Hiring Your First Employee: Complete Guide for Trade Businesses
Employer NI, insurance, contracts, payroll—the entire playbook for UK trades hiring their first team member.
Real annual cost of a £30k employee
Salary + tax + NI + pension + holidays + admin
⚠️ Not Employment Law or HR Advice
Employment law, worker rights, and HR compliance are highly regulated and complex. This guide provides general information only and should not be used as a substitute for professional legal or HR advice.
Before hiring employees or engaging workers: Consult an employment solicitor or HR professional. Requirements for contracts, PAYE, National Insurance, holiday pay, minimum wage, and worker classification (employee vs contractor) vary by situation and change frequently.
Incorrect worker classification or employment practices can result in tribunal claims, HMRC penalties, and significant back-payments.
ACAS (Advisory, Conciliation and Arbitration Service): acas.org.uk
The Real Cost Breakdown
| Cost item | Annual amount |
|---|---|
| Base salary | £30,000 |
| Employer NI (13.8%) | £3,768 |
| Workplace pension (3%) | £900 |
| Holiday pay (28 days) | £3,360 |
| Employers' Liability Insurance | £150-300 |
| Payroll/accountant | £600-1,200 |
| Sick pay contingency | £580 |
| Tools, PPE, uniforms | £800-1,500 |
| Training & certifications | £500-1,000 |
| TOTAL REAL COST | £40,658 – £42,608 |
Reality check: A £30k salary really costs £42k+. Budget £14k beyond base pay for hidden costs.
Stack even more demand by pairing this with Local SEO for Trade Businesses 2026, How to Get Your First 10 Customers, and Customer Review Management Playbook 2026.
Employee Cost Calculator
Calculate the true cost of hiring an employee including all hidden costs
UK statutory minimum is 28 days
UK minimum is 3%
Only if not providing company vehicle
Annual Cost Breakdown:
Legal Requirements (Non-Negotiable)
Register as an employer (HMRC)
Must be done before first payday to get PAYE reference number.
Deadline: before first payment · Cost: Free · Penalty: £100/month if late
Employers' Liability Insurance
Minimum £5M cover. Protects if staff are injured at work.
Cost: £150-300/year · Penalty: £2,500/day without it
Written employment contract
Provide within 2 months. Include pay, hours, holidays, notice.
Use ACAS template (free) or solicitor (£200-500)
Workplace pension scheme
Auto-enrol eligible employees (£10k+ earnings). Minimum 8% contribution.
NEST is free · Penalties escalate quickly if ignored
Health & safety policy
Required if you employ 5+ people. Risk assessments for every job type.
Use HSE templates or pay consultants £300-800
The Hiring Process
Step 1: Write a Clear Job Ad
Include:
- Required qualifications (NVQ Level 3, Gas Safe, ECS, etc.)
- Years of experience + typical job types
- Salary range, hours, travel radius
- Van/tools provided or own vehicle needed
- Benefits (phone, overtime rate, training)
Step 2: Where to Advertise
Indeed (best ROI)
Largest UK job board. Pay-per-click or free postings.
Cost: £100-300 for 30 days
Facebook local/trade groups
Post openings to local community + trade forums.
Cost: Free
Supplier & customer referrals
Ask wholesalers, other trades, clients.
Cost: Free · best quality
gov.uk apprenticeship service
If hiring an apprentice.
Cost: Free + training subsidies
Setting Up Payroll
Set up PAYE (or outsource)
Use BrightPay, FreeAgent, Xero, or an accountant to run payroll + RTI submissions.
Create payslips & recordkeeping
Store contracts, holiday accrual, overtime, expenses for 3+ years.
Enrol in pension
Add staff to NEST/other scheme, issue letters, track opt-outs.
Schedule PAYE/NI payments
Monthly HMRC payments (22nd online). Plan cash flow accordingly.
Common Mistakes to Avoid
× Paying cash-in-hand
HMRC will backdate tax + fines. Not worth it.
× Calling employees “self-employed”
If they use your tools, hours, and clients—they’re employed. IR35 penalties are brutal.
× Skipping contracts
Tribunal cases average £8k. Contracts protect everyone.
× Hiring too soon
Need £150k+ annual revenue before you can comfortably support £42k employee cost.
When Are You Ready to Hire?
The 4-Signal Test
Rejecting £1k+ every week means you need capacity.
Proves you can absorb the £42k total cost.
Creates a buffer for slow spells or bad hires.
Idle staff destroy cash flow. Plan the pipeline first.
The Bottom Line
Hiring your first employee costs ~£42k/year but unlocks growth when you’re consistently hitting £150k+ revenue.
Get PAYE, insurance, contracts, and payroll right from day one. Don’t cut corners—HMRC will notice.
Success formula: £150k+ revenue + written contract + proper payroll + employers' insurance = sustainable first hire.
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