Quick Answer
Going from sole trader to employer is one of the biggest decisions you will make in this business. It is also one of the most rewarding. The mechanics are simpler than people think. Register as an employer with HMRC, take out employers' liability insurance with at least £5 million of cover, set up payroll, give your new hire a written statement of employment on day one, and budget for the real cost, which is roughly 22 percent on top of their gross salary once you stack employer National Insurance, pension, holiday pay and sick pay. The hard part is not the paperwork. The hard part is the mindset shift from being a tradesperson who works alone to being the person who is responsible for someone else's mortgage. Get that right, and the rest follows.
Table of Contents
- The mindset shift that comes first
- Knowing when you are actually ready
- The legal setup, step by step
- The real cost of an employee in 2026
- Who to hire first, and why
- Contracts, policies and the paperwork that protects you
- Payroll, pensions and the monthly rhythm
- The CIS subcontractor trap, and how to avoid it
- The first 90 days with your new employee
- What tradespeople are saying
- Recommended videos
- Frequently asked questions
- My verdict
The mindset shift that comes first
Most sole traders I have spoken to over the years do not stall because of the paperwork. They stall because they have spent years being the business. The skill, the customer relationships, the standards, the reputation, all of it sits in their hands and their head. Handing any of that to someone else feels like risk.
It is risk. That is the honest answer. The first hire is the point where you stop being a self-employed engineer and start being an employer. You are now responsible for someone's pay packet, their pension, their training and their safety. If you go quiet for a month, they still need to eat. If a job goes wrong, you carry it.
The mindset shift is this. Your job changes from doing the work to building the system that lets other people do the work to your standard. You will still be on the tools for a while. But the value you add starts moving away from your hands and towards how you train, how you price, how you schedule, and how you support the person you have hired.
When I started growing Elite Heating and Plumbing, the hardest week was the first one after I took my first engineer on. I kept wanting to redo his work. I had to learn to let him be 90 percent of me, not 100 percent, and trust that the gap closes with time. That is the lesson.
Can you write down, in plain English, exactly how you do a standard job from first call to invoice paid? If you cannot, the person you hire will reinvent it every time. Build the system first. Hire into it.
Knowing when you are actually ready
The signals matter. You are not ready because you are tired. Plenty of sole traders take on staff to escape burnout and end up more stressed, not less. You are ready when the numbers and the workflow line up.
Three signals tell you the timing is right. First, you have turned down work in the last three months that you would have taken. Not "I was busy that week" turn-downs, but jobs you could have priced and won if you had a second pair of hands. Second, your pipeline is six to eight weeks ahead and stable. Not a one-off spike from a referral, but consistent, predictable demand. Third, you have at least three months of operating costs in the bank, plus enough to cover your new employee's first 90 days even if every single one of their jobs paid late.
If any of those three is missing, hire too soon and you will spend the first six months in cash flow panic. Hire too late and you will burn out before you get the chance.
The signals are objective for a reason. Hiring is not a feeling. It is a financial commitment that lasts for years if you do it right.
The legal setup, step by step
The legal side is more manageable than people fear. There are six steps, in this order, and you can do all of them in about a week.
1. Register as an employer with HMRC. Go to the HMRC Register as an employer service, follow the path for "other types of business" if you are a sole trader, and submit. Do this at least two weeks before your new employee's first payday. You cannot register more than two months in advance. HMRC posts your Employer PAYE reference and Accounts Office reference back to you, and you will need both for payroll. The threshold that triggers the requirement to register is paying anyone above £96 a week, £417 a month or £5,000 a year in 2026/27. Below that you can technically pay them without registering, but very few real-world hires sit below it.
2. Take out employers' liability insurance. By law, you need at least £5 million of cover from an authorised insurer the moment your employee starts work. Most policies are sold at £10 million as standard. If your new employee is a close family member, you are exempt, but that exemption is narrow and you should still get cover for protection. Display the certificate where employees work or share it digitally. If you operate without valid cover, the HSE can fine you £2,500 for every day you are uninsured.
