When is the right time to hire my first employee?

The right time to hire is when you are consistently turning away work because you cannot physically do it all yourself. Key indicators: your diary is booked 3 to 4 weeks in advance, you are turning down jobs every week, you are working excessive hours (consistently more than 50 hours per week), and your annual turnover is sufficient to cover the full cost of an employee (salary plus 25% to 35% for on-costs) while still leaving you a reasonable profit. As a rough guide, if your annual turnover is above £80,000 as a sole trader and you are turning away £30,000+ of work per year, hiring makes financial sense. Do not hire based on one busy month — wait until the pattern is sustained for at least 3 to 6 months.

How much does employers liability insurance cost?

Employers liability insurance for a small electrical business typically costs £300 to £800 per year for one to three employees. The exact cost depends on the number of employees, the type of work (domestic vs commercial), your claims history, and the insurer. It is a legal requirement from the day you hire your first employee — you must have at least £5 million of cover, and the certificate must be displayed at your workplace (or available electronically). The fine for not having employers liability insurance is up to £2,500 per day. Most trade insurance providers (Hiscox, Simply Business, Rhino Trade Insurance) offer employers liability as part of a business insurance package.

What is the difference between CIS and PAYE for subcontractors?

PAYE (Pay As You Earn) applies to employees — you deduct income tax and National Insurance from their wages and pay it to HMRC. CIS (Construction Industry Scheme) applies to self-employed subcontractors who do construction work (which includes electrical work) — you deduct 20% (or 30% if they are not CIS-registered) from their payment and pay it to HMRC as an advance tax payment. The crucial distinction is employment status. If a worker is genuinely self-employed (they control when, where, and how they work, they provide their own tools, they can send a substitute, and they are in business on their own account), CIS applies. If they are under your direction and control, work set hours, use your tools, and cannot send a substitute, they are an employee regardless of what the contract says — and PAYE applies. HMRC actively investigates misclassification, and the penalties for getting it wrong are severe.

Do I need to auto-enrol an apprentice into a pension?

It depends on their age and earnings. If the apprentice is aged 22 or over and earns more than £10,000 per year, they must be automatically enrolled into a qualifying pension scheme. If they are under 22 or earn less than £10,000, they are not eligible for auto-enrolment — but they can opt in if they choose. First-year apprentices typically earn below the auto-enrolment earnings threshold, but second and third-year apprentices earning the full apprentice rate may qualify. You still need to assess them each pay period. Use a payroll provider or software that handles auto-enrolment assessment automatically.

What training am I responsible for if I hire an apprentice?

As an employer of an apprentice, you are responsible for: providing a genuine working environment where the apprentice gains practical experience in electrical installation, allowing them paid time off (at least 20% of their working hours, known as "off-the-job training") to attend college or training provider sessions, providing a workplace mentor or supervisor, ensuring they are supervised appropriately for their level of competence (an apprentice must not work unsupervised on live electrical systems), and supporting them through their End-Point Assessment. You also need to sign an apprenticeship agreement and a commitment statement. The apprentice training costs are usually covered by the apprenticeship levy (if your payroll exceeds £3 million) or 95% government-funded (if it does not) — your contribution for a non-levy employer is 5% of the training cost, typically £500 to £800 over the apprenticeship.

What are the IR35 rules and do they affect me?

IR35 is tax legislation designed to catch "disguised employment" — where a worker operates through a limited company but would be an employee if contracted directly. Since April 2021, for medium and large businesses, the client (not the worker) is responsible for determining IR35 status. For small businesses (fewer than 50 employees, turnover under £10.2 million, balance sheet under £5.1 million), the contractor still determines their own status. If you are a small electrical business hiring a contractor through their limited company, the contractor determines their own IR35 status. However, if HMRC disagrees with that determination, both parties can face consequences. The safest approach: if a worker looks, acts, and is treated like an employee, put them on PAYE. Only use CIS or limited company contractors for genuinely independent subcontractors who have multiple clients, provide their own tools, and control their own work.

