Small Business Employment Requirements

Small businesses that have expanded beyond the point of being a sole trader or a partnership often find it difficult to expand without taking on employees. Of course, scaling up a business so that it can be repeated and grow is what it is all about for many small business owners. However, stepping beyond what is known into the unknown can be a bit of a headache for many. In terms of what the law says you must do as a small business owner taking on staff, there are some things that you need to know. If you just get on with it and worry about the fine details later, then you could leave yourself open to problems down the line. Employment law, contracts, recruitment, payroll and dismissal procedures are all things that you need to think about before you get going. Having said that, many of the things that you need to know about are little more than common sense, so you should not feel constrained in employing people by excessive bureaucratic measures.


Before you employ someone, it is essential that you try to recruit the right sort of person in the first place. Get it wrong and you are surely storing up problems for the future. Poorly performing employees can cost your business dearly, but good ones can be a valuable asset which helps it to grow and succeed. Take time in the recruitment process to select the best candidate. Always check references, qualifications and professional courses that the candidate claims to have been on.

Remember that the law states that an employer may not discriminate between candidates due to grounds of age, race, sex, marriage, disability, sexual orientation, religion or belief. Indeed, all stages of the recruitment process must treat both sexes and all racial groups with equality. If you don't do this, a disgruntled candidate could use the law as recourse against you.

Record Keeping

The law requires that employers keep proper records of all employees. If you don't then the Inland Revenue will certainly take a keen interest in your business' financial affairs. Keep personal details in a secure place. You need the name, address, gender, date of birth and Nation Insurance number of each and every employee. On top of this you must have records of any job-related disability and details of employment, for example job title, basic pay, overtime records and the date that employment began.

A Contract Counts

When it comes to the law, the central document between an employee and their employer is their contract. This is a legal document therefore, which both parties need to have signed and have kept a record of. A contract should be made when an offer employment is accepted and it should detail the role and job functions expected of the employee as well as what they can expect in return. You should, for instance, always state in the contract the salary level as well as when it will be paid. Don't forget to include holiday entitlement, too. You should also include details of any disciplinary procedures you might want to later call upon. In some cases, a verbal contract is enough for a short term role. However, for apprenticeships and longer term employment, the law demands that a written contract is made.

Contact law means that both parties must act 'in good faith' towards the contract they have both agreed to. Nonetheless, UK law can sometimes override things that are written in contracts. This means that statutes - that is, Acts of Parliament - cannot be overlooked by carefully worded contracts. Employees do not give up their statutory rights simply because they have signed a contract which says something to the contrary.


Pay is a crucial area for any employer-employee relationship. You must pay employees in accordance with their contract and a late salary could result in the employer being in breach of their contract. Employers must remember that UK law requires them to pay wages at the minimum level. This level varies, depending on the age of the employee.

Employers must also remember that any pay they make to their employees is subject to tax law. This means that employers have to deduct income tax from their employees' pay packets and forward the correct sums to the Inland Revenue. Equally, they must also do the same for National Insurance contributions. The calculations depend on how much has been earned, but there are plenty of third party payroll firms which can do this sort of work for small businesses.

Further Reading:

Employer Responsibilities and Employee Rights