How to Hire Your First Employee as a Sole Trader

You're turning down work, finishing quotes at 10pm, and you physically can't be on two jobs at once. That's usually the moment a sole trader starts thinking about taking someone on. It's a big step, but done properly it's the cleanest way to grow your income without burning yourself out.

This guide walks through hiring your first employee in the UK — the legal bits, the real costs, and how to set things up so an extra pair of hands actually makes you money rather than headaches.

Are You Actually Ready to Hire?

Before you post a job advert, be honest about whether the work is there. A new employee needs paying every week or month whether or not the phone rings.

A rough test: you should have enough steady, booked-in work to keep a second person busy for at least the next three to six months. One good month isn't enough.

Run the numbers first:

• Add up the wages, employer National Insurance and pension contributions you'd be paying.
• Work out how many billable hours that person needs to do to cover their own cost, plus a margin.
• Check you can cover their wage in a quiet month, not just a busy one.

If you're not sure your pricing leaves room for staff, it's worth getting that right before you hire. Our guide on pricing a job for profit covers how to build labour cost and margin into every quote.

Employee, Subcontractor or Apprentice?

You've got a few options, and they're not interchangeable.

• Employee — on your payroll, you control their hours and how they work, you provide tools and pay them through PAYE. Most stability for you, most obligations too.
• Subcontractor — self-employed, sends you invoices, works to their own methods. Less admin, but you don't get the same control or loyalty, and you must apply the rules correctly so HMRC doesn't reclassify them as an employee.
• Apprentice — a longer-term play where you train someone up. Often part-funded and cheaper, but it's a commitment.

This article focuses on taking on an employee. If you'd rather start with a self-employed pair of hands, read our managing subcontractors guide. And if you're weighing up training someone from scratch, apprenticeships are worth a look.

Tip: Getting the employee-versus-subcontractor distinction wrong is a common and expensive mistake. If someone works set hours, uses your van and only works for you, HMRC will likely treat them as an employee — regardless of what your paperwork says. Check the current employment-status rules before you decide.

The Legal Steps to Employing Someone

Once you've decided to employ, there's a clear set of things you must do. Check the current official guidance on GOV.UK as you go, because thresholds and rules change.

1. Register as an employer with HMRC. Do this before your new employee's first payday — it can take a little time to come through, so don't leave it to the last minute.
2. Set up PAYE payroll. You'll report pay and deductions to HMRC, usually each time you pay your employee. Most people use payroll software or an accountant.
3. Check they have the right to work in the UK. You're legally required to do this and to keep a record.
4. Get employers' liability insurance. This is a legal requirement once you have staff — fines apply if you don't have it. It's separate from your public liability cover. See do you need public liability insurance for how the different policies fit together.
5. Pay at least the National Minimum or Living Wage. The correct rate depends on age — check the current figures.
6. Sort out a workplace pension. Under auto-enrolment you'll usually need to enrol eligible staff and contribute.
7. Give a written statement of employment. Your employee is entitled to the main terms in writing from day one.

None of this is optional, and it's a lot less painful if you set it up properly at the start than if you try to fix it later.

What It Really Costs

The wage is only part of the picture. As a rough guide, budget for the headline pay plus these on-top costs:

• Employer's National Insurance on earnings above the threshold.
• Pension contributions — your minimum employer share under auto-enrolment.
• Holiday pay — most full-time staff are entitled to 5.6 weeks of paid leave a year, so that's paid time when they're not earning you anything.
• Tools, PPE, phone, fuel and van costs if they're out on the road.
• Training and tickets relevant to your trade.

A useful way to think about it: a new employee usually costs you noticeably more than their headline wage once you add everything up. Build that full figure into your day rates so the work they do still leaves a margin. If you're not confident your rates stack up, calculating your hourly rate is a good place to start.

Setting Them Up to Earn From Day One

The fastest way to lose money on a new hire is to have them stood around waiting for instructions, or driving back and forth because details got lost in a WhatsApp thread.

This is where having a proper system pays off. Instead of relaying every job by phone, you can assign work, share the address, customer notes and what needs doing, and see when it's been completed — all in one place. A job-management platform like Gaffer lets you push jobs straight to your new employee's phone, so they can turn up prepared and you can see progress without micromanaging.

A few things that smooth the first weeks:

• Write down how you like jobs done — your standard for quoting, finishing and tidying up.
• Set clear expectations on timekeeping, customer manners and reporting back.
• Give them everything they need to get paid: clear job sheets, photos and sign-off, so invoices go out fast.

When the admin is sorted, your employee spends their time on the tools rather than chasing information. For more on freeing yourself up, see onboarding a new engineer fast.

Don't Lose Your Grip on the Money

More work going out the door means more invoices to raise and chase. The risk for a growing one-person business is that cash flow gets messier exactly when you're busiest.

Keep on top of it by invoicing promptly, the day a job finishes ideally, and chasing late payers with a polite, automated nudge rather than an awkward phone call. Our guide on getting paid faster covers the small changes that make the biggest difference. With a second person earning, you can't afford to let payments drift.

FAQs

How much work do I need before I hire my first employee?

As a rough guide, you want enough steady, booked-in work to keep someone busy for at least three to six months, and enough margin in your pricing to cover their full cost — wages, National Insurance, pension and holiday pay — even in a quieter month.

Do I need to register with HMRC to hire someone?

Yes. You must register as an employer with HMRC, normally before your new employee's first payday, and set up PAYE to report their pay and deductions. Registration can take a little time to come through, so don't leave it until the last minute.

Do I need special insurance to employ staff?

Yes. Employers' liability insurance is a legal requirement once you have employees, with fines for not having it. It's separate from your public liability cover, so check your policy includes both.

Can I just pay someone cash to help out?

No. Paying someone off the books leaves you exposed to HMRC penalties, no insurance cover if they're hurt, and an employee with no proper contract. Even casual help should be set up correctly through PAYE or as a properly engaged subcontractor.