Employment and payroll
Employment contracts are required by law for each member of staff employed. A contract is an agreement which sets out the terms such as employment conditions, rights, responsibilities and duties of an employee.
As an employer, the tax and employment responsibilities for employees will depend on the type of contract and their employment status. Contract types include:
- Full time and part time contracts
- Fixed term contracts
- Agency staff
- Freelancers, consultants and contractors
- Zero-hour contracts
A person’s employment status helps determine their rights and their employer’s responsibilities. The main types of employment status are:
- Self employed and contractor
- Office holder
These depend on a person’s employment status. The main employment rights include:
- National Minimum Wage – this is the minimum pay per hour almost all workers are entitled to.
- Holiday pay, statutory sick pay, maternity pay, paternity pay.
Registering as an employer
You will need to register as an employer with HM Revenue and Customs (HMRC) online when you start employing staff or using subcontractors for construction work. You must register even if you are only employing yourself, for example, as the only director of a limited company.
As an employer, you normally have to operate PAYE as part of your payroll. PAYE collects income tax and national insurance from employment for HMRC.
You must get Employers’ Liability insurance as soon as you become an employer.
Employers must set up and provide a workplace pension for eligible staff as soon as they start work. Eligible staff are those who are aged between 22 and state pension age, earn at least £10,000 a year and normally work in the UK (this includes people who are based in the UK but travel abroad for work). You must pay at least 2% of your employees qualifying earnings into your workplace pension; this will rise to 3% in April 2019. Employees must also pay a percentage of their qualifying earnings into the workplace pension.