Previously: Part 4 - Customer Acquisition That Actually Works
The uncomfortable reality:
of first-time hires don't work out within 6 months—costing the contractor £8,000-15,000 in wasted wages, training, and lost productivity.
And most contractors hire too early, not too late.
There's a moment in every successful contractor's journey when you realise you can't do it all yourself anymore. You're turning down work. Working 70-hour weeks. Missing family events. Something has to change.
So you hire someone. And if you get it wrong—wrong person, wrong timing, wrong structure—you'll spend the next year regretting it whilst haemorrhaging cash and sanity.
This guide shows you exactly when to hire, who to hire, how much it actually costs (spoiler: way more than their wage), and how to avoid the catastrophic mistakes that bankrupt otherwise successful contractors.
Are You Actually Ready? (The Honest Assessment)
Most contractors hire too early because they're busy. Being busy isn't the same as being ready.
You're Ready to Hire When ALL of These Are True:
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Consistent work pipeline: 3+ months of work lined up (not just one big job)
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Cash reserves: 6 months operating expenses saved (can afford slow periods)
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Turning down work: Regularly saying no to £3,000+ jobs because you're fully booked
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Systems in place: Written processes for how jobs are done (not just in your head)
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Mental readiness: You're willing to manage someone, not just have a clone of yourself
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Profitable as sole trader: Making £50,000+ profit per year (proves business viability)
You're NOT Ready If...
- You've had a busy 6 weeks and assume it'll continue (it won't)
- You think hiring will solve your pricing problems (it won't—it'll make them worse)
- You can't afford to pay them if work dries up for 2 months
- You're hiring because you're exhausted (fix your pricing/boundaries instead)
- You think they'll be productive from day one (they won't—expect 3-6 months)
The True Cost of Hiring (It's Not Just Their Wage)
This is where contractors get obliterated financially. You think "I'll pay them £30,000/year, I can afford that."
Wrong. That employee costs you £45,000-50,000 once you include everything. Here's the real maths:
| Cost Item | Annual Cost | Notes |
|---|---|---|
| Gross Salary | £30,000 | What they actually take home (before tax) |
| Employer's NI (13.8%) | £3,794 | You pay this on top of their salary |
| Pension Contributions (3% minimum) | £900 | Legal requirement for auto-enrolment |
| Employers' Liability Insurance | £400-800 | Legally required once you employ anyone |
| Holiday Pay (5.6 weeks) | £3,230 | You pay them whilst they're not working |
| Tools/PPE/Uniform | £800-1,500 | Initial setup + replacements |
| Training/Courses | £500-1,000 | Keeping qualifications current |
| Van (if required) | £3,600-6,000 | Second van on finance + insurance + fuel |
| Lost Productivity (Year 1) | £5,000-8,000 | You're training them, not earning whilst you do |
| Payroll/HR Software | £200-400 | Or accountant fees to handle payroll |
| TOTAL FIRST YEAR COST | £48,424 - £52,624 | Nearly double their gross salary |
How Much Revenue They Need to Generate
To break even on a £30,000 salary employee (true cost £50,000), at 30% profit margin:
£50,000 ÷ 0.30 = £166,667 revenue per year
That's £3,205 per week they need to bill
Can they realistically generate that much billable work? If not, you're subsidising them from your own pocket.
Employee vs Subcontractor: The Critical Decision
Before you hire anyone, understand the difference. HMRC is brutal about this—get it wrong and you'll owe thousands in back taxes.
| Factor | Employee | Subcontractor |
|---|---|---|
| Control | You tell them what to do and how to do it | They decide how to complete the work |
| Equipment | You provide tools/van | They bring their own tools |
| Financial risk | You pay them regardless of profit | They take risk (could make more or less) |
| Exclusivity | Work only for you | Can work for multiple contractors |
| Holiday/sick pay | You pay it | They handle their own |
| Pension | You contribute | Their responsibility |
| Tax | You deduct PAYE, pay NI | They invoice you, handle own tax |
| Notice period | 1 week minimum (legal requirement) | None (unless contracted) |
| Flexibility | Hard to let go (employment law protections) | Easy to stop using (just don't call them) |
| True cost (£30k salary equivalent) | £50,000/year | £30,000/year (they invoice £30k, you pay £30k) |
The IR35 Trap
You can't just call someone a subcontractor to avoid tax. If they:
- Only work for you
- Use your tools and van
- Work set hours you dictate
- Can't send a substitute to do the work
HMRC will class them as an employee—and you'll owe years of back-taxes, NI, and penalties (£10,000-30,000+ is common).
