How to Hire Your First Employee as a UK Tradesperson (2026 Guide)

You’re turning down jobs. You’re working weekends. Your van is full and your phone won’t stop ringing. At some point, every growing trade business faces the same question: is it time to take on your first employee? The answer involves more than just finding someone good — there’s HMRC paperwork, insurance obligations, employment law, and a real cost calculation that catches many tradespeople off guard. This guide walks you through every step, from deciding whether you’re ready to scaling beyond your first hire.

Are You Actually Ready to Hire?

The most reliable signal is what experienced trade business owners call the three-job-in-the-van test. If you consistently have three or more concurrent jobs that you cannot physically attend without bouncing between sites and compromising quality, you have a capacity problem that a second pair of hands can solve. That’s different from having one unusually big week.

As a rough revenue benchmark, most sole traders find that hiring makes financial sense once they’re turning over £100,000 or more per year. Below that threshold, the employer’s National Insurance contributions, pension costs, and admin overhead eat too deeply into margin. Above it, a productive employee typically generates more revenue than they cost within the first six months.

Other signs you’re ready: you’re regularly referring work to competitors because you can’t take it on; your existing customers are waiting too long for follow-up jobs; or you’re spending so much time on the tools that quoting, invoicing, and admin are falling behind. If two or more of these apply, it’s worth running the numbers seriously.

Employee vs Self-Employed Subcontractor

Before you go any further, you need to understand the difference between taking on an employee and using a self-employed subcontractor — because HMRC takes this very seriously, and getting it wrong is expensive.

Many trade businesses use subbies to stay flexible, and that’s entirely legitimate when the relationship is genuinely self-employed. The problems arise when someone is treated as a subcontractor on paper but is actually working like an employee. HMRC uses a set of tests — known broadly as IR35 or employment status rules — to assess the true nature of a working relationship.

Key factors HMRC looks at include: whether the person can send a substitute in their place; whether they supply their own tools and equipment; whether they work exclusively for you or take on other clients; whether you control how and when the work is done; and whether there’s a genuine risk of financial loss if a job goes wrong. If someone works only for you, uses your van, works your hours, and has no real business of their own — HMRC is very likely to treat them as an employee regardless of what any contract says.

If you misclassify an employee as self-employed, you become liable for all the PAYE income tax and National Insurance that should have been deducted, plus interest and penalties. In serious cases this runs into tens of thousands of pounds. The safest approach: if someone is going to be a core, long-term part of your team, take them on as an employee from the start.

Apprentice vs Experienced Hire

Once you’ve decided to hire properly, you have a choice: bring in someone with experience who can hit the ground running, or take on an apprentice and shape them yourself. Both have genuine merit for a trade business.

Taking on an apprentice

If your business has a wage bill under £3 million per year, you don’t pay the apprenticeship levy — instead, the government covers 95% of training costs and you pay just 5%. For a first apprentice specifically, there’s also a £1,000 cash incentive payment available through your training provider, and some regions offer additional grants. Apprentice wage rates are lower than adult minimum wage during training: the 2026 apprentice rate is £7.55 per hour for the first year (for those under 19 or in the first year of any apprenticeship), rising to the relevant National Minimum Wage rate after that.

The trade-off is time. An apprentice needs supervision, teaching, and patience. For the first six to twelve months, you may spend more time managing them than the work they contribute. That’s a worthwhile investment for many businesses — but not if you need capacity immediately.

Hiring an experienced tradesperson

An experienced hire can quote, run a job independently, and deal with customers from week one. You’ll pay more — typically £28,000 to £40,000 per year depending on trade and location — but the return on investment is faster. The key risk is cultural fit: someone who’s used to doing things their way can be harder to integrate into your systems and standards than someone you’ve trained from scratch.

Legal Steps Before Day One

There are several legal obligations you must fulfil before your new employee walks through the door — or in most cases, before they get in your van. Skipping any of these creates real legal and financial exposure.

Employment Contract Essentials

Since April 2020, the law requires you to provide a written statement of employment particulars on or before the employee’s first day — not within two months as was previously acceptable for some elements. A basic employment contract for a tradesperson should cover:

• Pay — rate, frequency (weekly or monthly), and payment method
• Hours — standard working hours, start and finish times, and any expected overtime arrangements
• Holiday entitlement — the statutory 28 days and how to request leave
• Notice period — typically one week per year of service up to a statutory maximum of twelve weeks
• Probation period — duration and any conditions that apply during probation
• Tools and vehicle policy — who supplies what, what happens if tools are damaged or lost, and rules for personal use of a company vehicle
• Sick pay — whether you pay only Statutory Sick Pay or an enhanced company sick pay scheme
• Disciplinary and grievance procedure — even a brief summary is better than nothing

You can use a free contract template from ACAS or GOV.UK, but it’s worth having a solicitor or HR adviser check it if you’re doing this for the first time. An hour of legal advice up front is considerably cheaper than an employment tribunal further down the line.