3. Check the right to work. Before they start, you must check and copy your new employee's right to work in the UK. Use the GOV.UK online right-to-work check for anyone with a share code, or physically check and copy a passport or other accepted document. Keep the record for the duration of their employment and for two years after they leave.
4. Set up workplace pension auto-enrolment. If your employee earns more than £10,000 a year and is aged between 22 and the state pension age, you must auto-enrol them into a qualifying workplace pension. Most small employers use Nest, Smart Pension or The People's Pension because the providers handle the back-end work. Minimum contributions are 3 percent from you, 5 percent from them, on qualifying earnings.
5. Write the employment contract. Since April 2020, every employee is entitled to a written statement of employment particulars on or before day one. It must cover pay, hours, holiday, notice, job title, place of work, sick pay arrangements and pension. ACAS has free templates that are perfectly adequate for a first hire. Do not use a contract you copied from someone else's business without reading it line by line.
6. Set up payroll. You either run it yourself using HMRC's free Basic PAYE Tools, use a payroll add-on inside accounting software like Xero or QuickBooks, or pay a bookkeeper £20 to £35 a month to do it for you. For a first hire, I always recommend the third option. Your time is more valuable than the saving.
If your new employee works a single day before you have employers' liability insurance in place, you are operating illegally. The temptation to "start them Monday and sort the paperwork during the week" is real. Resist it. A single accident in that window can end the business.
The real cost of an employee in 2026
This is where most sole traders get caught. They look at the headline salary, decide they can afford it, and then discover the rest of the iceberg three months in. Let me walk you through what a real employee actually costs in 2026.
Take a fully qualified engineer on £32,000 a year. That is your starting number. On top of that, you owe:
- Employer National Insurance. From April 2026, employer NIC is 15 percent on earnings above the £5,000 secondary threshold. On £32,000, that is (£32,000 − £5,000) × 15 percent = £4,050.
- Employer pension contribution. 3 percent of qualifying earnings on auto-enrolment. Roughly £700 at the standard band.
- Holiday pay. 28 days statutory minimum including bank holidays. They are paid for those, so this is already baked into the salary, but you need to cover their work for those 28 days or lose the revenue.
- Statutory sick pay. From April 2026, SSP is payable from day one at the lower of £123.25 a week or 80 percent of weekly earnings, with no Lower Earnings Limit. Budget around £600 to £1,200 a year per employee, depending on absence.
- Employers' liability insurance. £200 to £600 a year for a single employee, depending on trade and cover level.
- Van, tools, fuel, uniform, phone. Realistically £4,000 to £8,000 a year for an engineer who needs their own vehicle and kit.
- Training and certification. Gas Safe registration, refresher courses, manufacturer accreditations. Plan for £500 to £1,500 a year.
That £32,000 salary turns into roughly £42,000 to £47,000 once you factor in everything. Call it a 22 to 28 percent uplift on the gross salary. Plan your pricing accordingly. If you are still charging sole trader rates after you have hired, you will lose money on every hour they work.
If a £32,000 engineer costs you £45,000 fully loaded, and they bill 1,400 chargeable hours a year (which is realistic once you take out holidays, sickness, training and admin), your break-even chargeout rate is £32 an hour. To earn a 25 percent margin on their time, you need to bill them at £43 an hour minimum. Most sole traders undercharge their own time. After the first hire, undercharging is fatal.
Who to hire first, and why
The choice of first hire shapes the next two years of the business. Three options dominate.
Option one, the apprentice. For me, this is the right answer in most cases, and not just because I co-founded an apprenticeship programme. The numbers in 2026 are exceptional. From April 2026, the apprentice National Minimum Wage is £8.00 an hour, which is roughly £15,600 a year for a 37.5-hour week. Employers of 16 to 24-year-old apprentices who start from October 2026 will get a £2,000 incentive payment once the apprentice completes 90 days. Apprentices aged 16 to 18 are fully funded for training. From August 2026, full government funding for non-levy paying employers expands to cover all apprentices aged 16 to 24. You shape them to your standards from day one. They cost less than a qualified engineer, they grow with the business, and the loyalty is real if you train them well.
