The legal guide to employing staff and taking on apprentices.
By Tom Ellis
Transitioning from a sole trader to an employer is the biggest leap you will make in your trade business. Taking on your first full-time employee or apprentice unlocks the ability to scale your operations, take on multiple jobs simultaneously, and finally step off the tools.
However, with employees comes a mountain of legal and financial responsibility. From setting up PAYE with HMRC to understanding statutory holiday pay, zero-hour contracts, and Employer's Liability Insurance, the UK employment framework is strict. Getting it wrong can lead to crippling HMRC fines or employment tribunals. This guide walks you through exactly how to hire legally and safely.
PAYE vs. CIS
Deciding whether you actually need a permanent employee or if a subcontractor is a safer bet for your current cash flow.
Legal Obligations
Right to Work checks, HMRC registration, and securing mandatory Employer's Liability Insurance before they step on site.
Contracts & Policies
Drafting bulletproof employment contracts and comprehensive staff handbooks to protect your business.
The Big Decision: Employee (PAYE) or Subcontractor (CIS)?
Before registering as an employer, you must decide if you actually need a permanent staff member. In the trades, many business owners use subcontractors under the Construction Industry Scheme (CIS) instead.
Employees (PAYE)
An employee works for you under a contract of employment. You have complete control over how, when, and where they work. They must use your tools and follow your exact processes. In return, you are legally obligated to provide statutory sick pay (SSP), 28 days of paid holiday, and pension contributions.
Subcontractors (CIS)
Subcontractors run their own businesses. You hire them to complete a specific task, but you cannot dictate their exact working hours or stop them from sending a substitute. They do not get holiday pay or sick pay, and they pay their own taxes (though you deduct a percentage upfront for HMRC under the CIS rules).
The Disguised Employment Trap: You cannot hire someone as a "subcontractor" to save on holiday pay if they work 40 hours a week exclusively for you, drive your van, and wear your uniform. HMRC will classify this as disguised employment, and you will be liable for thousands in backdated tax and National Insurance.
Setting Up as an Employer Legally
If you have decided to take the plunge and hire a PAYE employee, you must complete these non-negotiable legal steps before their first day on site.
Register with HMRC
You must register as an employer with HMRC before the first payday. It can take up to 15 working days to get your employer PAYE reference number. Once registered, you are responsible for deducting Income Tax and National Insurance contributions from your staff's wages and paying them directly to the government.
Employer's Liability Insurance
As soon as you hire anyone (even a part-time labourer or an apprentice), you are legally required to hold Employer's Liability (EL) Insurance with a minimum cover of £5 million. If an employee is injured on site, this covers the compensation. Failing to have EL insurance can result in a fine of £2,500 for every single day you are uninsured.
Right to Work Checks
You must physically check and take a photocopy of a candidate's passport or share code to prove they have the legal right to work in the UK. If you employ an illegal worker because you skipped this step, you can face a civil penalty of up to £60,000 per worker and a potential prison sentence.
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Contracts, Zero-Hours & Employee Handbooks
By law, you must provide a written Statement of Employment Particulars on or before their first day of work. A casual "handshake" agreement is no longer legally acceptable and will ruin you at an employment tribunal.
Structuring your workforce:
- ✓ Zero-Hour Contracts: Highly useful for the trades due to fluctuating seasonal workloads. A zero-hour contract means you do not guarantee them minimum weekly hours, but they are still entitled to statutory holiday pay (accrued based on hours worked) and the National Minimum Wage. Ensure the contract clearly outlines commission structures if their pay relies heavily on job completion rates.
- ✓ Statutory Entitlements: Your contracts must clearly define how you handle Statutory Sick Pay (SSP) and their 28 days of statutory paid holiday. Be explicit about how holiday requests are approved to avoid your whole team taking August off simultaneously.
- ✓ The Employee Handbook: A well-drafted handbook is your ultimate safety net. It should explicitly cover workshop operations, on-site health and safety, company vehicle rules (e.g., GPS tracking, speeding fines), and disciplinary procedures. If an employee crashes your van because they were on their phone, the handbook is what allows you to discipline them legally.
Financial Obligations of an Employer
An employee's hourly wage is just the baseline. When calculating if your business can afford a new hire, you must factor in these additional mandatory costs governed by UK employment law.
