Running your business solo can be empowering—but it can also become overwhelming. If you’re hitting capacity or turning down work, you’re likely wondering: can a sole trader have employees? Fortunately, the answer is yes, and there’s nothing illegal about it.
A lot of UK sole traders assume they can’t have help—but that’s simply incorrect. In fact, hiring help could be the smartest way to grow your income, reduce stress, and take on bigger projects without changing your business structure.
We’re here to break down the answer and cover everything step by step. From legal responsibilities and payroll setup to hiring tips and common pitfalls, you’ll get clear, practical advice tailored to UK sole traders who are ready to grow.
We’ll show you how to expand your team while maintaining your sole trader setup.
What Does ‘Sole Trader’ Really Mean?
Many people think being a sole trader means you must work alone. This is a myth. In the UK, “sole trader” refers to your business structure, not your workforce size.
You both own and run the business as a sole trader, making you personally liable for taxes and debts. But nothing stops you from hiring employees to help.
The key is understanding your responsibilities when becoming an employer.
Can a Sole Trader Have Employees Legally in the UK?
Yes, a sole trader can have employees. UK law allows sole traders to hire staff as long as they follow employment rules. You’ll need to register with HMRC, set up payroll, and meet employer obligations.
It offers more room to grow your business without altering your sole trader status.
Can Sole Traders Hire Employees—and If So, Who?
You may employ full-time, part-time, or temporary workers. Many sole traders also work with apprentices or trainees.
You may also hire subcontractors, but beware: if they work under your direction, HMRC may see them as employees.
Why Would a Sole Trader Hire Employees?
You may be wondering, can a sole trader have employees—and why would they need to? The answer lies in the demands of running a growing business. Running your business as a sole trader means managing all aspects yourself. But when your business begins to expand, doing everything yourself can limit your success and impact your well-being.
Hiring staff can offer several powerful benefits for sole traders:
Serve more clients or take on larger projects: With the support of one or more employees, you can increase your service capacity. This helps you accept bigger contracts or multiple jobs at once—without compromising on quality or deadlines.
Reduce your personal workload: Handling admin, customer service, or hands-on delivery alone can be exhausting. Giving tasks to others helps you prioritize your strengths and stay fresh.
Add expertise where you’re less experienced; no one excels at everything. Hiring staff with specialised skills—whether in marketing, tech, finance, or operations—can strengthen your business and improve efficiency.
Grow your business faster: Employees provide the manpower needed to scale. With the right team in place, you can expand your offerings, improve client satisfaction, and boost revenue—all while remaining a sole trader.
Software Tools to Make Hiring Easier for Sole Traders
Managing employees doesn’t need to be stressful. Popular tools include:
- BrightPay or QuickBooks Payroll – for PAYE and payslips
- BreatheHR – for managing leave and contracts
- Clockify – for tracking time
- Nest Pensions – for auto-enrolment
Step-by-Step Guide: Hiring Employees as a Sole Trader
Are sole traders able to hire and manage employees efficiently? Yes—and here’s exactly how to do it while staying compliant with UK laws:
Notify HMRC of your business
Register with HMRC as an employer prior to paying your employees. You’ll receive a PAYE reference number to manage tax and National Insurance.
- Set Up Payroll
Select HMRC-compliant payroll software like Xero, QuickBooks, or the free Basic PAYE Tools for managing wages. It helps calculate taxes and submit RTI reports.
- Get Employers’ Liability Insurance
Hiring someone triggers this legal requirement immediately. It must cover at least £5 million in case of employee illness or injury.
- Provide a Written Statement
Give employees working more than one month a written statement outlining job title, duties, pay, hours, and start date.
- Confirm right to work status
Make sure each team member has valid UK work rights. Keep copies of passports or visa documents for compliance.
- Enrol in a Pension Scheme
If an employee is 22 or over and earns £10,000+, auto-enrol them in a workplace pension and make employer contributions.
- Keep Employment Records
Maintain records like payslips, contracts, holiday/sick leave, and pension details for at least six years.
- Follow Employment Laws
You must pay the minimum wage, offer statutory leave, provide a safe workplace, and comply with equality laws.
Costs to Consider Before Hiring Staff
When considering growth, many business owners ask: can a sole trader have employees without breaking the bank? Yes, but it’s essential to understand the full cost of employing staff.
Hiring involves more than just paying a wage. Running your business as a sole trader means budgeting for:
- Staff NI payments
- Auto-enrolment pension payments
- Holiday pay and statutory sick pay
- Payroll and HR software subscriptions
- Employers’ liability insurance premiums
Additionally, while wages are a cost, they also bring a financial benefit. Wages paid to employees are tax-deductible, which means they reduce your taxable income and overall tax bill.
You must also maintain proper financial records—including payslips, tax deductions, and NI contributions—for at least six years, as required by HMRC.
These costs can impact your cash flow if not properly planned. That’s why understanding all expenses is crucial.
Do You Lose Sole Trader Status After Hiring Employees?
No. Hiring workers doesn’t change your sole trader status. There’s no change to your status or how you pay tax.
You don’t need to become a limited company unless you choose to.
