Hiring Your First Employee
Taking on your first employee is a significant milestone — and a significant responsibility. There are legal obligations to meet, costs to plan for, and a relationship to manage. Get it right and you gain a valuable team member who helps your business grow. Get it wrong and it can be costly and stressful. This pathway walks you through every step, from deciding whether you are ready to hire to getting your new employee settled in.
Before you start the hiring process, be honest with yourself about whether you are genuinely ready. Hiring too early is one of the most common and costly mistakes small business owners make.
The right time to hire is when you have consistent, predictable demand that you cannot meet on your own, and when the cost of the employee will be covered by the additional revenue they help you generate. If you are hiring to solve a cash flow problem or because you are hoping business will pick up, think carefully.
Consider the true cost of an employee. On top of their salary, you will pay employer's National Insurance (13.8% of earnings above the secondary threshold), pension contributions (minimum 3% of qualifying earnings), and potentially holiday pay, sick pay and other benefits. A £25,000 salary typically costs an employer around £28,000–£30,000 in total.
Also consider the time cost. Hiring, onboarding and managing an employee takes significant time — especially at first. Make sure you have the capacity to do this properly.
If you are not ready for a permanent employee, consider alternatives: freelancers, contractors or a part-time hire. These give you flexibility while you test whether the demand is there to justify a permanent hire.
Good to know
- Calculate the full cost of employment before committing — salary is only part of it
- Consider a part-time or fixed-term contract as a lower-risk first step
- Make sure you have enough consistent work to keep the employee busy — underutilised employees become disengaged quickly
Watch out for
- Hiring based on optimism rather than evidence of sustained demand
- Underestimating the time required to manage and support a new employee
- Not having the cash flow to cover at least three months of employment costs before you hire
Ready for the next step?
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