How do I set up PAYE as a new employer?

Register as an employer with HMRC online — you can do this up to 4 weeks before your first employee start date. HMRC will issue you a PAYE reference number and an Accounts Office reference. You then need payroll software (or a payroll provider) to calculate tax, National Insurance, and pension deductions for each pay period. Free options include HMRC Basic PAYE Tools (for up to 9 employees) and several commercial packages (Xero, QuickBooks, FreeAgent, BrightPay). Each pay period, you run the payroll, issue payslips, report to HMRC via RTI (Real Time Information) on or before payday, and pay the deductions to HMRC by the 22nd of the following month (or 19th if paying by post). Many small employers use an accountant or payroll bureau — the cost is typically £10 to £25 per employee per month, which is well worth it for compliance peace of mind.

BUSINESS GUIDE

Hiring Your First Employee as an Electrician: Everything You Need to Know

Ready to grow? Hiring your first employee transforms your business — but it comes with PAYE, pensions, insurance, contracts, and costs that catch many electricians off guard. This guide covers every step, from legal obligations to the true cost of employment.

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15 min readUpdated 2026-05-18Andrew Moore, Founder of Elec-Mate

Written and reviewed by Andrew Moore, founder of Elec-Mate, against BS 7671:2018+A4:2026, IET Guidance Note 3 and the IET On-Site Guide.

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Key Takeaways

1You must register as an employer with HMRC before your first employee starts work. This includes setting up PAYE (Pay As You Earn) to deduct income tax and National Insurance from their wages and report to HMRC each pay period.
2Employers liability insurance is a legal requirement from the moment you have one employee — the minimum cover is £5 million, and you can be fined £2,500 per day without it.
3Pension auto-enrolment is mandatory. You must enrol eligible employees (aged 22 to State Pension age, earning over £10,000/year) into a qualifying pension scheme and contribute a minimum of 3% of qualifying earnings.
4The true cost of an employee earning £35,000 is approximately £42,000 to £48,000 when you include employers NI (13.8%), pension contributions (3%+), employers liability insurance, tools, training, van costs, and annual leave.
5CIS (Construction Industry Scheme) applies when you pay subcontractors for construction work. Getting CIS vs PAYE wrong can result in significant penalties from HMRC — if HMRC deems a subcontractor should have been an employee, you owe the unpaid tax, NI, and penalties.

01 · Business Guide

When Is the Right Time to Hire?

Hiring your first employee is one of the biggest decisions you will make as a self- employed electrician. It changes everything — your income, your responsibilities, your daily routine, and the structure of your business. Get it right and it doubles your capacity and revenue. Get it wrong and it becomes a financial drain that puts your entire business at risk.

The right time to hire is when the work demand consistently exceeds what you can deliver alone — not for one busy week, but for a sustained period of 3 to 6 months. You should be turning down profitable work regularly, your diary should be booked 2 to 4 weeks in advance, and your turnover should be high enough to cover the true cost of an employee (which is 25% to 35% more than their salary) while leaving you a reasonable profit.

If your annual turnover is £80,000+ and you are turning away £30,000+ of work per year, the numbers usually work. Below that, consider using subcontractors for overflow work before committing to the ongoing cost of an employee.

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02 · Business Guide

Your Responsibilities as an Employer

The moment you hire someone, you take on significant legal obligations. These are not optional — failure to comply results in fines, penalties, and potential prosecution.