Option two, a fully qualified engineer. Faster ramp-up, immediate revenue, fewer training hours from you. But more expensive, and you are inheriting someone else's habits. The first qualified hire is also a finite person, not a system. If they leave in eight months, you are back to one and your costs have not adjusted. Choose this route when your pipeline truly cannot wait two years for an apprentice to qualify.
Option three, an admin hire instead of a trade hire. This is the one most sole traders miss. If you are turning down work because you cannot price, schedule or invoice fast enough, the right first hire might be a part-time admin person on 15 to 20 hours a week. Cost is lower, the role is easier to fill, and you keep all your billable hours on the tools. I have seen sole traders double their turnover with a 20-hour-a-week admin assistant before they hired their first engineer. The technology has changed what an admin person needs to be too. A good admin hire in 2026 should be comfortable with job management software, simple AI tools for drafting follow-ups, and shared inboxes.
The wrong first hire is the friend or family member you are doing a favour for. It rarely works. It either ends in a difficult conversation about performance or in the relationship breaking. Hire on the merits.
Contracts, policies and the paperwork that protects you
The written statement of employment particulars is non-negotiable. Day one, no exceptions. ACAS publishes a free template, and so does the GOV.UK Employer's guide. Use one, adapt it, sign two copies, give one to your employee, keep one for yourself.
At minimum, the contract needs to cover:
- Job title and a brief description of the role
- Pay rate, frequency of payment and payment method
- Working hours, including any expected overtime
- Holiday entitlement and how it accrues
- Sick pay arrangements above the statutory minimum, if any
- Notice periods on both sides
- Place of work and any travel expectations
- Probationary period, typically three to six months
- Disciplinary and grievance procedures
- Pension scheme details
- Confidentiality and non-compete clauses if relevant
The probationary period matters. Three to six months gives you a fair window to assess fit and lets the new hire understand they have to earn their place. Most experienced employers I know use six months as standard for trade roles. It gives you enough seasons of work to see how they handle peak workload, awkward customers and the boring jobs.
Two policies you should write down separately from the contract. A simple health and safety policy, even one page, that names you as the responsible person, lists your common job hazards and explains your incident reporting procedure. And a vehicle policy if they will drive a company van, covering business insurance, fuel cards, personal use rules and what happens if they damage it.
If you provide a company van for work use only, with no personal use, there is no benefit-in-kind tax charge. The moment personal use is allowed, the van benefit is taxable. Decide which side of the line you want to be on before you hand over the keys, and put it in the vehicle policy in writing.
Payroll, pensions and the monthly rhythm
Once registered, payroll becomes a monthly rhythm. You submit a Full Payment Submission (FPS) to HMRC on or before each payday, deduct income tax and National Insurance from your employee's pay, and remit it to HMRC by the 22nd of the following month if paying electronically.
The simplest setup for a first hire is a payroll add-on inside Xero or QuickBooks. Both have built-in PAYE filing, auto-enrolment pension feeds and payslip generation. Plan for £8 to £15 a month on top of your existing accounting subscription. If you would rather not touch it, a local bookkeeper will run a single employee payroll for £20 to £35 a month, which I think is money well spent in the first year.
Xero
Accounting plus integrated payroll for up to five employees
QuickBooks
Accounting plus payroll, popular with smaller trades businesses
Sage
Established UK payroll software, used widely by bookkeepers
HMRC Basic PAYE Tools
Free government payroll tool for employers with fewer than 10 staffThe Employment Allowance is worth knowing about. Eligible small employers can claim up to £10,500 a year off their employer NIC bill from April 2026 onwards, provided their total employer NIC liability was below £100,000 in the previous tax year. Most first-time trade employers qualify easily. Tick the box in your payroll software and it is applied automatically.
