Can a sole trader employ staff? 

What is a sole trader? Does it mean you have to work alone?

Sole traders are always self-employed but being a sole trader doesn’t necessarily mean you have to work alone. As a sole trader, yes you can employ staff.

What is a sole trader?

A sole trader is someone who works for themselves, runs a business themselves and is solely responsible for it.

You need to register as a sole trader if you have earnt £1,000 from self-employment in one financial year.

You can keep all the profits your business makes. After all, sole traders are essentially the business and many trade under their own name.

Can a sole trader employ staff?

Although a sole trader is individually responsible for the business, you can employ staff and do not need to set up a limited company. This is as long as you remain the sole owner of the business.

You will, though, need to register as an employer to HMRC and submit a PAYE registration form, so you can pay income tax on behalf of the employee. Make sure to register to HMRC before the employee’s first payday.

What to consider when taking on staff

If you are to employ a few helping hands, keep on top of your responsibilities and their rights. Once employed, the employee must be enrolled in a workplace pension by law and will be granted statutory employment rights.

You will need employers’ liability insurance, provide payslips, and manage payroll, though the last two here can be outsourced if you wish.

Here’s a checklist of what to consider:

  • Register as an employer with HMRC
  • Get employers’ liability insurance
  • Decide the employee’s salary – utilise a salary calculator such as Payscale to find the going rate
  • Conduct background checks, such as legal right to work in the UK and DBS checks
  • A written statement of employment if they are working for longer than one month
  • Enrol in workplace pension

See also: Salary is no longer enough for candidates – Here, Anna Dickson, product manager, NGA Human Resources, explores what motivates employees, as salary rises fall down the priority list

What legal documents do employees need to work in the UK?

As a UK business (even as a sole trader), it’s vital to keep in mind the documents any prospective employee will need. Employing someone illegally could mean a fine of up to £60,000 per employee, so it should be a priority when hiring.

In order to legally work in the UK, a employee must hold one of these:

  • British passport
  • British citizenship
  • Irish passport or passport card
  • European Economic Area (EEA) citizenship
  • Swiss citizenship
  • Work visa
  • Work permit

To quickly find out whether someone is allowed to work in the UK, you can use GOV.UK’s checker.

Staff vs freelancers

There are other options available, such as hiring freelancers, temporary workers or contractors. Freelancers will provide an invoice for their work, and you will not be required to provide employee benefits or file their PAYE returns. You will need to give gig workers a payslip, though.

Why employ staff?

With all the responsibilities that come with hiring an employee, you may be wondering why it’s worth employing someone over contracting work out.

With an employee, you will have reliable, ongoing support to your business. A contractor or freelancer may not always have the time or capacity to prioritise your work over their other assignments. They may not be as committed. And, if somebody else books their time, you could be left high and dry. Contractors may also be more expensive, whereas an employee can be trained to do tasks specific to your business.

More on sole traders

What business insurance do I need as a sole trader? – What are the main types of business insurance for a sole trader and what if I’m working from home?

Sole trade budgeting tips to avoid debt – As a sole trader, keeping an eye on your finances can sometimes prove tricky – particularly when you’re already snowed under with the day-to-day running of your business

How to scale your business quickly – What does scaling mean? How do you know when you’re ready to scale and how do you grow quickly?

Dom Walbanke

Dom Walbanke

Dom is a feature writer for Growth Business and Small Business, focused on matters concerning start-ups and scale-ups. He has also been published in the Independent, FourFourTwo magazine and various lifestyle...