Starting and growing an agency: taking on your first employee

Creative at work

When your creative agency or professional practice gets to the point where you can’t handle the work without expanding your team, you know you’re heading in the right direction.

For the first time, everything isn’t on you. You can start to delegate, collaborate and take on bigger projects.

If your first hire is a specialist – an animation specialist, say, or a logo design expert – you can start to broaden your offer, too.

You might even, just about, perhaps, be able to start thinking about taking a day or two off here and to spend some time with your family.

Crucially, it should also give you the headspace to focus less on the doing and more on strategic thinking so you can keep up the momentum and keep the growth going.

As well as freeing up time, however you choose to use it, taking on staff also brings serious obligations, both moral and statutory.

Recruiting rules

In the first place, you need to make sure you recruit the right people using legally compliant processes.

For example, under the general data protection regulation (GDPR), you shouldn’t collect and keep information on applicants’ criminal records unless you’re required to by law because, for example, they’ll be working with vulnerable people.

This article rounds up some common mistakes, including:

  • failing to follow GDPR when collecting data on applicants
  • misuse of social media background checks
  • failing to screen contract and temporary staff.

Get this wrong and you could end up with the wrong person, meaning you’ll have to repeat the whole process again three months later.

Or, worse, you could turn someone down and then face a legal challenge over your reasons for giving the job to someone else.

I’d recommend working with a local recruitment consultant if you’re in any doubt and want to get this absolutely right. At the very least, do plenty of reading.

There’s no need to be overly nervous but recruiting shouldn’t be done casually, either.

Once you’ve decided to recruit, there are various things you have to do by law as part of the onboarding process.

Minimum wage obligations

First, when you’re setting salaries, make sure your new employee is earning at least the national minimum wage.

The creative industries in particular have a history of unpaid internships and low-paid introductory roles, with often younger staff paying their dues and learning from more experienced colleagues.

For April 2020, you must pay at least:

  • £8.72 per hour to anyone over 25
  • £8.20 to anyone between 21 and 24
  • £6.45 to anyone between 18 and 20
  • £4.55 to anyone under 18.

Apprentices, recruited formally through the Government’s apprenticeship scheme, are a special case: because they’re undertaking formal learning while working, their minimum wage is £4.15 an hour.

In creative industries especially, it’s worth considering an apprentice. You can find some great talent this way and it can also be really fulfilling – just make sure you’re willing to commit to genuinely supporting their development and not just treating them as cheap labour.

Register as an employer

You have to register yourself as an employer with the Government when you take on staff. HMRC will then assign you an employer PAYE reference number, which is the first stage in setting up a payroll system.

The process can take up to a week to complete but at the same time, you can’t do it more than two months ahead of time.

Many of Alchemy’s clients trust us to handle this process, so they can be sure the paperwork has been completed properly before the employee’s first pay day, as the regulations require.

Employer’s insurance

The minute you take someone on, the law says you have to take out employers’ liability insurance. It has to have a minimum £5 million of cover and must come from an authorised insurer.

This is to cover the costs of any compensation you might have to pay out if your new team member gets injured or gets sick as a result of their job.

That’s less likely in a marketing or design agency than on, say, a building site but you can’t be sure, and the law is the law.

If you don’t get insurance, you might get fined £2,500 for every day without insurance and get slapped with an additional £1,000 fine if you don’t have a valid insurance certificate when a government inspector asks to see one.

Pensions auto-enrolment

You are obliged to enrol all employees aged between 22 and the state retirement age and earning more than £10,000 a year into a workplace pension scheme.

You have to contribute the equivalent of at least 3% of your employee’s ‘qualifying earnings’ into that pension scheme.

They can choose to opt out but whatever you do, don’t actively encourage them to do that or you’ll be breaking the law.

Make sure you keep records of:

  • names and addresses of staff on the scheme
  • dates of contributions paid in
  • requests to join or leave the scheme
  • your pension scheme reference number.

Register the employee

You need to gather some more information about your new team member at this point.

Are they still paying off a student loan? Do they pay child maintenance?

Do they have a recent P45 from a previous role? If not, have they completed HMRC’s new starter checklist?

You need all of this to work out the employee’s tax code so they get paid the right amount, and the right deductions are made.

You have to let HMRC know about your new employee before their first pay day.

We can help with all of this as part of our payroll service. Speaking of which…

Running payroll

You’ll need to use payroll software to work out deductions for tax and national insurance (NI), and your NI contribution.

Ideally, that software will also automatically generate a payslip.

HMRC endorses some software packages that are free to businesses with only a few employees.

Finally, you report their pay and deductions to HMRC on or before payday. This will then trigger a bill from HMRC which you need to pay by the 22nd of the following month, or the 19th if you’re still paying by post.

Alternatively, you can delegate all of this to your accountant – which, obviously, I would recommend, but I really do think it’s the quickest, easiest way to make sure it gets done properly, without stress.

And you really don’t want to mess up payroll. If you’ve ever been paid late, or paid less than you were expecting, you’ll know how much distress it can cause to employees.

And there’s more

There are a few other things you need to do, too, which I won’t go into detail on:

  • Send details of terms and conditions in writing to the new employee.
  • Check if they have the legal right to work in the UK.
  • Find out if you need to apply for a DBS check.


Although the Government has relaxed some rules and regulations during COVID-19, all of the above still applies.

In fact, clear processes and exemplary record-keeping are more important than ever.

Carrying out job interviews or inducting new staff over Zoom or in a phone call isn’t ideal but that’s where we are.

It’s certainly preferable to staying in limbo until all the lockdown restrictions are lifted. Keeping your business moving and growing now will give you the advantage when lockdown finally lifts for good.

Talk to us about getting your payroll handled the easy way.

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