How to Take On Your First Employee as a Tradesperson — A UK Guide
There comes a point where you are turning down work because there is only one of you.
That is usually when a tradesperson starts thinking about taking someone on. It is a big step — and the bit that catches people out is not the hiring, it is everything that comes after.
Here is what taking on your first employee actually involves in the UK, and what it really costs.
Employee or subcontractor — get this right first
Before anything else, be clear on what you are doing.
Taking on an employee means they work for you, you control their hours and how they work, and you pay them through PAYE. Taking on a subcontractor means they run their own business and invoice you, usually under CIS.
These are not interchangeable, and HMRC takes the difference seriously. Calling someone a subcontractor when they actually work like an employee can land you with back-dated tax and penalties. If you are unsure which is which, read subcontractor vs employed before you commit.
This guide is about taking on an actual employee.
Register as an employer with HMRC
Once you decide to employ someone, you need to register as an employer with HMRC. You should do this before the first payday — ideally a few weeks ahead, as it can take time to get your PAYE reference.
From then on, you run payroll: working out tax and National Insurance, paying it to HMRC, and giving your employee a payslip. Most one-person trades businesses use payroll software or get their accountant to run it. Doing it by hand is more hassle than it is worth.
Understand the real cost of an employee
This is the part that surprises people. An employee costs you a lot more than their wage.
On top of what lands in their bank, you are responsible for:
- Employer's National Insurance on their earnings above a threshold
- Pension contributions — you must auto-enrol eligible staff and pay in
- Holiday pay — full-time staff are entitled to paid leave
- Sick pay where it applies
- Their downtime — you pay them on quiet days too
A useful rule of thumb: budget for an employee costing meaningfully more than their headline wage once you add NI, pension and holiday. Make sure your pricing and pipeline can carry that before you hire — not after.
Get employer's liability insurance
This one is not optional. If you employ staff, you are legally required to have employer's liability insurance, usually with cover of at least £5 million.
It covers you if an employee is injured or becomes ill because of their work. Getting caught without it carries heavy fines. It is separate from your public liability insurance, which covers harm to customers and the public — you need both.
Put a contract in writing
From day one, an employee is entitled to a written statement of their main employment terms — pay, hours, holiday, notice and what the job is.
It protects both of you. A clear contract avoids the "I never agreed to that" arguments later, and gives you something solid to point to if things go wrong. You do not need a fancy solicitor for a standard trades contract, but do not skip it either.
Sort out the day-to-day before they start
The admin around an employee adds up fast. Before their first day, have a plan for:
- How you will track their hours and any overtime
- How you will record what they have worked on which jobs
- How you will handle their pay and payslips each month
- Who covers them on your insurance and any tickets or training they need
The businesses that struggle with their first hire are usually the ones that wing the admin. The ones that cope are the ones that had a system ready before the person turned up.
Start with a trial or a part-timer
You do not have to leap straight to a full-time permanent hire.
Many trades test the water with a part-timer, an apprentice, or a fixed initial period before committing. It lets you see whether the workload genuinely supports another wage, and whether the person is right, before you are locked in.
If the work is there consistently and you are still turning jobs away, that is your signal it is time.
The bottom line
Taking on your first employee is one of the biggest steps a trades business makes. The hiring is the easy part. The real work is the PAYE, the insurance, the contract, the pension and the simple fact that you now have someone relying on you for a wage every month.
Get the admin set up properly before they start, make sure your pricing covers the true cost of employing them, and the rest follows. Done right, your first hire is what turns you from a one-man band into an actual business.