PAYE Setup and National Insurance

Once registered as an employer with HMRC, you need to run payroll on or before every pay day. PAYE (Pay As You Earn) means you deduct income tax and employee National Insurance contributions from your employee’s gross pay, add your own employer’s National Insurance, and pay the total to HMRC each month (or quarterly if your monthly PAYE liability is under £1,500).

Employer’s National Insurance in 2026 is 13.8% on earnings above the Secondary Threshold (£9,100 per year). This is a cost you pay on top of your employee’s salary — it does not come out of their pay. The Employment Allowance, available to most small employers, reduces your annual employer NI bill by up to £5,000, which can significantly offset costs in your first year.

For pension auto-enrolment, the minimum employer contribution is 3% of qualifying earnings. Your employee must also contribute at least 5% (including tax relief). Use a provider like NEST (the government-backed scheme) if you don’t have an existing arrangement — it’s free to use for employers.

HMRC’s Basic PAYE Tools software is free and handles payroll submissions for up to ten employees. If you’re already using accounting software like Xero, QuickBooks, or FreeAgent, most have built-in payroll modules that handle Real Time Information (RTI) submissions to HMRC automatically.

The Real Cost of an Employee

This is where many first-time employers get a nasty shock. The salary you agree is not the full cost. Here’s a worked example using a £30,000 annual salary:

• Gross salary: £30,000
• Employer’s NI (13.8% on earnings above £9,100): approximately £2,893
• Employer pension contribution (3% of qualifying earnings): approximately £617
• Employer’s liability insurance uplift: £200–£500 depending on your insurer
• Total annual cost to you: approximately £33,700–£34,000 before Employment Allowance
• After claiming the £5,000 Employment Allowance (if eligible): approximately £28,700–£29,000

Add to this any tools, PPE, or uniform you provide; the cost of supervision time; and the occasional sick day where you still pay wages but get no output. Realistically, budget for the true employment cost to be 15–25% above the gross salary figure. A £30,000 employee costs you somewhere between £34,000 and £37,500 in a normal year once all on-costs are factored in.

Work backwards from this figure when deciding whether hiring is viable. If your average job generates £800 of gross profit, you need your employee to enable or directly produce at least 43–47 additional jobs per year just to break even. In a trade business where a good operative can run multiple jobs a week independently, that threshold is very achievable — but it’s worth modelling it clearly before you sign a contract.

Holiday and Sick Pay

Every employee is entitled to a minimum of 28 days’ paid annual leave per year (for a full-time worker), which includes bank holidays if you choose to count them. Part-time and variable-hours workers accrue leave proportionally. You cannot legally make an employee work without paying holiday entitlement — and you cannot replace statutory holiday with a payment in lieu (except on termination).

For sick pay, if an employee is off sick for more than three consecutive working days (known as waiting days), you must pay Statutory Sick Pay from day four. The 2026 SSP rate is £116.75 per week, paid for up to 28 weeks. You cannot reclaim SSP from HMRC. Some employers offer an enhanced company sick pay policy — for example, full pay for the first week of illness — but this is a business decision, not a legal requirement. If staff sickness is a genuine concern, income protection or key person insurance products exist that can offset the cost.

Managing Performance

Most employment disputes start not because an employer wanted to do something wrong, but because they didn’t follow a proper process. UK employment law gives employees strong protections against unfair dismissal after two years of continuous service — before that two-year mark, you have considerably more flexibility, but you must still act reasonably and consistently.

Set a probation period — typically three to six months — and use it properly. Have a conversation at the midpoint to give feedback, and a formal review at the end. If performance isn’t where it needs to be, extending probation is a legitimate option if your contract allows it.

If you need to address poor performance or conduct after the probation period, follow the ACAS Code of Practice: give a verbal warning, then a written warning, then a final written warning, before any dismissal — and document each step. Keeping records of conversations, written warnings, and any agreed improvement plans is what protects you if a claim ends up at a tribunal.

Gross misconduct — theft, serious health and safety violations, aggressive behaviour toward customers — can justify immediate dismissal without notice (summary dismissal), but you still need to investigate properly and hold a hearing before making the decision.

Scaling Beyond One Employee

Once your first hire is bedded in and generating more than they cost, you’ll find yourself having the same capacity conversation again at a higher level. The trigger for a second hire is usually the same as for the first — you can’t take on the work that’s coming in — but the organisational challenge shifts meaningfully.

With two or more employees, admin load increases disproportionately. You’re now managing timesheets, a rota, payroll for multiple people, scheduling across multiple jobs, and potentially multiple vehicles. This is the point where informal systems — WhatsApp groups, paper timesheets, mental job schedules — start to break down. Investing in job management software before you get to this point is considerably less painful than doing it while the wheels are coming off.

A second employee also changes your role. You shift from being primarily on the tools to being primarily a manager. Many tradespeople find this transition difficult — it’s worth acknowledging that managing people is a skill that takes time to develop, and being patient with yourself and your team as you build it.