Can You Employ Staff as a Sole Trader?


When you own a small business, it can quickly become apparent when you need to consider hiring additional staff to help with the daily workload. Those days when you’re overloaded and just don’t have enough hours in the day you’ve probably wondered; can a sole trader have employees or do I need to become a limited company?

Can a sole trader have employees?

Well, the great news is yes, you are allowed to hire employees. You can employ staff without the need to setup a limited company as long as you inform HMRC. As the owner, you may operate the business alone but that doesn’t mean you have to work alone too.

It is worth assessing how you will afford to pay new starters before deciding to whether to hire people on a permanent, part time or fixed term contract basis.

If you’re familiar with organising aspects of you own accounting affairs, it can be slightly daunting to consider including someone else. That’s why it’s important to set them up correctly from the start for your own peace of mind.

How to hire employees as a sole trader

To setup as an employer, you’ll need to register with HMRC and get set up on PAYE. This is so you can pay National Insurance and income tax to HMRC on behalf of employees by deducting it from their wages. You will then have to start thinking about running payroll, employer’s National Insurance and employee benefits such as annual leave, maternity and sick pay.


There are 7 things you need to do when you're a sole trader employing staff

  1. Decide how much you will pay your new employee, it must be at least the National Minimum Wage.
  2. Check if someone has the legal right to work in the UK. This can be checked at
  3. Consider whether the field you work in will require an application for a DBS check for their role.
  4. Get employers’ liability insurance which is compulsory as soon as you become an employer.
  5. Send details of the job (including terms and conditions) in writing to your employee. You need to give your employee a written statement of employment if you’re employing someone for more than 1month.
  6. Tell HM Revenue and Customs (HMRC) by registering as an employer - you can do this up to 4 weeks before you pay your new staff.  
  7. Check if you need to automatically enrol your staff into a workplace pension scheme.

Once you’ve done the above, you can then focus on the employee induction and their job responsibilities. If you would rather focus solely on this you can leave the PAYE setup and ongoing payroll management to a professional service provider such as Blue Rocket Accounting!

If you would like to find out more about our managed payroll services, contact our friendly team today, we have packages that can be tailored to all sizes of companies.


What is PAYE and How Do I Set It Up? >>

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