If in doubt, use HMRC's employment status checker.
The Subcontractor Advantage (Start Here)
For most contractors, subcontractors are better than employees—especially at first.
Why:
- Lower cost (no NI, pension, holiday pay)
- Flexibility (use them when busy, don't when quiet)
- Less admin (no payroll, no HR, no employment law nightmares)
- They're already skilled (no 6-month training period)
Start with subbies. Only hire employees when you've got consistent 12+ month work pipeline and need full control.
Finding the Right Person (Harder Than You Think)
Good tradespeople are rare. Great tradespeople who'll work for someone else are rarer still. Here's where to look:
| Source | Quality | Best For |
|---|---|---|
| Referrals from Trade Network | ⭐⭐⭐⭐⭐ | Experienced tradespeople looking for stability |
| Apprentice from College | ⭐⭐⭐ (variable) | Long-term investment, train them your way, lower cost (£5-12/hr) |
| Indeed/Reed | ⭐⭐⭐ | Wide reach, lots of applicants (quality varies massively) |
| Facebook Trade Groups | ⭐⭐⭐⭐ | Active tradespeople, local, often looking for work |
| Poaching from Competitors | ⭐⭐⭐⭐ (risky) | Experienced, known quantity—but expensive and can backfire |
| Career Changers | ⭐⭐ (high risk) | Older, mature, reliable—but learning curve is steep |
What to Look For (In Order of Importance)
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1. Reliability: Do they turn up on time? Every time? This matters more than skill.
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2. Customer manner: Will your customers like them? Skill is useless if customers complain.
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3. Attitude: Do they want to learn and improve, or coast?
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4. Clean driving licence: Non-negotiable if they're driving your van.
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5. Relevant qualifications: Level 3 NVQ, Part P, Gas Safe (depending on trade).
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6. Experience: 2+ years is ideal. Fresh out of college = higher training cost.
Red Flags to Avoid
- Can't provide references: Run a mile. Seriously.
- Badmouths previous employers: They'll do the same to you
- Vague about qualifications: "I've done the course, just waiting for certificate" = hasn't done it
- Unreliable during hiring process: Late to interview, doesn't reply to messages = how they'll be as employee
- Wants cash in hand: You're now complicit in tax fraud. Don't.
The Legal Stuff You Can't Ignore
Employ someone without doing this properly, and you're opening yourself up to tribunal claims, HMRC investigations, and eye-watering fines.
Legal Requirements Checklist
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Written contract of employment: Legally required within 2 months. Use a template from ACAS or pay a solicitor £200-400.
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Register as employer with HMRC: Get PAYE reference number before first payday.
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Employers' Liability Insurance: Legally required. £500-800/year. Non-negotiable.
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Workplace pension (auto-enrolment): Must set up within 3 months. Use NEST (free) or similar.
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Right to work check: Passport or birth certificate + NI number. Keep copies. £20,000 fine if you don't.
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Health & safety policy: Required if you employ 5+ people (write it down even if just one).
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DBS check (optional but recommended): If they'll work in customers' homes. £25-50.
Get Help With This
Don't DIY employment law unless you're confident. One mistake costs more than professional help.
Recommended:
- Payroll: Use software (Xero, QuickBooks, Sage) or outsource to accountant (£20-40/month)
- HR policies: Peninsula, Croner, or Breathe HR (£30-60/month for templates + advice line)
- Contracts: ACAS templates (free) or solicitor (£200-400 one-time)
The First 90 Days: Setting Them Up to Succeed
Most contractors hire someone and expect them to be productive immediately. Then they're frustrated when the new hire is slow, makes mistakes, or doesn't "get it."
The problem isn't them. It's you.
You didn't train them properly. Here's how to do it right:
90-Day Onboarding Plan
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Week 1: Shadow you everywhere. They watch, you explain. They're learning your standards, processes, customer manner.
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Week 2-4: They do, you supervise. Simple tasks first. Check work before customer sees it. Correct mistakes kindly.
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Week 5-8: Gradual independence. They handle straightforward jobs solo. You're available for questions. Spot-check quality.
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Week 9-12: Fully independent on standard jobs. You're working separately. Weekly check-ins on progress, problems, development.