National Minimum Wage
You must strictly adhere to the legal UK wage rates set by the Low Pay Commission:
• 21 and over (National Living Wage): £12.71 per hour
• 18 to 20: £10.85 per hour
• Under 18 & Apprentices: £8.00 per hour
Note: The £8.00 apprentice rate only applies to those under 19, or those aged 19 and over who are in their first year of an apprenticeship. After year one, an apprentice aged 19+ must be moved to the standard minimum wage for their age bracket.
Statutory Sick Pay (SSP)
If an employee is too ill to work, you are legally obligated to provide Statutory Sick Pay (SSP). Under updated UK statutory employment regulations, SSP is payable from day one of absence, with no qualifying lower earnings threshold.
The statutory rate is £123.25 per week (or 80% of their average weekly earnings, whichever is lower), payable for up to 28 weeks.
Statutory Holiday Pay
Almost all workers, including zero-hour staff, are legally entitled to 5.6 weeks (28 days for a 5-day work week) of paid holiday per year. This can include bank holidays. For staff working irregular hours, holiday pay is calculated at 12.07% of their hours worked. You must budget for this when pricing jobs; they get paid their normal rate even when not on site.
Pension Auto-Enrolment
By law, you must provide a workplace pension for eligible staff (those aged between 22 and State Pension age earning over £10,000 a year). You must automatically enrol them into a scheme like NEST and contribute a minimum of 3% of their qualifying earnings. The employee contributes 5%. Failing to set this up results in severe fines from the Pensions Regulator.
How Much Should You Pay Your Staff?
Knowing what to pay your team is critical for pricing your jobs accurately. If you underpay, you will lose reliable workers to competitors. If you overpay, your profit margins disappear. Below are the estimated 2026 UK averages for PAYE staff.
| Role / Experience Level | Avg. Daily Rate (Gross) | Gross Annual Salary | Est. Yearly Take-Home (Net) |
|---|---|---|---|
| First-Year Apprentice Aged under 19, or in year 1. Based on minimum wage. | £64.00 | £16,640 | ~£15,500 |
| General Labourer Unskilled / semi-skilled site support and lifting. | £115.00 - £130.00 | £31,850 | ~£26,500 |
| Skilled Tradesperson Qualified Carpenter, Bricklayer, Plasterer, etc. | £160.00 - £180.00 | £44,200 | ~£35,000 |
| Specialist / M&E Trade Gas Safe Engineer, Certified Electrician, Advanced HVAC. | £200.00 - £220.00 | £54,600 | ~£41,500 |
| Site Foreman / Manager Runs the site, manages staff, handles client interactions. | £240.00+ | £62,400+ | ~£46,200+ |
How these figures are calculated
The gross annual salary assumes a standard 5-day working week (approx. 260 working days per year, including paid statutory holidays). The "Take-Home" (Net) columns are approximate 2026 estimates based on a standard 1257L tax code, deducting standard Income Tax, National Insurance, and a mandatory 5% employee pension contribution.
Regional Variations
These figures represent national averages. If your trade business operates in London or the South East, expect to pay 15% to 25% higher day rates to secure reliable staff. In contrast, businesses in the North or Wales may see averages skew towards the lower end of the bands.
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Investing in the Future: Taking on an Apprentice
Apprentices are the lifeblood of the UK trade sector. Hiring a young person allows you to train them to your exact professional standards, but it comes with strict educational and legal conditions.
The Apprentice Wage Rules
You must pay at least the National Minimum Wage for apprentices. This special, lower rate applies to apprentices aged under 19, or those aged 19 and over but in the very first year of their apprenticeship. The critical rule: once they complete their first year and pass their 19th birthday, you are legally required to immediately bump them up to the standard National Minimum Wage for their age bracket.
Government Funding & Grants
You do not have to cover all the college costs yourself. For small employers (under 50 staff), the government typically covers 95% to 100% of the training and assessment costs. Furthermore, if you operate in the construction sector, you can claim substantial CITB (Construction Industry Training Board) grants to help offset the cost of their daily wages and attendance.
20% Off-The-Job Training
An apprenticeship is a legal employment contract coupled with an educational programme. By law, an apprentice must spend at least 20% of their paid working hours undertaking 'off-the-job' training. In the trades, this is usually fulfilled by sending them to a local college one day a week (day release). You must pay them their normal daily wage for this college day.
