Can a Sole Trader Employ Someone?

"I run a one-man band, so I can't actually employ anyone, can I?" A driving instructor asked us this in genuine sincerity a few months ago, having outgrown his own diary and turned away a fourth new pupil that week alone. He'd assumed, entirely reasonably given the phrase "sole trader," that the "sole" part legally meant working alone forever. It doesn't. It never has. And clearing up that single misunderstanding changed the entire trajectory of his business within a year.

This is one of the more persistent myths we encounter here at Cannon Accountants, and it holds back a genuine number of sole traders across Folkestone, Dover, Canterbury, Ashford, and Deal from growing at exactly the moment they're ready to. So let's answer this properly and completely: yes, a sole trader can absolutely employ someone, and here's everything genuinely involved in doing it right.

Can a Sole Trader Legally Employ Staff?

What UK law actually allows

"Sole trader" describes your business structure, meaning you personally, rather than a separate legal entity, own and run the business and are personally responsible for its debts. It says nothing whatsoever about how many people you can employ. You remain a sole trader, in exactly the same legal and tax sense, whether you work entirely alone or manage a team of ten. The "sole" refers to ownership, not headcount.

How this differs from being VAT registered or trading under a certain size

It's worth separating this clearly from other thresholds you may have come across. VAT registration, for instance, is tied to turnover, not employee numbers. There's no size limit, turnover cap, or profit threshold that forces a sole trader to restructure as a limited company purely because they've taken on staff. Plenty of substantial, multi-employee businesses across Kent continue trading as sole traderships indefinitely, entirely by choice.

Do I Need to Register as an Employer With HMRC?

When and how to register

Yes, and this is a genuine, necessary first step. Before your first employee's first payday, you need to register as an employer with HMRC, which sets you up to run PAYE, the system through which Income Tax and National Insurance are deducted from your employee's wages and reported to HMRC. Registration can be done online and typically takes a few working days to process, so it's worth doing this well ahead of your new employee's actual start date rather than leaving it until the week they begin.

What happens if you miss this step

Failing to register, or registering late, can result in penalties, and more immediately, means you're simply not equipped to pay your employee correctly and legally from day one. A retail client of ours near Maidstone once brought on a new team member with barely a week's notice; we managed to get his employer registration through in time, but it was considerably more stressful than it needed to be, purely because the process was left until the very last moment.

How Does Payroll Actually Work for a Sole Trader Employer?

Setting up PAYE

Once registered, you'll need a system for running payroll: calculating each employee's gross pay, deducting the correct Income Tax and National Insurance, and reporting this to HMRC through something called Real Time Information, submitted on or before every single payday. This can be managed through payroll software, or handled on your behalf by an accountant, which is how the great majority of our clients choose to manage it, particularly in their first year or two of employing staff.

What happens every pay period

Each pay period, you calculate wages, make the necessary deductions, submit your RTI report to HMRC, and pay your employee their net wage alongside a proper payslip. You'll also need to pay HMRC the tax and National Insurance you've deducted, typically monthly, alongside any employer's National Insurance contributions due on top. A landscaping client of ours near Ashford, taking on his first employee last year, found that once this rhythm was properly established with our support, it became a genuinely routine, low-effort part of his monthly admin rather than the daunting prospect it had initially seemed.

What Are a Sole Trader's Legal Responsibilities as an Employer?

Contracts, pay, and working time

Every employee is legally entitled to a written statement of employment particulars, covering pay, hours, holiday entitlement, and notice periods, provided from their first day of employment. You're also required to comply with working time regulations, including rest breaks and maximum average working hours, and to provide statutory holiday entitlement, currently 5.6 weeks a year for a full-time employee, calculated proportionately for part-time staff.

Health and safety obligations

As an employer, you take on a genuine legal duty of care for your employee's health and safety while they're working for you, which can range from straightforward, common-sense precautions for an office-based role to considerably more detailed requirements for physical trades. A builder's merchant client of ours near Ashford, employing warehouse staff, needed a proper, documented risk assessment covering manual handling and equipment use, something he hadn't needed to think about at all while working alone.

Do I Have to Pay at Least the National Minimum Wage?

The current rates

Yes, without exception, regardless of how small your business is or how new the role. From April 2026, the National Living Wage for workers aged 21 and over is £12.71 an hour. Workers aged 18 to 20 must receive at least £10.85 an hour, and those aged 16 to 17, along with apprentices, at least £8.00 an hour. These rates apply to every employee, full-time or part-time, and there's no exemption for a small sole trader employer simply because you're managing the payroll yourself for the first time.

