Hiring your first employee as a tradesperson in the UK

When does taking someone on make sense?

Most tradespeople hit a point where turning down work or rushing jobs feels wrong. You are at capacity, leaving money on the table, and you know that with an extra pair of hands, your work quality could improve. That is the moment to think seriously about hiring.

However, hiring a full-time employee is a significant commitment, both financially and legally. It's not just about wages. You take on responsibilities for PAYE tax, National Insurance, workplace pensions, holiday pay, sick pay, and employment law. Getting it right from the start matters. Mistakes can be costly, both in terms of money and time.

Employee or subcontractor?

Before anything else, be clear about the employment status of the person you are taking on. This is not just an admin question; HMRC actively investigates businesses that incorrectly treat employees as self-employed subcontractors to avoid PAYE and employers National Insurance.

A genuine self-employed subcontractor controls how and when they do the work, uses their own tools, works for multiple clients, and carries their own risks. An employee works to your direction, uses your tools, works primarily for you, and has set hours. If the reality looks like employment, HMRC will treat it as employment regardless of what the contract says. See our guide to subcontracting vs employing staff in the trades for more detail.

Legal requirements before you hire

Before your first employee starts, you must:

• Register as an employer with HMRC — do this at gov.uk/register-employer at least 4 weeks before your employee's first payday. You will receive a PAYE reference number.
• Set up PAYE — use payroll software to calculate income tax and National Insurance. Many tradespeople use free HMRC Basic PAYE Tools or simple payroll software like Moneysoft or Sage Payroll Essentials.
• Get employers liability insurance — legally required from day one of employment. Minimum cover is £5 million; most policies offer £10 million. Cost: £150 to £400 a year for a single employee in a trade business.
• Check the employee has the right to work in the UK — check original documents (passport, share code, etc.) and keep copies.
• Write a statement of particulars (employment contract) — legally required from day one. This must cover pay, hours, holiday entitlement, notice periods, and other key terms.
• Enrol in workplace pension — you must auto-enrol employees aged 22 to state pension age earning over £10,000/year in a workplace pension. You contribute at least 3% of qualifying earnings; the employee contributes at least 5%.

The real cost of an employee

The cost of hiring is significantly more than the wage. For an employee earning £28,000 a year in 2026:

• Gross salary: £28,000
• Employers National Insurance (15% above the secondary threshold of ~£5,000): approximately £3,450
• Employers pension contribution (3% of qualifying earnings): approximately £690
• Holiday pay (28 days statutory minimum including bank holidays): built into salary
• Employers liability insurance: £150 to £400
• Total employer cost: approximately £32,500 to £33,000 a year

That does not include the cost of sick pay (Statutory Sick Pay of £116.75/week for up to 28 weeks in 2026), any tools or PPE you provide, or training costs. Training new employees can be an investment in itself. Whether it is formal courses, in-house training, or time spent shadowing you, consider these as part of your budgeting process.

Employment contract basics

Every employee is entitled to a written statement of employment particulars from day one. You can find free templates on the Acas website at acas.org.uk. At a minimum, it must cover: job title, start date, pay rate and pay period, hours of work, holiday entitlement, notice periods, and any probationary period. A 3-month probationary period is standard for trade employees. During this period, you can dismiss without a full disciplinary process, but you must still act reasonably and fairly.

Consider carefully the terms and conditions you include. For instance, if you require flexibility in working hours, make this clear in the contract. If overtime is a possibility, how it will be compensated should be specified. Being upfront and clear helps avoid misunderstandings down the line.

Managing payroll as a small trade business

Running payroll is a monthly task. You must calculate gross pay, deduct income tax and employee National Insurance, add employer National Insurance, run the payroll, pay the employee and HMRC, and submit a Full Payment Submission (FPS) to HMRC via Real Time Information (RTI) on or before each payday. Missing an FPS can trigger penalties.

Use InvoiceAdept to manage your business income and expenses alongside your payroll software. Having clean records of your income makes it straightforward to account for wage costs as a deductible expense against your Self Assessment tax return.

Onboarding new employees

Bringing a new employee into your business is not just about paperwork and contracts. The onboarding process is critical in setting the tone for your working relationship. Start with a comprehensive induction. Introduce them to your business, your values, and how you operate.

Walk them through your safety procedures and ensure they are aware of all health and safety requirements. In the trades, safety is paramount, and it's your responsibility as an employer to ensure your staff are fully briefed and compliant.

Consider pairing them with a more experienced member of your team if possible. This can help integrate them into the workplace culture and provide them with a go-to person for questions and guidance. Regular check-ins during the first few months can help address any issues early on and ensure they are settling in well.

The role of technology in managing employees

Technology can greatly assist in managing your staff efficiently. Scheduling software can help organise work shifts and ensure that everyone knows their commitments. Time-tracking tools can be useful for monitoring hours worked, especially if you pay by the hour or need to track overtime.

Communication tools like Slack or Microsoft Teams can keep you connected with your employee, especially if they are working at different sites. These tools can also help in sharing resources, updates, and important information quickly and efficiently.

Additionally, consider using project management tools to keep track of jobs, deadlines, and responsibilities. This not only helps in managing your workload but also ensures that your employee is on the same page and understands the priorities.

Building a positive work culture

As your business grows and you start bringing on employees, fostering a positive work culture becomes increasingly important. A supportive and inclusive environment can lead to higher job satisfaction, increased productivity, and lower turnover.

Encourage open communication and feedback. Let your employees know that their opinions are valued and considered. Regular team meetings, whether formal or informal, can provide a platform for discussing challenges and sharing ideas.

Recognising and rewarding hard work and achievements can also boost morale. This doesn't have to be costly; sometimes a simple acknowledgment or a thank you can go a long way in making your employees feel appreciated.

Dealing with challenges

Managing employees will inevitably come with its challenges. From performance issues to interpersonal conflicts, it’s essential to address problems promptly and effectively. Having clear policies in place for dealing with such issues can provide a framework for resolution.

Training in basic human resources practices, or having access to HR advice, can be invaluable. This could be through a consultancy or online resources. Understanding employment law and best practices will help you manage disputes and disciplinaries fairly and legally.

Remember, the goal is to find solutions that work for both you and your employee, maintaining a professional and amicable workplace environment.

Conclusion

Deciding to hire your first employee is a significant step for any tradesperson in the UK. It requires careful planning, financial consideration, and an understanding of your legal obligations. By ensuring that you are fully prepared, you can make the transition smooth for both yourself and your new employee. This step can ultimately lead to more opportunities and growth for your business, allowing you to take on more work and potentially expand further in the future.