Employing people: the options

Common scenarios where businesses review their staffing include:

• aiming to grow the business
• responding to increased workload whether temporary or long-term
• replacing an employee who has left
• bringing in new skills to your business that none of your existing employees have
• ensuring there is cover for your own role - both now and in future.

Before progressing with any recruitment, make sure that you have evaluated your existing staffing to ensure you are recruiting for the correct position. Consider whether you could make any other changes that would impact the number, type, and level of roles you need to recruit for and whether these changes are temporary or permanent. For example:

• training staff in new skills and supporting continuing professional development
• sharing work differently among existing employees
• improving the efficiency of the business, perhaps by rearranging tasks
• promoting existing staff
• asking part-time employees if they would consider full-time work
• offering overtime
• adopting flexible working arrangements, e.g. allowing some staff to begin earlier/later to provide cover for a longer part of the day
• re-organising the company structure.

Freelancers and contractors are workers who are self-employed or are employed by separate outside companies.

You may want to use freelancers or outside contractors for projects with a clear beginning and end (such as an external IT contractor to build your website) or for tasks where there is variation in the level of resource needed over time (such as a freelance PR consultant when you want a promotional push or need to react to media coverage).

This approach gives you flexibility without permanently increasing your head count.

In many cases they look after all their own income tax affairs and National Insurance contributions. But check that you won't be responsible for deducting tax and National Insurance from their payments.

People who are self-employed have different rights from employees. However, depending on the contract under which they are providing services, they may qualify as workers. Under these circumstances they would be entitled to workers' rights such as holiday pay. If you are in any doubt about a person's employment status, you should seek professional advice.

Freelancers and contractors still have a right to the National Minimum Wage. But if they are being paid by their own firms, this will not affect you.

As an employer you still have responsibilities for the health and safety of freelancers and contractors. You should also check whether your insurance is affected by having non-employees working on your premises. Remember too that you should not discriminate against anyone who carries out work for you, whether they are employed by you or self-employed.

Using agency staff can be ideal for emergency temporary cover in sectors such as hospitality, construction, retail, health, and childcare. It can cost more hour-by-hour than employing a temporary staff member directly, but a big benefit is that all of the administration is handled by the agency.

You usually pay the agency and the agency pays the worker. The rate the agency charges could include elements of National Insurance payments, holiday and sick pay, as well as an administration fee and profit margin.

It is the agency's responsibility to ensure agency workers receive the rights that they are entitled to.

You still have various legal responsibilities. Agency workers are entitled to access to the same on-site facilities as comparable employees and information on relevant job vacancies within your business.

After 12 weeks' continuous employment in the same role, agency workers become entitled to the same terms and conditions as comparable employees. This includes terms relating to pay, working time, night work, rest periods and breaks, annual leave and pregnant workers.

You should provide the agency with information on your terms and conditions so that the agency can ensure agency workers receive the same terms and conditions as if they had been employed directly by you.

You should do some research before using an agency to ensure you are happy with the agency's reputation. Any poor experience the worker has - such as not getting paid on time or the right amount - could reflect badly on your business.

As soon as you recruit employees, and whether they are full time or part time, you will have responsibilities as their employer.

The UK government has a checklist of actions you must complete when employing staff for the first time:

• pay employees at least the national minimum wage.
• undertake pre-employment checks such as making sure they have the right to work in the UK.
• undertake criminal record and disclosure checks if the type of role requires it, e.g. working with vulnerable groups.
• ensure you have employers’ liability insurance to protect against any claims of any harms an employee may come to caused by your negligence as an employer.
• a written statement of the main terms and conditions of their employment - the principle statement must be provided on their first day, and a wider written statement provided within two months.
• register as an employer with HM Revenue & Customs (HMRC) to set up a payroll, deducting tax and National Insurance contributions from your employees' pay and forwarding the money to HMRC.
• enrol staff into a workplace pension scheme if they are between 22 years old and the State Pension age, and earn at least £10,000 a year.

You will have obligations around statutory pay and/or time off for sickness, maternity, paternity, adoption, shared parental leave, parental bereavement, neonatal care, holiday entitlement, and time for public duties.

You must also:

• make sure the working environment is safe and secure and that you give the employee the appropriate equipment.
• treat your employees fairly and avoid discrimination.
• make 'reasonable' adjustments to reduce or remove the impact of physical features of your business if your employee has a disability.

There may be times when it's best for your business to take on an employee on a fixed-term contract. This is one which either:

• lasts for a specified time, set in advance
• ends with the completion of a specified task
• ends when a specified event does or does not take place.

For example, if you're a shopkeeper you may want to take on someone for just three months to cover the busy run-up to Christmas. Or you may wish to employ someone specifically to cover for another person who is on maternity, paternity, or adoption leave.

Fixed-term contracts give you the advantage of bringing in specific skills as and when they are needed.

It's important to remember that unless there are special circumstances that can be justified, you must treat fixed-term employees in the same way as comparable permanent employees. This means you must give them:

• the same pay and conditions
• the same or equivalent benefits package
• the same or equivalent pension scheme
• the same opportunity to apply for vacancies for permanent posts in the business.

Fixed-term employees also have access to the same employment rights as their permanent equivalents. You will need to make the same tax arrangements for fixed-term employees that you would for permanent employees.

Fixed-term contracts usually end automatically on the agreed end-date without the employer giving notice. But there are various considerations around renewing or ending contracts. For example, after two years, the employer must show there is a fair reason for ending the contract.

Any employee who has been on a fixed-term contract, working continuously for you for two years or more, has the same redundancy rights as a permanent employee.

Download our useful templates from our employer toolkit to help you with various aspects of recruiting and employing staff.