Common mistakes that lead to underpayment

Underpayment doesn't always happen through paying a rate that's obviously too low. It often creeps in through deductions, unpaid trial shifts, time spent travelling between job sites not being counted as working time, or uniform costs deducted from wages that push effective pay below the minimum threshold. A hairdresser client of ours near Hythe hadn't realised that requiring staff to purchase branded uniform items themselves, without reimbursement, could technically bring their effective hourly pay below the minimum wage threshold if not handled correctly; a quick adjustment to her policy resolved it entirely once flagged.

Do I Need to Set Up a Workplace Pension?

Auto-enrolment explained

In most cases, yes. If your employee is aged between 22 and State Pension age and earns above £10,000 a year, roughly £192 a week, you're legally required to automatically enrol them into a workplace pension scheme and make employer contributions. The minimum total contribution is currently 8% of qualifying earnings, the band between £6,240 and £50,270 a year, typically split with a minimum of 3% coming from you as the employer and the remainder from the employee, alongside tax relief.

Who can be excluded, and why

Employees earning below £6,240 a year, or those outside the qualifying age range, aren't automatically enrolled, though those earning between £6,240 and £10,000 have the right to opt in if they choose, and you'd then need to contribute accordingly. A contractor client of ours near Canterbury, taking on a part-time apprentice working modest hours, found his new employee fell below the automatic enrolment threshold, though we made sure he understood the opt-in right clearly, since it's a genuine entitlement his employee could have exercised regardless.

What Insurance Do I Need Before Hiring Someone?

Employer's Liability Insurance

This is a genuine legal requirement, not an optional extra. Employer's Liability Insurance covers you if an employee is injured or becomes ill as a result of working for you, and UK law requires a minimum of £5 million of cover for the vast majority of businesses. Costs vary considerably depending on your trade and the nature of the work involved, but for many low-risk, office-based sole traders taking on a first employee, it's a genuinely modest annual cost.

What happens if you don't have it

Trading without required Employer's Liability Insurance carries a fine of up to £2,500 for every day you're without cover, and the Health and Safety Executive can, and does, check. A plumber client of ours near Folkestone arranged this properly before his new apprentice's very first day, precisely to avoid any gap in cover, and it's genuinely one of the very first practical steps we walk every new employer client through.

Can a Sole Trader Employ a Family Member?

What's genuinely allowed

Yes, entirely, and it's a common, perfectly legitimate arrangement, a spouse handling admin and invoicing, an adult child helping out during busier periods. The same employment rules apply regardless of the relationship: proper contracts, at least the National Minimum Wage, correct PAYE reporting, and genuine, demonstrable work actually being carried out for the pay received.

Why HMRC pays closer attention here

This last point is genuinely important. HMRC does look more closely at payments to family members specifically, because historically it's been an area occasionally used to artificially shift income for tax advantage rather than reflecting genuine employment. A café owner client of ours near Whitstable employs her adult daughter for a genuinely defined role, clear hours, and market-rate pay, properly documented throughout; this kind of clear, well-evidenced arrangement causes no issue whatsoever, but it's worth keeping records specifically robust in this area precisely because it does attract closer scrutiny than an arrangement with an unrelated employee would.

Can a Sole Trader Employ Someone Part-Time or Casually?

Zero-hours and casual arrangements

Yes, sole traders can employ staff on a part-time, casual, or even zero-hours basis, and this is genuinely common among seasonal or fluctuating trades across Kent, hospitality businesses along the coast, for instance, needing extra hands during the busier summer months.

What obligations still apply regardless of hours

It's worth being clear that reduced or irregular hours don't reduce your legal obligations proportionately across the board. National Minimum Wage still applies for every hour genuinely worked, holiday entitlement still accrues, calculated proportionately, and a written statement of employment particulars is still required. A café owner near Deal, bringing on casual weekend staff for her busiest season, still needed to run these through proper payroll and provide the same basic legal protections as she would for a full-time team member.

What's the Difference Between Employing Someone and Hiring a Subcontractor?

The employment status tests HMRC actually uses

This is genuinely one of the most important distinctions in this entire topic, and getting it wrong is a common, costly mistake. HMRC looks beyond whatever label you've used and considers the actual working relationship: does the person have to do the work themselves, or can they send someone else in their place? Do you control how, when, and where the work is done, or does the individual have genuine independence over that? Are they using their own equipment and bearing their own financial risk, or are they integrated into your business much like an employee would be?