Pension auto-enrolment runs in parallel. Your payroll software calculates the deductions, sends them to your chosen pension provider, and the provider invests the money. The minimum employer contribution is 3 percent of qualifying earnings, the employee contributes 5 percent, with the employee getting tax relief on top of theirs. Set this up once and it runs itself.
The CIS subcontractor trap, and how to avoid it
This is the section most of you need most. A huge number of trades businesses run on labour-only CIS subcontractors instead of employees because it looks cheaper and avoids the PAYE and pension overhead. For some jobs it is the right call. For most, it carries a risk that nobody is telling you about clearly.
CIS is a tax collection mechanism, not an employment status. Being inside CIS does not mean someone is self-employed. HMRC looks at how the work is actually done, not what the contract says. If you control where and when they work, supply the materials and the van, expect them to come every day, and they work mostly or only for you, HMRC's view is that they are an employee for tax purposes, regardless of what you have written down. They can then go back several years, charge you the unpaid PAYE and NIC, plus penalties and interest, and the bill can run into tens of thousands.
Genuine subcontractor relationships look like this. The subcontractor sets their own hours within the project deadline. They use their own tools where practical. They can substitute someone else. They take on financial risk on the job, for example by quoting a fixed price and bearing overruns. They have other clients, or could realistically take them on. They invoice you. They handle their own tax.
If the relationship does not look like that and they show up every day in your van, doing what you tell them, on a day rate, they are an employee. Pay them as one.
HMRC has invested in more compliance officers focused on the construction sector and uses CEST (Check Employment Status for Tax) data plus FPS filings to flag suspect arrangements. If you are unsure, run your arrangement through CEST and keep the printout. It does not guarantee HMRC will agree, but it shows you took the question seriously.
The first 90 days with your new employee
The first 90 days set the standards for everything that follows. Get them right and the relationship is a long one. Get them wrong and you will be hiring again in 18 months.
Week one. Shadow you on every job. Not because they cannot do the work, but because they need to see how you handle the customer at the door, how you decide what gets quoted versus what gets called out, what your standard looks like for tidiness on the way out. This is where culture transfers. Do not skip it.
By the end of week one, they should have their tools, van keys, software access, fuel card, uniform and PPE. They should know who to call if they cannot get hold of you. They should have read the written employment statement and signed it.
Weeks two to four. Pair on the harder jobs, give them straightforward jobs solo. Build a simple feedback loop. End of every day, five-minute call: what went well, what is wobbling, what they need from you tomorrow. This is the bit that gets dropped first, and it is the bit that matters most. People leave because they feel unseen.
Months two and three. They run more solo work. You start spending one day a week off the tools doing quoting, customer follow-up, supplier conversations and admin. This is the moment you stop being a sole trader and start being a business. It feels uncomfortable, because for the first time in years you are not doing the visible work. Trust the process.
End of month three, do a formal probation review. Either confirm them in role with a signed letter, extend the probation if you are not sure but it is salvageable, or part ways early if it is not working. Do not drift past the end of probation without making the call. That is how problem hires turn into difficult dismissals.
If you want a deeper structure for this period, the Academy has a dedicated piece on onboarding a new engineer in five days with digital checklists and automation that maps tightly to what good employers do in week one. Pair it with the field service engineer skills matrix so you have an objective measure of where they are at 30, 60 and 90 days.
What tradespeople are saying
Recommended videos
How to Employ Someone as a Sole Trader in the UK
Business4Beginners
How to Employ Someone: Employing Staff in the UK
Tax Talk UK
Hiring Employees for the First Time as a UK Business Owner
The StartUp Wallet
Sole Trader to Limited Company: 2025-26 Step-by-Step Guide
Pro Tax Accountant
Sole Trader vs Limited Company in the UK
Small Business Toolbox
How to Employ an Electrical Apprentice
A121 Training
The Apprenticeship Problem in the UK
Fix Radio · The Electrical Show
How to Pay Yourself as a Business Owner
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Frequently asked questions
No. You can hire employees as a sole trader without changing your business structure. The HMRC registration is exactly the same. Most sole traders stay sole traders for the first one or two hires and only consider incorporating when their profits regularly cross around £40,000 to £50,000 a year, where the tax efficiency of a limited company starts to matter. Talk to your accountant before you change anything.
