, it also introduces new challenges and responsibilities.
Becoming an employer means managing staff, including hiring, ensuring their wellbeing, handling wages and tax deductions, and complying with employment laws.
What changes when you become an employer?
- Increased responsibilities: You’ll be responsible for your employees’ welfare, including ensuring a safe and productive work environment.
- Regulatory compliance: You must stay current with employment laws and regulations. This includes keeping records, filing returns, and ensuring workplace compliance.
- Payroll management: Managing payroll becomes a significant part of your routine. This includes calculating wages, deducting taxes, and handling employee benefits.
- Employee management: You’ll need to manage various aspects of employee relations, from recruitment to performance appraisals and conflict resolution.
Hiring and managing staff
When you decide to become an employer, one of your primary responsibilities is hiring the right people. This process involves advertising job vacancies, conducting interviews, and selecting suitable candidates. Businesses increasingly focus on hiring employees with the right skills who fit the company culture well. This approach helps reduce turnover and foster a positive work environment.
How to ensure employee wellbeing
Employee wellbeing has become a significant focus for UK employers. Recent legislative changes, such as the Employment Rights (Flexible Working) Act 2023, allow employees to request flexible working arrangements from day one. This flexibility can include part-time work, remote working, or compressed hours. Employers must respond to these requests within two months and provide valid reasons if they deny any request.
These changes highlight the importance of considering employee well-being and maintaining a supportive work environment.
Employee training and development
One critical consideration of becoming an employer that often gets overlooked is the importance of employee training and development. Investing in your employees’ growth enhances their skills and improves your business’s overall success. According to a 2023 study by LinkedIn, companies that provide extensive training opportunities see a 24% higher profit margin than those that spend less on employee development.
Training can range from onboarding sessions that help new hires understand their roles and company culture, to ongoing professional development programs that keep employees up-to-date with industry trends and technologies. It’s essential to create a structured training plan that includes mandatory and optional courses catering to the different needs of your workforce.
Moreover, building a culture of continuous learning can improve employee engagement and retention. A report by the Chartered Institute of Personnel and Development (CIPD) found that 94% of employees would stay longer at a company if it invested in their career development. Therefore, as an employer, prioritising training and development boosts productivity and builds a loyal and skilled workforce, driving your business towards long-term success.
How to handle wages and tax deductions
As an employer, you are responsible for calculating and distributing wages, including making the necessary tax and NI deductions. The Government has introduced significant changes to the National Minimum Wage (NMW) and National Living Wage (NLW) rates, effective April 2024. The top rate of NLW will now apply to workers aged 21 and over, representing the largest-ever cash increase to the minimum wage.
Ensuring compliance with these new rates is crucial to avoid legal issues and financial penalties.
Compliance with employment laws
Compliance with employment laws is a critical aspect of becoming an employer. The UK has seen a flurry of changes in employment legislation set to take effect in 2024. For instance, the Carer’s Leave Act 2023 entitles employees to one week of unpaid leave per year to care for a dependent, starting from April 2024.
Additionally, the Protection from Redundancy (Pregnancy and Family Leave) Act 2023 extends redundancy protection for employees on family leave to 18 months. Employers must stay updated with these changes to ensure they meet their legal obligations. Non-compliance can result in significant penalties and damage to the business’s reputation. Therefore, regular training for HR and management teams on the latest employment laws is essential.
Steps to becoming an employer
- Register as an employer with HMRC: The first step is registering with HMRC. This should be done before the first payday. You’ll receive an employer PAYE reference number and accounts office reference number, both of which are essential for managing payroll and reporting to HMRC.
- Set up payroll: Setting up a payroll system is crucial. This system will help you calculate and distribute wages and ensure correct tax and NICs. HMRC offers a free payroll tool called ‘Basic PAYE Tools’, but many businesses use payroll software which can significantly simplify this process.
- Check employment rights: Ensure you understand and comply with employment rights, including minimum wage, working hours, and workplace safety. This protects both you and your employees.
- Draft employment contracts: Every employee should have a written contract outlining their job role, salary, working hours, and other terms of employment. This document is a legal requirement and sets clear expectations for both parties.
- Consider pensions: Employers must provide a workplace pension scheme and automatically enroll eligible employees, although this can be deferred until the employee’s third month of employment. This is part of your responsibilities and is essential for UK law compliance. The employer also has an obligation to submit a ‘Declaration of Compliance’ to the Pensions Regulator.
- Maintain records: Keep accurate records of employee details, pay, and tax information. This helps in managing payroll, and it’s also a legal requirement.
Ask for help
Managing staff, ensuring compliance with ever-evolving employment laws, and handling payroll are just a few of your many responsibilities. This is where the expertise of an accountant or professional advisor becomes invaluable. Professionals can set up and manage your payroll system, ensuring that wages, tax deductions, and NICs are accurately calculated and compliant with current laws. They provide essential guidance on legal requirements, such as drafting employment contracts and setting up workplace pensions, and help you stay updated with legislative changes.
Additionally, accountants offer strategic financial planning, advising on budgeting for new expenses like wages and benefits and optimising tax efficiency. Their insights can help you make informed decisions that align with your business growth objectives.
By leveraging their expertise, you can focus on your core business activities, confident that your employer responsibilities are managed professionally and efficiently. This support fosters a thriving work environment and ensures your business’s long-term success.
If you’re considering becoming an employer, contact us for support to ensure a simplified transition! And don’t forget to follow us on LinkedIn for daily business and tax news.
