Can a Sole Trader Have Employees

Can a Sole Trader Have Employees?

Wondering can a sole trader have employees? The quick answer is yes. But it is not practised on common grounds. Being a sole trader, it is not necessary to work all alone. Of course, you can hire employees to expand your business. By employing people, you became an employer and there are legal obligations you need to comply with. Read on to learn:

  • Is it essential to form a limited company to hire people?
  • How to set up as an employer?
  • UK employment law for sole traders


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Is it Essential to Form a Limited Company to Hire People?

No, you can hire people being a sole trader. It is not mandatory to form a limited company just for this reason. Though sole traders carry out their business on their own, it doesn’t imply that they can’t employ other people. The term sole trader doesn’t mean working individually, rather it refers to running a business under your own name. So, a sole trader can be an employer.

But how to set up as an employer being a sole trader? Let’s find out!


How to Register as an Employer Being Sole Trader?

Alike a limited company, a sole trader also need to register himself as an employer with HMRC. First, the sole trader need to do the PAYE (Pay As You Earn) registration before paying the first salary to the employees, but should not register late more than two months before the first payment.

By logging into the Government Gate Online Account, a sole trader can register for PAYE through this online form. Here is the information that needs to be provided while registering:

  • Sole trader and Trading name (if applicable)
  • Your business nature
  • National Insurance number (NIN)
  • Unique taxpayer reference (UTR)
  • Official business phone number & address
  • If the sole trader is working as Troncmaster
  • If Occupational Pension Scheme will be used
  • Staff expected to be hired in the current tax year
  • Wages that have already been paid to employees
  • Expenses and benefits that are going to be paid to employees

Once you (sole trader) registered as an employer, you will be issued PAYE and Accounts Office reference numbers by HMRC, around five working days. These reference numbers are needed to enrol for PAYE online. Let’s see the use of PAYE online.


PAYE Online

PAYE Online provided by HMRC is used for:

  • the outstanding amount to be paid to HMRC
  • sending payroll reports to HMRC
  • appealing any penalty
  • getting notices and tax codes about one’s employees
  • receiving alerts from HMRC in relation to late payments etc

The sole trader (as an employer) needs to use PAYE online login details in payroll for submitting reports to HMRC. However, PAYE online service itself cannot be applied to send payroll reports, other than benefits and expenses returns by submitting a P11D form.


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How to Process Salary Payments without PAYE reference?

For the purpose of processing salary payments before getting an Employer PAYE reference number, you are required to:

  • Operate payroll
  • Store and send due Full Payment Submission (FPS) to HMRC


UK Employment Law for Sole Traders

As a sole trader, if you have decided to hire staff, you should understand and follow UK employment laws. These include:


UK Employment Law for Sole Traders


  • Paying at least the national minimum wage
  • Statutory pay for maternity, paternity and adaptation leave
  • Protecting staff from discrimination
  • Providing minimum rest breaks and paid holiday

While hiring employees for your sole tradership, you need to understand your responsibilities as an employer and need to implement them in your business.


Quick Sum Up

After giving this blog a read, you have now got the answer ‘can a sole trader have employees’. Sole traders can have employees the same way as a limited company. Similarly, they need to register themselves as employers with HMRC. Moreover, they also need to run payroll and enrol for PAYE service to pay employees. And, they need to comply with employment laws and regulations.


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Disclaimer: This blog contains general information on the topic.


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