Tips On Becoming an Employer

Many small businesses operate on the basis that those working with them are self-employed. This enables a company to avoid the additional bureaucracy and effort of managing employees as it expands in the initial phase of its existence. Eventually, however, it is vital that a business acknowledges itself as an employer and enters into a formal relationship with its employees. This is necessary for legal and financial reasons, but in any event is also usually the best way to conduct a long-term relationship with those working for the business.

Financial Arrangements

The need to become an employer is triggered by an assessment of whether you are, in actual fact, responsible for employees rather than contractors. This is a legal test, but is usually quite obvious. If you have control over what someone does, as well as when and where they do it, you are likely to be their employer. Once this becomes obvious, you will need to take a number of steps in order to set yourself up to deal with your responsibilities. Full details of these can be found on the HMRC website, and most of them can be done online, but it is vital that you are in compliance with all of them.

The first step is to register as an employer with the HMRC, which for most small businesses can be done online. Following this, you will need to set yourself up as PAYE (Pay As You Earn) employer, so that you can deduct tax and national insurance from salaries. You will also need to keep careful records of these deductions, both for each employee over the year and for the business overall. These will generally need to be kept for the current tax year and the three preceding years, and will be needed when you are required to pay the money collected to HMRC during the year. Last but not least, you will also need to check that any new employee who comes to your business from outside the country is actually eligible to work in the UK!

Management Procedures

Financial and administrative procedures are only one part of becoming an employer. You also owe it to your employees to take responsibility for managing them effectively, and for setting up a business for which it is both pleasant and empowering to work. By doing so, you will be able to retain employees more easily, as well as seeing an increase in productivity due to a genuine desire to do a good job. Whilst every business is different, the most important step in effective management is normally to set out transparent processes for decision-making, and to stick to them. The most demoralising aspect of any poorly managed workplace is a lack of knowledge about how decisions are made, because this makes it impossible to influence them. As far as possible, you should attempt to give employees power over their immediate situation. You will certainly be rewarded with greater loyalty, and with an increase to your bottom line.

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