Employers liability insurance — minimum £5 million cover, required by law from day one. Fine: up to £2,500 per day without it. The certificate must be displayed or accessible to employees.
PAYE registration — register as an employer with HMRC before your employee starts. Deduct income tax and National Insurance from their wages and report to HMRC each pay period via RTI (Real Time Information).
Pension auto-enrolment — set up a qualifying workplace pension scheme and enrol eligible employees. Minimum employer contribution: 3% of qualifying earnings. Minimum total contribution (employer + employee): 8%.
Employment contract — issue a written statement of employment particulars on or before the first day of employment. This must include pay, hours, holiday entitlement, notice period, and other key terms.
Right to work check — verify that every employee has the legal right to work in the UK before they start. Keep a copy of the relevant documents (passport, visa, share code) for the duration of employment and for 2 years after.
Health and safety — provide a safe working environment, appropriate PPE, and relevant training. If you have 5 or more employees, you must have a written health and safety policy. Risk assessments are required regardless of employee count.
Holiday and statutory rights — employees are entitled to a minimum of 5.6 weeks (28 days for full-time) paid annual leave, statutory sick pay (SSP), and protection against unfair dismissal (after 2 years service).

03 · Business Guide

Setting Up PAYE and Payroll

PAYE is the system HMRC uses to collect income tax and National Insurance from employees. As an employer, you are responsible for calculating deductions, paying employees the net amount, and reporting to HMRC.

Step 1: Register with HMRC — register as an employer online at gov.uk. You can register up to 4 weeks before your first employee starts. HMRC will send your PAYE reference number and Accounts Office reference.
Step 2: Choose payroll software — HMRC Basic PAYE Tools (free, for up to 9 employees) or commercial software (Xero Payroll, QuickBooks, FreeAgent, BrightPay). Alternatively, use a payroll bureau or your accountant (typically £10 to £25 per employee per month).
Step 3: Collect employee information — full name, address, date of birth, National Insurance number, P45 (or starter checklist if no P45), and bank details. The starter checklist determines their initial tax code.
Step 4: Run payroll each period — calculate gross pay, deduct income tax (using the employee's tax code), deduct employee NI, deduct pension contribution, and pay the net amount. Submit a Full Payment Submission (FPS) to HMRC on or before payday.
Step 5: Pay HMRC — pay the total tax, employee NI, and employer NI deductions to HMRC by the 22nd of the following month (19th if paying by cheque). Late payment attracts automatic penalties and interest.

Employers National Insurance is an additional cost on top of the employee's salary. For 2026/27, the rate is 13.8% on earnings above £175 per week (the secondary threshold). On a salary of £35,000, employer NI is approximately £3,760 per year — a cost many new employers forget to budget for.

04 · Business Guide

Pension Auto-Enrolment

Every employer, regardless of size, must comply with pension auto-enrolment. You cannot opt out of this obligation.

Who must be enrolled — eligible jobholders: aged between 22 and State Pension age, earning more than £10,000 per year, and working in the UK. They must be automatically enrolled — you do not need their consent.
Minimum contributions — employer minimum: 3% of qualifying earnings (earnings between £6,240 and £50,270 for 2026/27). Employee minimum: 5%. Total minimum: 8%. You can choose to pay more than the minimum — it is a useful benefit for attracting and retaining good staff.
Choosing a pension provider — NEST (National Employment Savings Trust) is the government-backed scheme and must accept any employer. Other options include The People's Pension, NOW Pensions, and Smart Pension. Setup is usually free; charges are deducted from the pension fund.
Employee opt-out — employees can choose to opt out within one month of enrolment. If they opt out, you must refund their contributions. However, you must re-enrol them every 3 years. You must NOT encourage employees to opt out — this is an offence.

For an employee earning £35,000, the minimum employer pension contribution is approximately £870 per year (3% of qualifying earnings between £6,240 and £35,000 = 3% of £28,760). This is a direct cost to your business on top of salary and employer NI.

05 · Business Guide

Apprentice vs Qualified Hire

Your first hire is a significant decision. The choice between taking on an apprentice and hiring a qualified electrician depends on your workload, budget, and long-term plans.

