Employing as a sole trader

If you’re a sole trader, and the time has come to take on additional help to manage the workload, you might be wondering if you’re able to take on staff, and if so, how to go about getting a reliable and trustworthy pair of hands-on board. Don’t fret! You can, indeed.

This article shows you how to go about employing as a sole trader.

Can Sole Traders Employ Staff Members?

There seems to be an unspoken taboo in the business world that you need to be a limited company in order to begin taking on staff. Nothing could be further from the truth!

Being a sole trader doesn’t mean you have to carry the load by yourself – it just means you’re a business owner for a company that isn’t registered as an LTD company. So, if the time has come to share the loads with another (or even a few!), and your budget permits, by all means, reach out and take on a team member or two. Your options in this department are:

  • Hiring an employee under PAYE conditions.
  • Hiring a freelancer/contractor.

How to Take On PAYE Staff as a Sole Trader 

So, now you’ve gotten the green light, the first thing you’ll need to do is register yourself as an employer with HMRC.

It’s advised to do this before you take on anyone, but as long as you’ve completed this by the time your employee’s first payday comes around, HMRC won’t find fault.

HMRC will then send you an Employer PAYE Reference Number (an ERN), which helps them to identify that your business is evolving. As well as this, you’ll be expected to complete an end of year PAYE return.

Please note: you won’t be able to register more than two months before you start paying a new employee. If you’re unsure of any areas within the process, be sure to discuss it with HMRC’s customer support team.

Other boxes to tick include:

  • Setting up a workplace pension scheme. In the UK, this is now a legal requirement for all businesses. You’re expected to pay into an employee’s pension, unless, for whatever reason, the employee wishes not to be a part of it.
  • Creating time to run your payroll – or hiring an accounting service to do it for you. If you opt to do it yourself, you’ll need to provide payslips, as well as manage tax, national insurance, and the aforementioned pension. You’ll also be expected to maintain all necessary records to report at the end of the tax year.

Employment Rights Under PAYE for Sole Traders

Employing a staff member under PAYE in the UK means they are entitled to statutory employment rights, including holiday pay, paid sick leave, pension contributions, and maternity/paternity pay.

Hiring a Freelancer/Contractor

Many businesses benefit more from hiring freelancers or contractors, depending on the business type and the help required. The main benefit of this is that freelancers and contractors do not qualify for statutory employment rights, therefore they need to manage their own taxes and will not be able to receive sick pay, holiday pay, and so on.

More information on being a sole trader can be found here.


So, myth debunked!

Sole traders do not have to carry the hurdle alone! You are more than welcome to take on staff members on either a PAYE or freelance basis, depending on which type best suits your business model.

However, if it is the former, you’ll need to register with HMRC for a PAYE number and make sure you follow all the legal requirements of pension schemes, and other statutory employment rights obligations.

Need a Helping Hand?

Managing all your monetary needs as a business owner can, at times, be time-consuming and overwhelming. Why not let us help? At Mercury Accounting & Financial Services Ltd, we will take care of your business’s financial endeavours to allow you the time to manage your other tasks. Find out more today. 

Need a helping hand?

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