Can Sole Traders Hire Employees? A Brief Guide

Starting a small business as a sole trader is exciting and challenging, but it can also be stressful in some aspects. If you are experiencing good business growth, you might need an excellent staff to help you manage your chores.

Employing trained staff can help you grow and propel your business toward success. However, the critical question is whether employing staff can help with business growth. We will clear up your confusion through this guide. Also, we will explore how hiring employees as a sole trader can help you with legal responsibilities and how it will make the process slightly more accessible for you and your employees.

Navigate directly to your desired section by clicking the links below.

• Who is a Sole Trader?
• Employing Staff as a Sole Trader: Is it an Option?
• Stepwise guide on how to Employ Staff as a Sole Trader
• What are the Considerations for Employing Staff as a Sole Trader?
• Are You Ready to Hire New Employees?

Who is a Sole Trader?

Before discussing details, we must clarify who a sole trader is. In the UK, a sole trader is a self-employed business owner responsible for any business profits and losses. This means that sole traders make decisions independently and are entirely responsible for debts and liabilities incurred by the business.

Employing Staff as a Sole Trader: Is it an Option?

Sole traders can have employees as long as they remain the sole trader of the business. If you want to hire employees as a sole trader, you do not need to set up a limited company.

However, you are responsible for registering as an employer with HMRC and submitting your PAYE registration form. The following section will cover the steps you must take as a self-employer.

Stepwise guide on how to Employ Staff as a Sole Trader

Step #1

Register as an Employer with HMRC
When you hire employees as a sole trader, you must register as an employer with HMRC and operate a Pay As You Earn Scheme. That means deducting income tax and national insurance contributions from your employees’ salaries and paying them to HMRC.

To initiate the process, you must register online with HMRC before the first payday. After that, HMRC will take action and send your employer your PAYE reference number. Your employer will take up to fifteen days to get their PAYE reference number. Also, you can only register up to two months before paying your first employee.

Step#2

Setup Employment Contracts For Your Employees

Establishing a written employment contract highlighting your employees’ rights, responsibilities, and terms of employment is very important.
This contract outlines wages, working hours, holiday entitlement, and notice periods.

Step # 3

National Minimum Wage Payment

You must pay your employees the National Minimum Wage and the National Living Wage, depending on their age and circumstances. Failure to follow minimum wage laws can lead to severe penalties and fines. So your employees must be adequately paid. This is crucial no matter how much you earn.

Step #4

Seek Professional Advice When Needed

As an employer, the duties of fulfilling your legal responsibilities cannot be overstated. If you are a newbie and hiring new staff as a sole trader, consult a professional accountant or tax consultant who will give you the details and get off to the best start possible for new hires. You can get help from our dedicated accountants, who will ensure you meet all legal obligations.

What are the Considerations for Employing Staff as a Sole Trader?

Other than the legal requirements listed, there are various practical considerations you need to take when hiring employees for the first time.

Listed below are the things you need to consider before hiring new persons.

Total Cost of Employing Staff

Hiring new employees requires an additional financial commitment, so knowing if your business can afford the extra cost is essential. Different factors, such as salaries, employer National Insurance contributions, pension contributions, and other employee benefits you choose, should be considered to determine whether it is a suitable option.

Recruitment and Training

Recruiting new staff is a complex process. Instead, it demands time, effort, and resources. From advertising job posts to conducting interviews, it is a time-consuming task. Further, you have to train the new hire with professional training. Being a sole trader, you must have sufficient time and resources to align your recruitment and employment process.

Initiating a Stronger Bond in Teams

As a sole trader, your business is the image of your personality. Hiring different employees means inviting others to share their vision. Creating a solid team culture based on trust, communication, and respect is vital for building a positive work environment. Additionally, creating a new joiner handbook for the newly employed person will be more beneficial.

Are You Ready to Hire New Employees?

A sole trader owns the right to employ staff in the UK, and the process is relatively easier and simpler. It becomes more accessible with help from a professional accountant. However, it is necessary to implement all legal requirements and practical considerations when hiring employees.
Complying with employment laws and carefully planning and fostering a positive working environment as a sole trader is extremely exciting in any business journey. So, if you want to make a move and hire the best staff as a sole trader, build strategies thoughtfully and make your business thrive in the competitive business arena.