Can a sole trader have employees?

Sole traders are self-employed; hence they can only employ others and not themselves. You cannot work as an employee in your business.

This is where a limited company differs. It is an individual legal entity in its right. So, a company can provide an employment contract with its directors. But, a sole trader cannot do it. The business and the person are the same here. Thus, they cannot have an employment contract here.

Though you cannot be an employee of your business, it doesn’t mean you cannot hire staff. There are several ways to hire employees for specific purposes or general office assistance.

• Employing workers with the help of traditional PAYE system.
• Recruiting independent contractors and freelancers.
• Hiring workers temporarily or on part-time contracts.

Sending payroll reports.
Displaying the outstanding balance to HMRC.
Filing any penalties.
Accessing tax codes and information about employees.
Receiving notifications from HMRC.

A member is classified as a worker if these things apply:

• The person is under a contract to do a task or service in exchange for money.
• The person cannot subcontract the task.
• The person attends the workplace.
• The work has to work as per the contract duration.
• The person doesn’t contract with the employer as a client or customer.

Though workers are not employees, they are entitled to some employment law rights, such as:

• Minimum Wage.
• Security against unlawful wage deductions.
• Minimum paid holidays.
• A minimum amount of rest breaks.
• Maternity, paternity and parental pay.
• Security from whistleblowing.

If a person is not a worker or an employee, you can address them as freelancers or self-employed contractors. A sole trader also falls in this category.

So, a sole trader can contract with other self-employed people without any legal obligations involved, other than health, safety, and discrimination regulations.

It is essential to keep in mind that HMRC can sometimes consider a person self-employed for tax purposes, even when they enjoy a different position in the employment regulation.

If the above mentioned considerations stand true, they are not considered employees for tax reasons and don’t receive payment through PAYE.

• They manage their business.
• They decide the business to be done, where, when, and how.
• They can subcontract out their responsibilities.
• They can rectify any unacceptable work without paying for any additional time.
• They work on a fixed price method and not on an hourly basis.
• They can work for other clients.

• They offer their raw materials, machinery, and tools to do the job.

Opposite to the conditions mentioned above concerning PAYE, a person is self-employed if these conditions apply:

• They offer quotes and bids to acquire projects.
• They do not work under anyone’s supervision.
• They submit invoices for the completed work.
• They handle their yearly tax returns.
• They are not eligible for vacation or sick pay.
• They work under a contract with terms like a self-employed, independent contractor, or consultant.

Wrapping Up

So, the answer to can a sole trader have employees is yes. They have all the rights to have employees, considering the abovementioned aspects and following the regulations. However, if you think that your business has grown financially, you can expand as a limited company and enjoy better benefits of hiring employees, workers, freelancers and contractors for you.