Your first worker matters the most
Take care when you start hiring
IDENTIFYING and hiring your first employees is one of the most important decisions an entrepreneur will ever make. Employment decisions can make and sometimes break a young start-up.
So, what should an entrepreneur consider when it comes to employing staff?
The starting point for recruiting your first employees is you must be able to present a compelling long-term vision that will help potential recruits take the leap of faith to join your start-up or fledgling business.
Your first staff member will help create the culture for years to come, so it’s important that person has the right attitude and is as passionate as you are about your vision for the business.
When hiring your first employees it’s likely that you won’t be offering large salaries and benefits packages. The offer of equity ownership can however be an attractive incentive for those with entrepreneurial spirit who are keen to help you build the business and can visualise the opportunity that exists.
Given the choice, many start-up entrepreneurs would prefer to recruit people with lots of experience, or better qualified, more skilled even than the founder.
Young people though, with nurturing and empowerment can progress and develop within the company and shouldn’t be overlooked.
As the business grows, this can often provide the foundation for an inspiring and diverse leadership culture.
Employing full-time staff is a big commitment for start-ups. Every new full-time person increases the break-even output for the business, but you need to ensure there is enough work to justify the costs of employing fulltime members of staff.
To help reduce pressure on cashflow in the early days, entrepreneurs will often look to hiring part-time staff and sometimes freelancers.
Hiring independent contractors means employers do not have to comply with wage and working hours requirements or include contractors on their worker’s compensation or medical insurance. However, many employers wrongly classify employees and workers as independent contractors in order to avoid these obligations, and doing so puts their companies at risk of costly litigation.
The well-publicised Uber ruling has shown to have widereaching implications for the gig economy and entrepreneurs weighing up the viability of using self-employed contractors for short-term contracts. In light of the ruling, prospective employers will have to decide whether or not they are taking on a workforce as employees or workers, or a combination of both. Generally speaking, employees have a greater range of employment rights, including the right not to be unfairly dismissed once they have accrued two years continuous service. Workers have more restricted rights, which include the right to holiday pay and Statutory Sick Pay. The main distinction between employers and workers is that in the case of workers there is no mutuality of obligation, which means that the employer is not obliged to offer work to the worker and if offered work, the worker is not obliged to undertake that work. This introduces a degree of flexibility but can also bring with it operational difficulties for the employer.
Before employing someone it is also essential that you check whether that person has the right to work in the UK. If you don’t carry out the required checks and the person does not have the right to work in the UK, you may be fined. If as an employer, you recruit illegal workers either knowingly or when you had reasonable cause to believe that the workers were illegal, you have committed a criminal offence and would be subject to an unlimited fine and/or imprisonment.
A good employment lawyer will help you understand your contractual and legal obligations and provide advice on how you navigate any potential minefield areas.
And lastly, in order to realise your vision for the business you will continue to need the support of your talented team of recruits long after the contract is signed. By looking after your staff and investing in your staff, you are investing in the health and future success of the business. Martin Stephen is employment law specialist at Scottish independent law firm Wright, Johnston & Mackenzie LLP.