Who'd be an employer?

Vast amounts of new legislation and ever tightening Inland Revenue rules about using subcontractors mean that the badly advised business is walking a tightrope. The minimum wage, working families tax credit, stakeholder pensions and an increasing number of penalties for late returns have increased the burden considerably.

An organised approach to employing staff is essential and first time employers should consider the following:

1. Once you have registered for PAYE you should consider purchasing payroll software or employing someone to carry out your payroll. Using the Inland Revenue manual PAYE tables is time-consuming and difficult. Sage Instant Payroll costs about £110 plus VAT and can be used for up to 10 employees
   
   
2. If your business has five or more employees (if you are a limited company, this includes the directors), talk to an Independent Financial Adviser about having a company stakeholder pension scheme. With good advice, this should not only result in minimal cost but also in tax and national insurance savings for employer and employee.
   
   
3. Get a standard contract of employment for your employees. This could save all sorts of problems in the future.
   
   
4. Make sure you have considered important regulations such as the National Minimum Wage and working time directive
   
   
5. Ensure your terms of employment explains the terms of holiday pay

Employed or self-employed is it worth taking the risk?

Many small businesses take on workers without considering any of the above. Typically, they pay someone on a self-employed basis. Therein lies the biggest risk of all. On a later PAYE visit the Inland Revenue may determine that the individual concerned was not genuinely self-employed but was really a shadow employee. If this happens then the amounts paid will be deemed to be net wages and a large tax and National Insurance bill will follow.

Taking Advice

Getting the right advice has never been more important.