The different ways a small company can hire staff

different employee contract types

If you’re considering taking on a new member of staff, that’s usually a positive sign that your business is growing. The next decision you face is whether or not to take on a full-time employee. Adding someone else to the payroll on a permanent contract is a serious commitment, especially for a small business and can seem pretty daunting. So what are the other options available to you as an employer?

What do you really need?

Before you start recruiting or rushing into a contractual agreement, make sure you fully understand what it is your business needs by asking yourself the following questions:

  • Is there enough extra work to justify employing a full-time member of staff?
  • How many hours do you need someone to work per week? Is that every week or only during peak times?
  • Do you need one full-time employee to cover the workflow, including any extra hours, or would it be better to hire some part-time staff?
  • Will a full-time employee help you grow the business or can you achieve this with part-time staff or contractors?

Take some time to consider your answers until you have a clearer picture of your needs. Also, familiarise yourself with the steps you will need to take when taking on your first staff member.

Here we look at the various employment options and what each one means for you as the employer.

Permanent contract

An employee on a permanent contract can be full-time or part-time. The terms of the contract may vary and depending on the length of service, the employee will be entitled to holiday pay, sick pay and various other benefits and legal rights. This type of contract offers both parties security and stability going forward, but the lack of flexibility may not suit all employers. Permanent contracts were once the standard formal employment arrangement across all sectors, but that is no longer the case.

Fixed-term contract

Employees on a fixed term contract have the same rights as staff on a permanent contract for as long as the contract lasts. Fixed term contracts are for a set period such as three, six or 12 months, or until a project is finished. If you’re an employer in an industry which typically experiences seasonal peaks (at Christmas, or in summer for example) fixed-term contracts can work well as you only have to fund extra staff when you need them. It can also be a cost-effective option if you’re a contractor who needs expert help to deliver a project within a certain timeframe.

Temporary staff

For small businesses, taking on temporary staff via an employment agency can be ideal, especially if you need someone at short notice to cope with a surge in orders, or cover for existing staff who are away. Taking on temporary staff is also a relatively low-risk means of confirming what extra resources you may need as your business grows, although you can’t always be sure about the quality of worker or the skillset of the worker you’ll be sent by an agency. Using an employment agency can also be an expensive option as on top of paying for the employee, you’ll have to pay temp agency fees. It’s important to note that you still have legal obligations towards agency staff, such as providing rest breaks and a safe working environment. Rights to basic pay and the same benefits as permanent staff may also apply after a certain time.

Zero hours contracts

Essentially, zero-hour contracts mean having people on call to work as and when you need them. You are under no obligation to provide or guarantee work to an employee. On the other hand, the employee doesn’t have to accept the hours you offer them. With a zero hours contract, you’ll still be bound by legal obligations although these will depend on the type and terms of the contract drawn up. Zero hours contracts have become increasingly popular in recent years, especially in some sectors such as hospitality, entertainment, and media, where demand for staff fluctuates depending on bookings and the work available. Although this type of contract can be cost-effective and offer you greater flexibility, you can’t always expect – or demand – employee loyalty in return.

Contractors, freelancers and consultants

Depending on your type of business, hiring a self-employed contractor or freelancer can be a practical alternative to taking on someone permanently. If you offer IT services, for instance, and have landed a lucrative contract that call for additional skills, buying in the services of a contractor makes sense. Media and publishing are two sectors who often hire freelance editors, designers and writers to cover shifts on a daily, weekly or longer basis.

In these cases, a freelancer is self-employed (responsible for his or her income tax and National Insurance payments) although you still have some legal obligations. If you plan to use contractors, it’s important to be sure of their employment status and what your responsibilities are under this arrangement.

You should also take some time to find out about the IR35 legislation, which affects contract workers who are deemed to be ’employees’ for tax purposes, even if you are hiring them on a business-to-business basis.

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