If you are building your team for 2022 you are bound to be cautious after all the last couple of years has thrown at us. We speak to business owners and managers every day who are weighing up the pros and cons of taking on an employee or a freelancer.
If you are overworked and need more people you simply have to make a decision about what is the best way for you to expand your business.
Misunderstandings – employees and freelancers
The biggest misunderstanding comes from believing that freelance workers have no rights so you can hire and fire without consequences of any kind. Freelancers working in the UK and the EU do have legal rights and contractual rights depending on what contract you are both on.
The next misunderstanding comes from believing that employees in the UK have so many rights and costs associated with them that it is too scary to take them such a big step and commitment. This too is not necessarily so, since the rights of employees with less than two years of service are not that different to freelance workers (as opposed to business owners).
Which do you choose?
Key considerations for taking on employees
Employees earning less than £120 a week do not get any national insurance-related benefits. You do not pay employers national insurance. If you are not clear about national insurance thresholds, this link will give you more information. You don’t have to pay employers national insurance until your employee earns the equivalent of £184 a week.
Employees are entitled to statutory holidays. This will add to the cost of employing them. This comes to 5.6 weeks including bank and public holidays. This is keyed to their working week, not a calendar week.
Unfair dismissal and redundancy
Employees accrue unfair dismissal and redundancy rights after two years with you. In the middle of the ‘great resignation,’ this may not be the biggest thing on your mind.
Paying someone is a big commitment
Can you commit to paying someone regularly? Employees get paid before the boss (or should do) so it is a really important consideration. Many of our clients have concerns about promising to pay someone months ahead when cash flow is uncertain.
After one month’s service, your employee is entitled to one week’s notice. Many new employers copy their old contract of employment and accidentally make this a far longer period. This may be wise if you are asking someone to leave a highly paid job to join your team but this is not always necessary. It is not a good idea to owe someone a long period of notice if you simply do not get along.
Wrongly worded trial periods trigger a fixed-term contract. This means the whole trial period needs to be paid if things don’t work out. Be careful about your exact offers. Many clients sadly decide someone is unsuitable after the trial period has ended. This is often because the trial period is the wrong length!
Zero-hours contracts have attracted much criticism and have often been used by large employers who totally fail to commit to their regular workforce. However, they do have a place if you are taking on someone who is not leaving regular employment for zero hours and if you are increasing your headcount and are unsure of how much work is needed. Used wisely and temporarily they can be a springboard to more regular employment.
However, there are restrictions on how you can ‘restrain’ a zero-hours worker from working elsewhere. This means that zero-hours contracts are not suitable for all your options. And if you need someone to definitely be available at particular times, then zero hours is not for you.
Part time contracts
Part-time contracts can give you both a halfway house between zero hours and full-time work. These will normally attract people with family commitments or other jobs, so you should not assume that all part-timers go on to become full-time employees. You can at least contract them not to work for your direct rival for a specific period of time, if your business legitimately needs that kind of protection. Part-time contracts can be used within a job share arrangement to give you access to candidates who want to hold down a more senior role but are not currently available full time.
Key considerations for using freelancers or service businesses
Calling someone self-employed does don’t make it so (for tax or employment law purposes) and you should not assume that labelling or contracting someone self-employed is the end of the matter. This type of arrangement is most suitable for:
Skills you don’t need all the time
This is often the way web designers, bookkeepers, social media managers and virtual assistants work – along with digital marketers, PRs and more. They provide a specific skill set and service that is not ‘core’ to your home business team and they have very specific skills you are unlikely to be able to teach to your own employed team without a great investment of time and expenditure.
Roles that need insurance to protect you from mistakes
If your accountant or bookkeeper makes a mistake they will usually carry insurance to sort things out if things go wrong. But someone employed by you will not. There are great benefits in having your professional support provided by people who carry their own insurance.
Self managing project roles
Some roles like website design, social media, or PR, lend themselves well to being held by self-employed specialists who have a ‘basket’ of clients since you are unlikely to be able to give a full time or even part-time employee access to the resources, networks and skills they need unless you are running a very large organisation indeed. The same could be said for Facebook advertising specialists, podcast support teams, video editors and more.
Rather than attempting to find one person with the thousands of skills a modern business needs to trade and grow online and virtually, it can be wise to use specialists who come with those skills and a thriving business of their own.
Be aware that an outsourced team is never 100% dedicated to you. The fact they have other clients means they will always be managing your needs against other clients needs. If you absolutely have to be able to say drop everything and do this now, you probably need an employee over the longer term.
How do you decide which is right for you?
There is no hard and fast rule. But it is important you choose the route and contract type that most closely suits your needs. And that means digging into the facts of how you work, and what these options really mean.
The cost of getting it wrong can mean unexpected tax bills, holiday pay claims, or even disputes on who can do what after the contract is ended.
But the benefits of the properly recruited and contracted new team member can really transform your business.
Want to chat?
If you’d like to chat about which option suits you best our team of experienced specialists are always here to help.
Whatever you decide to do, we wish you the very best of luck with your new team member.
Call us on 020 3887 0500 or pre-book a quick chat at a time that suits you. Click here