Apprentice

Salary: £6.40/hour minimum (apprentice rate 2026/27), rising with age and experience. Typically £12,000 to £18,000 per year.
Pros: Lower cost, trainable to your standards, long-term loyalty, government training funding (95% of training costs for non-levy employers).
Cons: Cannot work unsupervised for 3 to 4 years, slows you down initially, requires 20% off-the-job training time, you need patience and teaching ability.
Best for: Established businesses with consistent domestic work where you can supervise an apprentice while working.

Qualified Electrician

Salary: £28,000 to £40,000 per year depending on experience and location.
Pros: Productive from day one, can work independently, doubles your capacity immediately, can handle their own jobs and customers.
Cons: Higher cost, may have established habits (good or bad), may leave for better offers, harder to find reliable candidates.
Best for: Businesses with more work than one person can handle, where you need someone productive immediately.

Some electricians hire a qualified electrician first (for immediate capacity) and then take on an apprentice 6 to 12 months later once the business is stable enough to absorb the training overhead. The qualified hire generates revenue on their own while you supervise the apprentice alongside your own work.

06 · Business Guide

Employment Contract Basics

Since April 2020, all employees and workers must receive a written statement of employment particulars on or before their first day of work. This is your legal obligation — not providing one can result in a tribunal awarding the employee 2 to 4 weeks pay as compensation.

Required on day one: employer and employee name, job title and description, start date, pay rate and frequency, hours of work, holiday entitlement, workplace location, notice period, probationary period (if any), and any other benefits.
Required within 2 months: pension scheme details, collective agreements, training requirements, disciplinary and grievance procedures.
Additional clauses to consider: van use policy, tool ownership (who owns tools purchased by the business), social media policy, confidentiality, restrictive covenants (non-compete clauses — though these are hard to enforce for electricians), and a clause on private work (whether the employee can do side jobs).

Use a template from a reputable source (ACAS, Citizens Advice, or your HR advisor) and customise it. Do not download a generic template from the internet without checking it is current and compliant with UK employment law. If in doubt, spend £200 to £500 on an HR consultant to review your contract — it is cheap insurance against tribunal claims.

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07 · Business Guide

CIS vs PAYE: Subcontractors vs Employees

One of the most common (and expensive) mistakes small electrical businesses make is treating someone as a self-employed subcontractor under CIS when HMRC considers them an employee who should be on PAYE.

If HMRC decides a worker was an employee, you owe: all the PAYE tax and National Insurance that should have been deducted, employer National Insurance on all payments made, interest on the unpaid amounts, and potentially penalties of up to 100% of the tax due for deliberate non-compliance.

This can be financially devastating. A worker paid £35,000 under CIS who should have been on PAYE could result in a bill of £15,000 to £20,000 in back-tax, NI, and penalties.

Genuine Subcontractor (CIS)

Controls when, where, and how they work. Provides their own tools and equipment. Can send a substitute to do the work. Has their own business (multiple clients, own insurance, own van). Invoices you for completed work. Bears financial risk (fixed price for a job, responsible for defects). Is not integrated into your business structure.

Employee (PAYE)

Works set hours determined by you. Uses your tools and van. Cannot send a substitute. Works exclusively or mainly for you. Is paid a regular wage (hourly, daily, or weekly). You direct where they go and what they do. Is integrated into your business — wears your uniform, answers to your customers. Has no financial risk beyond their employment.

The CIS deduction rates: 20% for CIS-registered subcontractors (the majority), 30% for unregistered subcontractors, and 0% for subcontractors with gross payment status. You must verify all subcontractors with HMRC before making the first payment and submit a monthly CIS return.

08 · Business Guide

IR35: When Contractors Use Limited Companies

IR35 applies when a worker provides their services through an intermediary (usually their own limited company) but would be an employee if contracted directly. The legislation aims to ensure they pay the same tax as an employee.

