Five things every entrepreneur needs to know before hiring a team

If your business is doing well, you might be thinking about hiring – be that a permanent employee, a virtual assistant or a self-employed contractor.

But, unless you’ve got a background (or best friend) in HR, you may not know about your legal requirements in terms of hiring and managing an individual or a small team – and one slip-up can cost you dearly.

Don’t fret. Here are the five most important things you need to know about hiring your team. These tips will help to keep you on the right path and hopefully stop you from making a costly mistake.

1. Understand the term ‘employment status’

Hiring can be exciting, but nerve-wracking. Especially if it’s your first hire. It’s important to establish whether the person you are hiring is an employee, a contractor, or a worker. The legal term for this is the Employment Status and this is determined by the way you work with the person. 

There are big differences between them legally and also the employment rights and tax implications differ for all three.

To keep it super short:

✔ An employee is someone on your payroll that is dedicated to working for you. They would need to work set hours and times from an agreed location (all of which you choose) in exchange for a salary. And in exchange for this, they get lots of rights, such as sick pay, maternity pay, company equipment, and holiday.

✔ A self-employed contractor/freelancer is the other extreme, where they can offer you services, in exchange for a fee and they invoice you for the work they complete. Provided they deliver the brief, they can choose when, where and how the work gets done – and they can delegate this to others should they wish. They pay for their own equipment and training.

✔ A casual worker – is kind of in the middle. This is a short-term arrangement where they do ad hoc work and only get paid for the hours they work – perfect for retail or hospitality, managing seasonal trends and peaks in your business.

Need more info? Read my blog dedicated to this hot topic which explains the pros and cons of each.

2. Be super clear on why you are hiring

If you’ve got investment, or you’re working 18 hours a day, it can be easy to rush the hiring process. However, if you end up making a bad hire because you haven’t thought things through, it’s going to cost you.

There’s a lot I can share about this, but if you’re time poor, I’d recommend you dedicate an hour focusing on one thing: why you’re hiring. Most importantly, what exactly is the return on investment you want from hiring someone. Is it to free up your time, serve more customers (if so, how many and by when) or is it something else?

By focusing on the outcome that you want to achieve through the entire recruitment process, this can keep you laser-focused on what you need from the role and the person. This will help determine what specific skills, behaviours, values, knowledge or experience you require so you hire someone that’s game-changing for your business.

3. Protect yourself with a proper contract

You should put in place a contract for every person you hire, including contractors.  Yes, it can be tempting to download cheap or free contract templates when you’re hiring people but please don’t.

Contracts that truly protect you – and genuinely look after your interests – are more than one page and need to be written by a professional who understands employment law. If the worst were to happen, you want a contract that’s written in a way to give you choices about what to do. A contract can be a huge blessing in a sticky situation.

Without a proper contract, you could encounter unnecessary problems that take time to resolve such as who owns your Intellectual Property or what happens if the employee wants to go and work for your competitor. No-one wants the stress or time it takes to handle these situations in a court of law.

There are many different types of contracts, but in a nutshell, an employee needs an Employment Contract, a self-employed contractor needs a Contract for Services and an intern or person that works ad hoc hours will likely have a Zero Hours Contract.

If you don’t have them in place today, it’s never too late to introduce contracts to your business. Or indeed, improve upon what you already have.

I have all templates available in my shop, or I create bespoke versions if needed.

4. Get the right HR policies in place before you have a team

The reason why ‘people problems’ happen in business, is often because things aren’t written down and so misunderstandings crop up.

If you have robust HR policies in place, they make it super clear how everyone should behave and what happens when people don’t. These policies should cover everything from how to report sickness absence and how to request holiday, through to rules around personal relationships with clients or staff.

Policies help your staff to know what’s expected of them, and they make sure that everyone’s treated the same way. And more importantly, they better protect you from complaints and tribunal claims.

5. Be aware of what you could be sued for

If your employee believes you’ve acted unlawfully towards them, they could start the employment tribunal ball rolling.

Here are three most common reasons why this might happen:

❌ There’s been a breach of contract. This is where terms in an employment contract have been broken. For example, you’ve reduced an employee’s hours without their agreement.

❌ There’s been an unfair dismissal. This is when you’ve sacked your employee for an unfair reason – and/or you’ve gone about it the wrong way. The maximum penalty for this is £88,519.

❌ There’s been discrimination. This is where you or your staff have treated someone differently because of their gender, religion, age, sex, familial status, or disability. There is no cap on the fines for discrimination. This also extends to the interview process as people that don’t work for you can also sue you if they feel they didn’t get the job because of discrimination.

So, although I can’t promise you won’t ever get sued, it will be much less likely if you have a greater awareness of what you could be sued for so you don’t make a mistake that could have been avoided.

So, that’s the five things you need to know.

I hope that’s a helpful introduction into the world of HR. If you have any questions, feel free to drop me an email.

And if you want to check out my book on hiring your first employee, which is on my website, or find out how I can help you, then visit www.modernhr.co.uk. KTN have 10 free copies of my book to give away. To secure your copy, please email womenininnovation@iuk.ktn-uk.org by 25th August with no more than 100 words on how you would benefit from receiving it.

Mandy Hamerla​ is a virtual HR Director & Leadership Mentor, and creates HR and Hiring Strategies for ambitious small businesses in the UK. You can download HR templates, contracts and find out more here. Women in Innovation and Young Innovators community members can benefit from a 50% discount for all items using code: KTN50