Under-18s Working Directives
If you hire a school leaver (16 or 17 years old), strict working time regulations apply. They cannot legally work more than 8 hours a day or 40 hours a week. They are strictly prohibited from working night shifts and must have a 30-minute rest break if they work longer than 4.5 hours. Furthermore, you must conduct a specific 'Young Persons Risk Assessment' before they ever step onto a live site.
Red Flags: Common Employment Mistakes
The trade sector is notorious for informal hiring practices. Avoid these illegal traps that could bankrupt your company.
"Cash in Hand"
Paying labourers cash in hand off the books is tax evasion. If HMRC conducts an investigation into your finances, you will be liable for all the unpaid Income Tax, National Insurance, plus massive penalties. It also means you have no paper trail of business expenses to lower your own corporation tax.
Unpaid Travel Time
If your employees are required to travel to different sites during the day in a company van, that travel time is legally working time. If you do not pay them for it, and their total pay drops below the National Minimum Wage, you can be publicly named and fined by HMRC.
Ignoring Tool Cover
If your employee's personal tools are stolen from your company van overnight, your standard van insurance will not cover them. You must ensure you have specific "Tools in Transit" cover that extends to your employees' equipment, or establish clearly in the handbook that they leave tools at their own risk.
DIY Payroll
Unless you have an accounting background, do not attempt to run PAYE payroll yourself using spreadsheets. Navigating tax codes, student loan deductions, maternity pay, and RTI (Real Time Information) submissions to HMRC is highly complex. Use cloud payroll software (like Xero or QuickBooks) or hire a local bookkeeper.
Frequently Asked Questions
Do I have to pay my staff when bad weather stops work?
If you employ someone on a guaranteed hours contract and you have to send them home because of rain or snow (often called 'lay-offs'), you must still pay them their normal daily wage. If you use zero-hour contracts, you are only legally required to pay them for the hours they actually worked.
Can I put a new employee on a probation period?
Yes. A standard probation period in the trades is usually 3 to 6 months. During this time, the notice period required to dismiss them (if they aren't up to standard) is usually much shorter—often just one week. However, they are still entitled to all statutory rights from day one.
How does statutory sick pay (SSP) work?
If an employee is too ill to work for four or more days in a row, they are entitled to Statutory Sick Pay. It is paid by you (the employer) through the normal payroll process. You can require a 'fit note' from their doctor if they are off sick for more than 7 days continuously.
Do I legally need Employer's Liability Insurance for a part-time labourer?
Yes. You are legally required to hold Employer's Liability (EL) Insurance the moment you hire your first employee, regardless of whether they are full-time, part-time, or a temporary apprentice. The minimum legal cover is £5 million, and failing to have this insurance can result in a fine of up to £2,500 for every single day you are uninsured.
Who pays the college training fees for a trade apprentice?
If your trade business has fewer than 50 employees, the UK government will typically fund between 95% and 100% of your apprentice's college training and assessment costs. You are only responsible for paying their hourly wage. Additionally, if you operate in the construction sector, you can often claim substantial CITB (Construction Industry Training Board) grants to help offset the cost of their day release.
Can I legally put a new employee on a probation period?
Yes. A standard probation period in the trade sector is 3 to 6 months. During this time, the notice period required to dismiss them (if their workmanship is not up to standard) is usually much shorter—often just one week. However, it is crucial to understand that they are still entitled to all statutory rights, including holiday pay and sick pay, from day one of their employment.
What happens if site work is rained off—do I still have to pay my staff?
If you employ staff on a guaranteed-hours contract and you have to send them home because of extreme weather (known as 'lay-offs'), you must still pay them their normal daily wage. If your business is highly susceptible to weather delays (like roofing or landscaping), it is much safer to utilise zero-hour contracts or specifically draft a "short-time working" clause into their employment contract.
Do I provide their PPE and tools?
By law, you must provide all required Personal Protective Equipment (PPE) for free—you cannot charge your employees for hard hats, hi-vis jackets, or safety boots. Regarding hand tools and power tools, it is up to your contract. Many employers provide heavy power tools, whilst tradesmen bring their own basic hand tools.
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