Small business exemption — if your business has fewer than 50 employees, annual turnover under £10.2 million, and a balance sheet under £5.1 million (meeting 2 of 3 criteria), you are a small business. The contractor is responsible for determining their own IR35 status. You are not liable for their tax classification.
Medium/large business rules — if your business exceeds the small business thresholds, you must assess the IR35 status of every contractor, provide a Status Determination Statement, and account for PAYE if the engagement is inside IR35.
Practical advice — most small electrical businesses do not need to worry about IR35 in practice. If you are hiring a one-person limited company electrician to work alongside you every day, using your tools, on your jobs, under your direction — that is inside IR35 and they should be on PAYE (or CIS if genuinely self-employed without a limited company). Reserve IR35/limited company arrangements for genuinely independent specialist contractors on specific projects.

09 · Business Guide

The True Cost of an Employee vs a Subcontractor

Many new employers budget only for the salary. The true cost is significantly higher.

Employee (£35,000 salary)

Gross salary: £35,000
Employer NI (13.8%): £3,760
Pension (3% qualifying): £870
Employers liability insurance: £400
Tools and equipment: £1,000
Van costs (share or second van): £3,000
Training and CPD: £500
Workwear and PPE: £300
Holiday cover (28 days at cost): £3,770
Total: approximately £48,600/year

Subcontractor (equivalent)

Day rate: £200/day x 220 days: £44,000
Employer NI: £0
Pension: £0
Insurance: Their own
Tools: Their own
Van: Their own
Training: Their own
Holiday pay: £0
CIS admin: £200
Total: approximately £44,200/year

At first glance, a subcontractor appears cheaper. But there are important trade-offs: you have less control over their work, they can leave at any time, they may not share your standards, and you are paying a premium for their flexibility. An employee, over time, becomes more productive, more loyal, and more aligned with your business.

The right choice depends on the nature of your work. Overflow on a single large project? Subcontractor. Consistent daily domestic work that you need covered reliably? Employee.

10 · Business Guide

For Electricians: Scale Your Business with Confidence

Hiring your first employee is a growth milestone. Having the right tools ensures your team delivers the same quality and professionalism you built your reputation on.

Consistent Quoting

Use the quoting app to ensure every team member quotes accurately and consistently. No more underquoting because someone forgot to include the cost of an employee.

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Your team can complete EICs and Minor Works on site with Elec-Mate. Professional certificates from every member of your team, all stored centrally.

Apprentice Training

If you take on an apprentice, the Elec-Mate study centre supports their learning with structured modules covering Level 2 and Level 3 electrical installation. On-the-job training supported by structured study.

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Frequently Asked Questions About Hiring Employees

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Hiring Your First Employee as an Electrician: Everything You Need to Know

Key Takeaways

When Is the Right Time to Hire?

Get the BS 7671 A4:2026 Cheat Sheet — free

Your Responsibilities as an Employer

Setting Up PAYE and Payroll

Pension Auto-Enrolment

Apprentice vs Qualified Hire

Apprentice

Qualified Electrician

Employment Contract Basics

Price the job in minutes, not evenings

CIS vs PAYE: Subcontractors vs Employees

Genuine Subcontractor (CIS)

Employee (PAYE)

IR35: When Contractors Use Limited Companies

The True Cost of an Employee vs a Subcontractor

Employee (£35,000 salary)

Subcontractor (equivalent)

For Electricians: Scale Your Business with Confidence

Consistent Quoting

Team Certification

Apprentice Training

Scale your electrical business with professional tools

Frequently Asked Questions About Hiring Employees

When is the right time to hire my first employee?

How much does employers liability insurance cost?

What is the difference between CIS and PAYE for subcontractors?

Do I need to auto-enrol an apprentice into a pension?

What training am I responsible for if I hire an apprentice?

What are the IR35 rules and do they affect me?

How do I set up PAYE as a new employer?

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What electricians say

One App for Everything!

Fantastic app for electricians

Absolutely amazing

Trusted by electricians across the UK

Grow Your Team with Professional Tools