Why getting this wrong is a genuinely costly mistake

If someone you've treated as a self-employed subcontractor is later determined by HMRC to have genuinely been an employee, or a worker with employment rights, you can be held liable for backdated PAYE, National Insurance, and potentially penalties, sometimes stretching back years. A builder client of ours near Ashford had been paying a "subcontractor" who, in practice, worked exclusively for him, used his tools, and followed his instructions on every job, much closer to an employee relationship than genuine self-employment. We helped him properly formalise the relationship before it became a genuine problem, rather than after HMRC had raised it directly.

Can a Sole Trader Take on an Apprentice?

How apprenticeships work for small employers

Yes, and it's a genuinely popular route for tradespeople across Kent specifically. Apprentices are employees, entitled to at least the apprentice minimum wage, currently £8.00 an hour for those under 19 or in their first year, rising to the appropriate age-based rate thereafter, alongside proper contracts and the same core employment protections as any other member of staff.

Funding and support available

Government-funded apprenticeship schemes can meaningfully reduce the cost of training, and in some cases cover it entirely for smaller employers, alongside structured support connecting you with a suitable training provider. A plumber client of ours near Folkestone took on his first apprentice largely through this route, finding the available funding made what had felt like a significant financial commitment considerably more manageable than he'd anticipated.

How Much Does It Actually Cost to Employ Someone?

Beyond the headline wage

It's worth looking honestly beyond the hourly rate itself. Employer National Insurance applies on earnings above £5,000 a year, currently at 15%. Auto-enrolment pension contributions, if applicable, add a further minimum of 3% of qualifying earnings. Employer's Liability Insurance adds a modest but genuine annual cost. And there's the less tangible cost of your own time spent on payroll administration, however streamlined that process becomes.

A worked example

Here's where it genuinely helps to see real numbers. Say you take on your first employee at 30 hours a week on the National Living Wage of £12.71 an hour, giving an annual gross wage of roughly £19,828. Employer National Insurance on the portion above £5,000 would come to around £2,224 at the current 15% rate. However, most small employers qualify for the Employment Allowance, which lets you reduce your annual employer National Insurance bill by up to £10,500, meaning a genuine number of sole traders taking on their first employee end up paying little to no employer National Insurance at all, once this relief is properly applied. Add roughly £408 in minimum pension contributions and a modest insurance premium, and the realistic additional cost beyond the wage itself, for many first-time small employers, comes to considerably less than the "add 20 to 30%" rule of thumb often quoted generically online. A driving instructor client of ours, taking on his first part-time employee this year, was genuinely relieved to discover this once we walked through his actual figures together.

Does Hiring Staff Mean I Should Become a Limited Company?

What changes, and what doesn't

Not automatically, and this is worth stating plainly. Plenty of sole traders across Kent employ staff, sometimes several, while remaining sole traders indefinitely. Employing people changes your obligations as an employer; it doesn't change your underlying business structure or force incorporation.

When it's genuinely worth reconsidering

That said, as your team and your overall risk profile grow, the personal liability that comes with sole trader status, meaning you're personally responsible for the business's debts and obligations, without the legal separation a limited company provides, becomes a more significant consideration. If you're managing a growing team, taking on more contractual risk, or your profit has grown to a level where a limited company's tax treatment might genuinely suit you better, it's worth a proper, dedicated conversation about whether incorporating makes sense, rather than deciding this in the context of hiring alone.

So, Can a Sole Trader Employ Someone? A Clear Answer

Our honest recommendation

Yes, unambiguously, and it's one of the most natural next steps for a growing sole trader business across Folkestone, Dover, Canterbury, Ashford, and Deal. The genuine requirements, registering as an employer, running proper payroll, paying at least the National Minimum Wage, arranging pension auto-enrolment where it applies, and securing Employer's Liability Insurance, are all entirely manageable, particularly with proper support in place from the outset.

Getting set up properly from day one

The businesses that navigate this most smoothly are almost always the ones that get the fundamentals right before their new employee's first day, rather than reconstructing compliance retrospectively under pressure. As a two-partner practice based in Folkestone, we walk every client through exactly this process, from employer registration through to their very first payroll run, so nothing is left to chance.

If you're a sole trader across Kent considering taking on your first employee, or you already employ staff and want to make sure everything's genuinely set up correctly, get in touch with us at Cannon Accountants. We'll help you get it right from day one.