How to Hire Workers for Your Trades Business Legally (UK) [2026]

To hire someone legally in the UK, the first decision is their employment status — employee, worker, or self-employed subcontractor — because that determines everything else. Status is set by how the work actually happens, not by what you call the arrangement, and getting it wrong is the main risk (unpaid tax, National Insurance, interest and penalties). If you subcontract in construction you also operate the Construction Industry Scheme (CIS); if you take someone on as an employee you have a defined checklist — PAYE, employer NI, a pension, Employers' Liability insurance, a written statement, minimum wage, a right-to-work check and holiday. Use HMRC's free CEST tool and your accountant to confirm status before anyone starts.

Taking on your first pair of hands is the moment a lot of trades owners freeze. Not because they can't find someone — because they're worried about getting the legal side wrong and HMRC catching up with them two years later. This guide is the honest map. It's general information to help you ask the right questions, not legal or tax advice — your situation is specific, so pair it with HMRC's tools and an accountant (links below).

First: the decision that carries the risk — employed, worker, or subcontractor?

In UK law a person can be an employee, a worker, or self-employed. It matters because each comes with different rights and a different tax treatment — and, importantly, someone can have one status for employment rights and another for tax.

• Employee — works under an employment contract and has the fullest set of rights (holiday, minimum wage, and after qualifying periods, protection from unfair dismissal).
• Worker — has an arrangement to do the work personally for a reward, with only a limited right to send a substitute. Workers still get core rights: the minimum wage, paid holiday, and protection from discrimination.
• Self-employed — runs their own business, takes the risk of profit or loss, isn't paid through your PAYE, and generally has no employment rights.

You don't get to pick — the reality decides

This is the part that trips owners up. Calling someone "self-employed" and having them invoice you does not make them self-employed if the day-to-day reality looks like employment. HMRC and the courts look at the substance, using questions like these:

• Personal service: do they have to do the work themselves, or can they genuinely send a substitute or bring their own helpers at their own cost?
• Control: do you tell them when, where and how to work — or do they decide?
• Mutuality of obligation: do you have to provide work and they have to accept it? Are they paid a regular wage rather than per job?
• Financial risk: can they make a loss as well as a profit? Do they risk their own money?
• Equipment: do they provide the main tools and materials for the job?

The more it looks like "turn up when I say, do it my way, get paid weekly, use my van and tools," the more it looks like employment — whatever the paperwork says.

Why getting it wrong hurts

GOV.UK puts it plainly: individuals and their employers "may have to pay unpaid tax and penalties, or lose entitlement to benefits, if their employment status is wrong." In practice that means two kinds of fallout — HMRC can pursue the PAYE income tax and National Insurance that should have been paid, plus interest and penalties; and if a tribunal later rules the person was really a worker or employee, the rights above can apply retrospectively (think backdated holiday pay). There is no single "false self-employment fine" — the amount depends entirely on the case, which is exactly why it's worth getting right up front.

If you use subcontractors in construction: the CIS

If you're in construction and you pay subcontractors, you almost certainly fall under the Construction Industry Scheme (CIS). In plain terms:

• Register as a contractor with HMRC before you take subcontractors on.
• Verify each subcontractor with HMRC before you pay them — HMRC tells you which deduction rate to apply.
• Deduct from their labour payment and pass it to HMRC: 20% for registered subcontractors, 30% for unregistered ones, and 0% for those with gross-payment status.

Those deductions aren't an extra tax — they're an advance toward the subcontractor's own Income Tax and NI. CIS sits alongside the status question in the last section; being inside CIS doesn't automatically make someone self-employed. (Rates verified with GOV.UK at the time of writing; they're statutory, but always confirm the current figures.)

If you take someone on as an employee: the checklist

Decided it's a genuine employee? Here's the core of what the law asks of you as an employer. Treat this as the shape of the job, not the fine print — a payroll-savvy accountant makes it painless.

