Adam Bernstein explains what you need to consider when taking on your first employee.

Taking on an employee for the first time can be daunting. In addition to making sure that someone is a good fit for the business, there are numerous legal issues to address.

The process

First off, a new employer seeking to fill a vacancy must bear in mind that it is unlawful to discriminate against a prospective employee. 

Mark Stevens, a Senior Associate Solicitor at VWV, says that particular care should be taken when placing the job advert and when drafting its content: “Advertising for an ‘experienced mature employee’ is likely to amount to unlawful discrimination. The same applies to the words ‘youthful enthusiasm’, ‘drive’ and ‘motivation’.”

If a discrimination claim succeeds, an Employment Tribunal can award compensation for the injury to feelings suffered by the claimant. Mark warns that “compensation for injury to feelings is unlimited, so it is important to get this right”.

For some time, it has generally been unlawful for employers to ask potential recruits questions about their health within an application form or during an interview. Mark says this means that questions about a job applicant’s prior sickness record or absence should be avoided.

The job offer should be set out in writing to avoid potential confusion as to the employee’s duties and responsibilities further down the line. It should confirm any conditions to which the offer is subject, for example, receipt of satisfactory references. An employer can ask questions about health here.

Next, Mark warns that “it is a criminal offence to knowingly employ an individual who does not have permission to undertake the work for which they are employed”. 

He adds that employers should obtain, check, and keep copies of originals of the acceptable documents proving a right to work (see A penalty up to £20,000 per illegal worker and disqualification as a director awaits those ignoring the rules.

Some employers may want to check the criminal record of someone applying for a role. Previously known as a CRB check, this is now known as a Disclosure and Barring Service (DBS) check. A basic check costs £25 and takes up to 14 days to process. 

Contract terms

“There are,” Mark continues, “a number of things that an employer must, by law, include in a contract that must be given to the new employee within two months of their starting with the business.” It’s quite a list, and he points to a page on written statements at for detail.

He adds that it is also “important to set out any specific terms that are required under the contract, such as data protection obligations, who owns any intellectual property rights created during the employment, the employee’s confidentiality obligations, and the amount of notice due from employer to employee”. 

These might seem odd but, if the business grows, that employee might end up in a different role with new responsibilities.

Pay and tax

Employers must observe National Minimum Wage legislation. Mark points out that “there are different rates of minimum pay that apply to workers depending on their age. Currently, workers who are 25 or over are entitled to a minimum of £8.21 per hour. The government takes enforcement action against employers that do not pay the appropriate rates.”

At the same time, employers must provide a workplace pension scheme for eligible staff. Eligible staff are generally those who are aged between 22 and the State Pension, and earn at least £10,000 a year. From 6 April 2019, those percentages rose to 3% from the employer and 5% from the employee.

Another obligation requires firms to register as a new employer with HMRC when they take on new staff. HMRC will provide the business with a PAYE reference number which will need the new employee’s P45 to complete the registration.

The last step, and one that Mark says is important to not forget, is to obtain Employers’ Liability insurance as soon as the business becomes an employer. “The policy that you put in place must include a minimum level of cover – at least £5 million.” He cautions that failing to put this in place can be extremely expensive – an employer can be fined £2,500 every day that the correct insurance is not in place. 

Taking on an employee is a significant step, with various legal responsibilities being placed on the employer from the very beginning of the relationship. For this reason, it is important to carefully review and understand those obligations as early as possible