Setting up as an employer in the UK

As an employer, you need to consider different information, rights, and documents before you start employing staff. This article will explain how you can set up your company as an employer in 5 simple steps.

1. Understanding the costs for the company

 

Before you take on employees, you will need to check what costs you will bear. Below, find out more about the main costs regarding:

 

 

  • National Insurance: as an employer you can pay up to 13.8% of gross salary as employer contributions, click here to know exactly how much you will pay;

  • Statutory Sick Pay (SSP): when an employee falls ill, you will have to pay £96.35 a week for up to 28 weeks, however you can claim it back from HMRC, find more here;

  • Statutory Maternity Leave: as an employer you need to pay up to 90% of the employees’ weekly earnings before tax for 6 weeks and £151.97 or 90% of their weekly earnings for 33 weeks (whichever is lower) with tax and national insurance deductions, however, you can claim back these costs from HMRC. Be aware that eligible employees can take up 52 weeks maternity leave;

 

  • Statutory Paternity Leave: as an employer you need to pay £151.97 or 90% of the employees’ average weekly earnings (whichever is lower) for up to 2 weeks, however, you can claim back these costs from HMRC.

 

 

2. Register as an employer and set up PAYE

 

To become an employer, you will need to register as an Employer with HMRC. Once you registered you will get a PAYE reference number via post to the company’s address. PAYE is an HMRC system that will allow you to pay tax and national insurance for your employees. Note that you must register even if you are only employing yourself (as the only director of a limited company, for instance). 

 

3. Check your responsibilities around workplace pensions

 

As an employer you must provide a workplace pension to all eligible jobholders. Employees are eligible if they meet certain conditions and must be enrolled within 3 months after their employment start. As soon as you enrol your employee in a workplace scheme you must tell them:

  

  • The date they were added to the pension scheme;

  • The type of pension they are in;

  • The costs you will contribute with and how much they will have to pay;

  • How to leave the scheme in case they want to;

  • How tax relief is applied to them.

4. Get Employer’s Liability insurance

 

As soon as you become an employer you must get Employer's Liability insurance which must cover you for at least £5 million and come from an authorised insurer. If you are under these conditions and are not insured, you can be fined up £2.500 every day. Note that you do not need insurance if you are employing either a family member or someone who is based abroad. Getting EL insurance with providers like Simply Business or Superscript is very easy and will only take you 5 minutes.

5. Develop a safe workplace for your employees 

 

As an employer you need to make sure your workplace environment if free from discrimination and has the appropriate adjustments for people with disabilities or mental health conditions. Besides you must keep employees’ data safe, secure and up to date and be aware of fire safety rules in the workplace. If you are operating from a commercially leased office, your landlord should taken care of fire safety but you should confirm this.

What's next?

Now that you have become an employer, you should register for an online PAYE tax account.