Sage : Hiring and managing employees in a small business

When you first launched your business, you probably did almost all the work yourself. However, if you really want to grow the operation, you'll need to think about hiring your first employee.

This is an exciting step and shows your company is going in the right direction. However, if you've never employed someone before, it does come with extra responsibilities.

Let's look at how to recruit employees for a small business and how to be a good boss once you've hired them.

Here's what we cover:

Guide to hiring for small business owners

But first… do you definitely need to hire staff?

Finance and budgets for hiring your first employee

How to recruit staff for a small business

How to manage staff in a small business

Dreaming of bossing your own business? Take our quiz to see how ready you are to take the plunge

Guide to hiring for small business owners

There's a lot to think about when hiring for a small business. This includes practical, financial, administrative and personnel management issues.

It might feel like a lot to take on board at first, but it's fairly straightforward in practice. It might be helpful to create a checklist of tasks you need to do when hiring someone.

Research from Sage shows that many people who dream of starting a business tend to overestimate the complexities of running a company and over-index on the personality traits that are required.

But when it actually comes to things like hiring staff, it's often easier than you might think.

But first… do you definitely need to hire staff?

If you're going through a busy period at work, taking on an employee might seem the obvious thing to do.

But in some situations, it might be less expensive to outsource work instead.

Freelancers often cost more per hour than employees, but if you only need someone for a short period of time it might work out cheaper overall.

You can find freelancers on websites such as Upwork and Fiverr.

Finance and budgets for hiring your first employee

It's also worth looking at the numbers to decide if you can actually afford to employ someone.

Review your current sales data and forecasts to work out your expected revenue for the next year (if you're using cloud accounting software, you can find this information quickly and easily).

That will tell you if it's going to be possible to pay someone a steady salary.

Costs of hiring staff include:

• Using a recruitment agency: They will typically charge around 25% of the employee's final salary.
• Job boards: Expect to pay between £50 and £300 for ads on sites such as Indeed or Monster.
• The salary: The median UK salary for full-time roles is £31,461 in 2021, or £11,234 for part time. Of course, you may pay more or less depending on the experience and skills of your employees. You can use job boards and websites such as Glassdoor to get an idea of how much similar roles are compensated.
• National Insurance: As an employer you need to make Class 1 National Insurance contributions for each employee. These are currently set at 13.8% of their total pay.
• Pension: If the employee is aged 22 or above and earns more than £10,000 per year, you need to pay at least 3% of their monthly salary towards a pension.

These costs can seem quite a lot at first.

But remember that the new employee is likely to help you generate income too - and may soon pay for themselves. It will also give you more time to look for new leads.

How to recruit staff for a small business

Most business owners will have been employees themselves in the past, so you'll already be somewhat familiar with the recruitment process.

Recruitment is a bit of an art.

It's about finding people who are capable of doing the job and who would also fit in and add something to the company.

Here's how to hire good employees for small businesses:

• Decide what the job will be: Think about what you want your new employee to actually do and create a precise job description and title. This should describe their responsibilities as well as desired skills, experience and education.
• Advertise the job: Use either a recruiter or a job board. After posting the job, you'll start receiving responses. Next, you need to read through all the CVs and create a shortlist of people you'd like to know more about.
• Interviews: Depending on the job and the number of applications you receive, you might want to begin by doing some short telephone chats to get a feel for each candidate. You can then narrow your list further to do in-person or video call interviews.
• Prepare for the interview: Interview preparation is one of the key skills for a good manager. Spend some time to think about the questions you'd like to ask the applicant. Job interviews normally cover:
  • The candidate's employment history - what jobs they've done in the past and why they're leaving their current position.
  • Any achievements they're particularly proud of.
  • Evidence of specific skills (such as a portfolio or certificates).
  • Getting a feel for a candidate's motivations and why they're interested in working for your company.
  • Questions from your candidate for you to answer. An interview is a two-way process, so expect them to ask you questions about what they will be doing and how your company works.
• Equal opportunities: When thinking about how to hire staff for small businesses, you have a legal obligation to interview candidates fairly. Employers must comply with equal opportunities legislation when it comes to inviting people to interview and hiring.
• Create a job offer: Once you find someone who would be right for the role, offer them the job. You may need to negotiate the salary, so go in with a 'ballpark' figure in mind. Besides the salary itself, they may also have certain expectations of benefits. Once this has been agreed, create a formal job offer, including a contract and a start date.
• The legal bits: When hiring your first employee, you need to register as an employer with HMRC, take out employer's liability insurance and create policies for disciplinary hearings, personal data management, and health and safety.
• Set up payroll: Most employees are paid monthly. So you'll need to set them up on your company's payroll and ensure they receive their salary on time. To make this process a lot more efficient you can use cloud payroll software.

Phew! So now you know how to hire employees for a small business. The next question is how to manage them.

How to manage staff in a small business

If you've just hired your first employee, you'll want to help them perform at their best, which will benefit you and your business.

Knowing how to motivate staff and thinking about the wellbeing of employees are some of the key traits of a good manager and employer. Fortunately, this can all be learned.

Here are our tips for a first-time manager of a small business:

Day one intros

On their first day, your employee will probably be feeling nervous. So, give them a big welcome, show them around the premises and help them settle in.

If they're working remotely, you can do this via a series of video calls, using the likes of Microsoft Teams or Zoom.

Share an induction pack

It'll be worth providing your new starter with an induction pack. This can feature details about the business, your employee's responsibilities and any key contacts they need to know about.

As your business grows and you have more employees, the induction process could involve time for new starters to meet the team and learn about what each person does.

Source employee details

You will normally need to get certain details from your new starter, such as their National Insurance number, bank details and other personal information including their address and an emergency contact. Store all this information in a secure folder.

Or, to make this easier, use cloud HR software. Using it means your employee can self-serve - meaning they can input all of this information into the software.

And the benefit for you?

You'll save time and there'll be less chance of errors occurring as your new starter will be adding their own details.

Provide clear expectations

Make sure your new employee knows what is expected of them.

Sit down with them (or via a video call if they're working remotely) early in their first week (on day one or two ideally) and explain their duties, including timeframes.

Think about training

Depending on the job and the employee's experience, you might need to provide them with some basic training so they can start doing the work.

And as your employee develops in their role, they may require further training and career development. This doesn't have to be expensive.

There are lots of ways that your employee can learn, from free courses and YouTube videos to online course offerings that may have a cost attached but won't break the bank.

And if you do need to spend a bit more money for courses, remember that the outcome will be an upskilled team member who can provide real value to your business.

Frequent performance reviews

It can be useful to check in with your new employee and find out how they're doing and give frequent feedback - especially in the first couple of months.

Having regular one-to-one meetings will help your employee to stay on top of their workload, ask for advice and feedback, and get the support they need to succeed in their role.

Find out about their professional ambitions

If you're thinking about how to motivate staff, ask your new employee about their professional ambitions.

You might find that there are certain projects they could take on that really align with their personal interests. This will help you get the most out of them.

Get to know them and develop a company culture

It can be really helpful to get to know your employee on a personal level and find out about some of their hobbies and interests.

Doing some non-work socialising together (be that lunch or after work drinks) is good for morale and means your employee feels personally invested in the company.

And if they're working remotely, it doesn't mean they have to miss out here - socialising can work virtually too.

Final thoughts on hiring your first employee

Recruiting your first hire is a really exciting time for any business. But it does also come with several important responsibilities and commitments.

Staying on top of these can really help your new starter (and your business) thrive.

Are you ready to be your own boss?

Dreaming of bossing your own business? Take our quiz to see how ready you are to take the plunge.

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