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Month 4-6: Build competence in complex work. They're tackling bigger jobs, trickier problems. Still learning but largely self-sufficient.
The Probation Period (Use It)
Always include a 6-month probation period in the contract. During probation:
- You can terminate with 1 week's notice (vs 1 month+ after probation)
- They can't claim unfair dismissal (unless discrimination)
- You have flexibility if it's not working out
If they're not working out by month 3, cut your losses. Don't keep someone bad hoping they'll improve. They won't.
Common First-Hire Mistakes (And How to Avoid Them)
Mistake 1: Hiring a Mate
The problem: Your mate needs a job. You need help. Seems perfect. It's not.
What happens: Can't manage them properly (they're your mate). Can't fire them when it's not working (awkward). They take liberties (late, sloppy work, long lunches).
The fix: Hire based on competence, not friendship. If you do hire a mate, set crystal-clear boundaries from day one.
Mistake 2: Paying Too Much
The problem: You pay them what you'd want to be paid (£18-20/hour). Can't afford it when work slows. Have to let them go.
The fix: Pay market rate for their skill level. Qualified electrician: £14-17/hour. Apprentice: £5-12/hour. You can give raises when they prove themselves.
Mistake 3: No Written Processes
The problem: Everything's in your head. They have to ask you constantly. You get frustrated they "don't know" obvious things.
The fix: Document your processes before hiring. "How we quote jobs." "How we communicate with customers." "How we handle callbacks." Reduces questions by 80%.
Mistake 4: Not Managing, Just Working Alongside
The problem: You're not the boss, you're two tradespeople working separately. No accountability, no standards, no leadership.
The fix: Have weekly one-on-ones. Set expectations. Give feedback. Review work quality. Actually manage them.
Mistake 5: Keeping a Bad Hire Too Long
The problem: They're not great, but you've invested time training them. Maybe they'll improve? (They won't.)
The fix: If it's not working by month 3, end it. Sunk cost fallacy kills businesses. Cut losses, try again.
The Apprentice Alternative
Can't find (or afford) an experienced tradesperson? Consider an apprentice.
| Factor | Experienced Hire | Apprentice |
|---|---|---|
| Salary | £28,000-35,000 | £12,000-18,000 (age dependent) |
| Productivity (Year 1) | 70-80% | 20-30% |
| Training required | 4-8 weeks | 2-4 years |
| Government funding | £0 | £3,000-9,000 (training costs covered) |
| Loyalty | Medium (might leave for more money) | High (you trained them, feel obligation) |
| Bad habits | Hard to untrain | Clean slate (train your way) |
| Risk | Medium | Higher (might not work out, waste 2 years) |
When Apprentices Work Well
Good fit if:
- You've got consistent work pipeline (2+ years minimum)
- You enjoy teaching and have patience
- You want to build long-term team culture
- Lower immediate cost matters more than immediate productivity
Bad fit if:
- You need someone productive immediately
- You're impatient or bad at explaining things
- Work pipeline is uncertain
The Decision Tree: Should You Hire?
Answer These Questions Honestly:
- Do you have 6+ months operating expenses saved? (YES/NO)
- Have you turned down £10,000+ of work in the last 3 months? (YES/NO)
- Are you confident work will continue at this level for 12+ months? (YES/NO)
- Can you afford to pay £50,000/year for an employee (or £30,000 for subcontractor)? (YES/NO)
- Do you have documented processes they can follow? (YES/NO)
- Are you willing to spend 20% of your time managing/training them? (YES/NO)
4-5 YES answers: Consider subcontractors first, employee later.
2-3 YES answers: Not ready. Fix cash flow, systemise, build pipeline first.
0-1 YES answers: Absolutely not ready. Hiring now will destroy your business.
The Bottom Line
Hiring your first employee is the biggest decision you'll make as a contractor. Get it right, and you'll double your capacity, income, and freedom. Get it wrong, and you'll lose £15,000+ and waste a year of your life managing the wrong person.
The key points:
- Hire when you have consistent work pipeline + cash reserves, not just when you're busy
- Understand true costs (£50k for a £30k employee)
- Start with subcontractors for flexibility, move to employees when ready
- Invest heavily in first 90 days—training pays back tenfold
- Use probation period to cut losses on bad hires quickly
- Document processes before hiring, or you'll answer the same questions 100 times
Most importantly: don't rush it. Better to be busy and profitable as a sole trader than struggling with an employee you can't afford.
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