From April 2026, the apprentice National Minimum Wage is £8.00 an hour. It applies to apprentices under 19, and to apprentices aged 19 and over in the first year of their apprenticeship. After year one, an apprentice aged 19 or over moves up to the normal age-band minimum wage. Most decent employers pay above the floor anyway, especially in skilled trades where apprentices are scarce.
From 6 April 2026, statutory sick pay is payable from day one of sickness, at the lower of £123.25 a week or 80 percent of weekly earnings. The Lower Earnings Limit has been removed too, so the old loophole where lower-paid staff were not eligible no longer applies. Budget for this from day one. Build a sick pay line into your monthly cash flow forecast.
No. If you employ someone, you employ them. Cash-in-hand work that should be PAYE is tax evasion, exposes you to HMRC investigation, leaves you uninsured if the worker is injured, and protects nobody. The people I have seen try this lose more money to one HSE visit or one HMRC review than they ever saved.
Run the relationship through HMRC's CEST tool, which is free online. Be honest in your answers. If the result comes back as employed for tax purposes, take that seriously. The three biggest red flags are control (you decide where, when and how they work), exclusivity (they only work for you), and lack of substitution (they cannot send someone else in their place).
Non-levy paying employers (which covers most sole traders moving to first hire) get a £2,000 payment when recruiting an apprentice aged 16 to 24 who starts from 1 October 2026, paid after the apprentice completes the first 90 days. Employers of 16 to 18-year-old apprentices get a separate £1,000 incentive payment. From August 2026, training is fully funded by government for apprentices aged 16 to 24 with non-levy paying employers. The combined package is the best apprenticeship deal UK trades have seen in years. Pair it with the Skills Bootcamps and CITB grants guide to stack funding properly.
Public liability cover should already be in place from your sole trader days. Keep it. Add commercial vehicle insurance for any company van. Tools cover for the value of equipment your new hire uses. Professional indemnity if you give design advice. Most trades insurance brokers package these together into a "tradesman policy" that covers everything except specialist risks.
For your first hire, outsource it. A bookkeeper running a single employee payroll costs £20 to £35 a month, and you get someone who handles HMRC correspondence, year-end filings and auto-enrolment errors. The time you save is worth ten times the cost. Once you have three or four employees and a payroll rhythm, then look at bringing it in-house with Xero or QuickBooks payroll. Not before.
My verdict
Hiring your first employee is the moment you stop being a self-employed engineer and start being a business owner. The legal and financial mechanics are well-trodden ground. The hard part is the change in how you spend your time, what you optimise for, and how you measure success. You stop counting jobs done and start counting the standard those jobs were done to, by people who were not you.
The 2026 environment makes this the best moment in a decade to take on an apprentice. The funding is full for under-25s with smaller employers from August. The £2,000 incentive payment is back. The £8 hourly floor is real money. Pair an apprentice with a proper onboarding system and you build the foundation for a business that does not collapse the day you take a holiday. That is the goal. Not five vans on the road for the sake of it, but a business that runs to a standard you set, with people you have helped to grow.
Take the legal steps in order. Get the insurance before they pick up a tool. Price your work to cover the real fully loaded cost, not just the salary. Treat the first 90 days as the most important quarter of work the business will ever do. Get those four right, and the rest of the journey looks after itself.
If you want to keep going, the next steps after this article are the scaling playbook to a team of five that protects margins, the recurring revenue playbook for predictable monthly income, and once you have a couple of engineers on the road, the automating quote-to-invoice playbook to keep admin from eating your growth.
The day you sign your first contract, write the next person you want to hire on a Post-it note and stick it on the wall. Role, skills, when. You will hire faster, calmer and better the second time because you started thinking about it from day one.