Common Mistakes Sole Traders Make When Hiring
Can a sole trader have employees without legal trouble? It’s doable— but only by steering clear of these common traps. Many sole traders slip up by not fully understanding their responsibilities as employers.
Hiring without proper contracts
Failing to provide written terms can breach employment law and lead to disputes.
Failing to register with HMRC in time
You must register as an employer before the first payday to avoid penalties.
Misclassifying contractors as employees
Treating a worker as self-employed when they should be on payroll can trigger HMRC investigations.
Overlooking business insurance requirements
Hiring your first employee triggers a legal obligation to hold employers’ liability insurance.
Missing pension obligations
If eligible staff aren’t enrolled in a pension scheme, you could face serious fines.
Alternatives to Hiring Employees
If you’re not quite ready to commit to hiring staff full-time, there are flexible options to help you grow your business. You may still be wondering, can a sole trader have employees, or should you consider alternatives first?
Here are some common solutions:
Freelancers or Independent Contractors
Hiring freelancers can give you access to specialised skills without the obligations that come with employing staff. They handle their own taxes and insurance, making it easier to manage. However, be careful—if they work under your control regularly, HMRC may still classify them as employees.
Casual or Seasonal Workers
Need extra hands during busy seasons? Hiring casual or temporary workers can ease the pressure without long-term commitments. They’re still considered employees for legal purposes, but with more flexible working terms.
Is It Better to Outsource Instead of Hiring?
Some sole traders outsource work to freelancers or virtual assistants. This avoids payroll and pension duties. However, if the work is regular or directed by you, HMRC may consider them employees.
Outsourcing is ideal for short-term or specialist tasks. Hiring is better for reliable, long-term help.
Benefits and Challenges of Hiring as a Sole Trader
Is managing employees effectively feasible for a sole trader? Yes—but like any business decision, hiring comes with both advantages and challenges.
Benefits:
Increased Productivity
Delegating routine or time-consuming tasks lets you focus on strategic areas like sales, growth, or customer relationships.
Enhanced Expertise
Bringing in skilled professionals adds value to your services, improves quality, and boosts client satisfaction.
Business Growth
With support, your business can take on larger projects, serve more clients, and scale faster than working alone.
Challenges:
Administrative Burden
Running payroll, managing records, and staying compliant with HMRC can take time and effort—especially for sole traders juggling multiple roles.
Higher Costs
Beyond wages, you’ll need to budget for employer’s National Insurance, pensions, insurance, and potentially training.
Legal Risks
If you don’t follow employment laws, such as failing to register or misclassifying workers, you could face penalties or legal action.
What’s the best time for a sole trader to start bringing on help?
Clues that it’s time to expand your team:
- You’re turning away work.
- You work evenings and weekends.
- Customer service is slipping.
- You need skills you don’t have.
- Your income is high enough to cover costs.
As a sole trader employer, what laws must you comply with?
You must follow UK employment law. This includes:
- Complying with National Minimum Wage laws
- Leave pay (holiday and sickness)
- Ensuring a safe workplace
- Giving breaks and rest periods
- Avoiding unfair dismissal
Following ACAS and HMRC guidance can help you stay compliant.
FAQs:
Q1: Can a sole trader in the UK legally hire employees?
A: It is legal for sole traders in the UK to hire workers. They must register as an employer with HMRC, set up payroll, and meet their legal obligations under UK employment law.
Q2: Does hiring employees change my sole trader status?
A: No. Hiring staff does not change your business structure. Even with employees, you still operate as a sole trader.
Q3: What are the legal requirements for sole traders hiring staff?
A: You must register with HMRC as an employer, provide employment contracts, pay at least minimum wage, set up a workplace pension if applicable, and have employers’ liability insurance.
Q4: Do I need to register for PAYE as a sole trader?
A: Yes. If you pay employees more than £123 per week, you need to register for PAYE and report taxes and National Insurance through payroll.
Q5: Can I hire part-time or freelance workers as a sole trader?
A: Yes. You can hire full-time, part-time, or freelance workers. However, if freelancers are under your control, HMRC may treat them as employees.
Q6: What risks do sole traders face when hiring employees?
A: Risks include legal penalties for non-compliance, cash flow pressure from employment costs, and administrative responsibilities such as payroll and pensions.
Q7: What’s the difference between hiring and outsourcing as a sole trader?
A: Hiring involves taking on legal obligations like PAYE and pensions. Outsourcing means paying independent contractors or freelancers, but you must ensure they’re truly self-employed.
Q8: Do I need a business bank account to employ staff as a sole trader?
A: It’s not legally required, but having a separate business account helps manage payroll, taxes, and business expenses more clearly and professionally.
Q9: How much does it cost to hire an employee as a sole trader?
A: Costs include salary, employer’s National Insurance, pension contributions, holiday pay, payroll software, and insurance. You should budget accordingly before hiring.
Conclusion: Can a Sole Trader Have Employees?
A sole trader can employ staff in the UK, which is frequently a beneficial choice. Hiring can help you grow, increase profits, and reduce stress.
Be sure to take the right steps. Register, insure, and set up payroll properly. Understand your legal duties. And when in doubt, seek help from an accountant or employment advisor.
Being self-employed doesn’t mean working alone forever. With the right support, your sole trader business can thrive with a team.
