How Do I Hire My First Employee or Freelancer?

Introduction

Hiring your first team member is a major milestone for any business. It means your workload is growing, and you are ready to bring in extra help. However, hiring also comes with responsibilities and decisions that can feel daunting, especially if it is your first time managing someone.

The first step is deciding whether you need an employee or a freelancer. Both can help your business grow, but the legal, financial, and practical considerations differ. This article explains how to hire your first worker confidently and correctly, from planning the role to setting up payroll and contracts.

Step 1: Decide What Kind of Help You Need

Before hiring, clarify what you want the person to do and how much work there will be.

An employee is suitable if you need:

• Ongoing, regular help

• Someone to work under your direction and schedule

• Consistent availability and commitment

A freelancer may be better if you need:

• Short-term or project-based work

• Specialist expertise you cannot justify hiring full-time

• Flexibility without long-term employment costs

Choosing correctly matters because employment law treats these arrangements differently. Misclassifying a worker could lead to penalties or unexpected tax liabilities.

Step 2: Budget for the Role

Hiring costs more than just paying a salary or invoice. For an employee, factor in:

• National Insurance contributions

• Workplace pension contributions

• Holiday pay and sick leave

• Payroll administration

• Equipment or software they will use

Freelancers usually charge higher hourly rates, but you avoid these extra employment costs. Decide what you can afford monthly and how the new hire will contribute to generating revenue or efficiency.

Step 3: Write a Clear Job Description

Whether hiring an employee or freelancer, define the role clearly. Include:

• Key responsibilities and daily tasks

• Required skills or qualifications

• Working hours or project duration

• Expected outcomes or targets

• Pay rate and benefits (if applicable)

A well-written description attracts the right candidates and sets expectations early.

Step 4: Advertise or Search for Candidates

You can post job adverts on sites such as Indeed, Reed, or Totaljobs, or use freelancer platforms like Upwork and Fiverr. Social media, LinkedIn, and word-of-mouth can also be effective for small businesses.

Be clear about whether the role is permanent, part-time, or freelance. For freelancers, ask for portfolios or examples of previous work. For employees, request a CV and references.

Step 5: Interview and Assess Candidates

Once you shortlist applicants, arrange interviews. Focus on their skills, reliability, and how well they fit your company culture.

Ask questions such as:

• What experience do you have in this type of work?

• How do you manage deadlines or pressure?

• What attracted you to this role or project?

• What are your long-term goals?

For freelancers, you can also start with a small trial project to assess quality and communication before committing to ongoing work.

Step 6: Check Legal and Tax Responsibilities

If You Hire an Employee

• Register as an employer with HMRC before their first payday.

• Set up payroll to handle PAYE (Pay As You Earn) tax and National Insurance.

• Provide an employment contract outlining pay, working hours, notice period, and other terms.

• Check the right to work in the UK using official documents or online checks.

• Set up a workplace pension and automatically enrol eligible employees.

If You Hire a Freelancer

• Confirm that they are genuinely self-employed. They should invoice you for their services and handle their own tax.

• Agree on a written contract stating payment terms, deadlines, and who owns the work produced.

• Verify that they have the right insurance if needed, such as professional indemnity cover.

An accountant can help ensure your setup complies with employment and tax laws.

Step 7: Agree on Pay and Contracts

For employees, you must pay at least the National Minimum Wage and provide payslips showing deductions. You will also need to include statutory entitlements such as holiday pay.

For freelancers, agree on payment schedules, such as 50% upfront and 50% on completion, or monthly invoices for ongoing work. Always have a written agreement signed by both parties to avoid disputes.

Step 8: Prepare for Onboarding

Your new team member will need support to start effectively. Provide:

• Clear instructions and training for their role

• Access to software, tools, or passwords

• Contact details for communication

• Guidance on company policies and expectations

For employees, health and safety applies even if you work from home. Carry out a basic risk assessment to ensure a safe working environment.

Step 9: Manage and Communicate Effectively

Whether you hire an employee or a freelancer, communication is key. Set regular check-ins to review progress and offer feedback.

For employees, regular one-to-one meetings help maintain motivation and resolve issues early. For freelancers, clear briefs and deadlines ensure projects run smoothly.

Step 10: Keep Proper Records

HMRC and employment law require you to keep accurate records, including:

• Contracts and offer letters

• Payment details and payslips

• Working hours and holiday records (for employees)

• Invoices and correspondence (for freelancers)

Keeping everything organised protects you from disputes or compliance issues later.

Example Scenario

Imagine Rachel, who runs a small social media agency. She decides to hire help for client campaigns. At first, she brings on a freelancer to manage content scheduling for three months. The freelancer invoices monthly and uses their own tools, keeping things simple.

As the business grows, Rachel needs someone full-time to handle client communications. She registers as an employer, sets up payroll, and offers a part-time employment contract. By starting with a freelancer, she gained experience managing others before committing to an employee.

Common Mistakes to Avoid

• Hiring too quickly without defining the role clearly

• Paying someone cash-in-hand without proper contracts or tax setup

• Misclassifying a freelancer as an employee

• Forgetting to register with HMRC or provide payslips

• Failing to check legal right to work in the UK

Taking time to plan properly ensures your first hire strengthens your business rather than creating problems.

How an Accountant Can Help

An accountant can guide you through:

• Registering as an employer with HMRC

• Setting up payroll software and PAYE

• Understanding employment costs and budgeting

• Reviewing freelance contracts for tax compliance

• Managing pension and National Insurance obligations

Having professional advice at the start ensures everything runs smoothly from day one.

Conclusion

Hiring your first employee or freelancer is a big step, but it is also an exciting sign of growth. The key is preparation: define what you need, understand your responsibilities, and set up proper systems before making an offer.

Start small if needed, communicate clearly, and get professional advice to stay compliant. With the right planning, your first hire can bring new energy, skills, and momentum to your business journey.