1. Register as an employer and run PAYE. Register with HMRC before your first payday (you can't register more than two months ahead), then deduct tax and NI through payroll.
2. Pay employer's National Insurance. On top of the wage, employers pay secondary Class 1 NICs — for the 2026–27 tax year, 15% on earnings above a £96/week (£5,000/year) threshold. (This is a tax-year figure — it changes each April.)
3. Enrol them in a workplace pension. You must auto-enrol staff aged 22 up to State Pension age who earn over £10,000 a year, with a minimum total contribution of 8% of qualifying earnings, at least 3% of that from you.
4. Get Employers' Liability insurance. It's a legal requirement the moment you employ someone — at least £5 million of cover from an authorised insurer. Being uninsured can cost £2,500 for every day you're not covered (and £1,000 for not displaying the certificate). Limited exemptions exist — for example some businesses employing only close family — so check the GOV.UK rules for your case.
5. Give a written statement of particulars. Employees and workers are entitled to the principal statement on or before their first day — it's a day-one right. Our sister guide on contracts for UK trades covers the customer-side paperwork; this is the staff-side equivalent.
6. Pay at least the minimum wage. From 1 April 2026: £12.71/hour for 21 and over (National Living Wage), £10.85 for 18–20, and £8.00 for under-18s and apprentices. (These change every April — always check the current rate.)
7. Do a right-to-work check. Confirm the person can legally work in the UK before they start. Getting this wrong carries a civil penalty of up to £60,000 per illegal worker, so it's not a box-tick to skip.
8. Give them their holiday. Almost all workers are entitled to 5.6 weeks' paid holiday a year — 28 days for a five-day week.

What about IR35?

IR35 (the "off-payroll working" rules) gets talked about a lot, but for most small trades firms it's a smaller worry than the two things above. It only bites when a worker supplies their services through their own limited company (a personal service company). If you hire a person directly, it doesn't apply. And even when someone does work through their own company, where you're a small business the responsibility for deciding IR35 status sits with their company, not yours. Your real homework is nailing employment status and, in construction, CIS.

Before anyone starts: two free checks

Two things will save you most of the risk on this page:

• Run HMRC's CEST tool (Check Employment Status for Tax) for the specific role. It gives you HMRC's view on tax status — and HMRC will stand by the result if your answers are accurate. One honest caveat: CEST covers tax/NI status only, not employment rights, which a tribunal decides separately.
• Ask your accountant. Payroll setup, CIS, pensions and status are bread-and-butter for a good trades accountant, and an hour of their time is cheaper than an HMRC correction.

Get the legal side right — then let the software carry the day-to-day

Here's the honest bit about where OptiTech fits, because we'd rather tell you what we don't do. OptiTech does not run your payroll, make your CIS deductions, or decide anyone's employment status — that's your accountant's job, and it should be. It manages the work, not the wages.

What it does is what happens after you've taken someone on properly: the system that lets you actually run a team instead of running yourself into the ground. Jobs get matched and dispatched to the right person, each worker has an app showing their day, and you can see who's on what without a group chat and a paper diary. That's the point of hiring in the first place — to stop being the bottleneck — and it's what our Growth tier is built for. If you're weighing whether you can afford the extra pair of hands at all, our guides on what to charge per hour and whether to raise your prices are the honest place to start, and hiring well is a core part of growing a trades business.

Frequently asked questions

Can I just pay a tradesperson cash-in-hand as self-employed?

Only if they are genuinely self-employed — running their own business, carrying their own risk, free to send a substitute. If the reality is that they work when and how you say, using your tools, for a regular payment, HMRC can treat them as employed regardless of the label, and you can be liable for the unpaid tax and NI. Use HMRC's CEST tool to check.

What is the difference between a worker and an employee?

Both do the work personally and get core rights like the minimum wage and paid holiday. An employee has extra rights (for example unfair-dismissal protection after qualifying) and a fuller contract. The key practical line is how much obligation and control sits on each side.

Do I have to use the CIS if I take on a subcontractor?

If your business is in construction and you pay subcontractors, yes — you register as a contractor, verify each subcontractor with HMRC, and deduct 20% (registered), 30% (unregistered) or 0% (gross-payment status) from their labour, passing it to HMRC as an advance on their tax.

What does it cost to employ someone beyond their wage?

Budget for more than the hourly rate: employer's National Insurance, a workplace pension contribution, Employers' Liability insurance, and payroll admin. A good accountant will give you the all-in figure for your situation before you commit.

Does OptiTech handle payroll or tell me someone's employment status?

No. OptiTech manages the work — job dispatch, worker apps, scheduling — not the wages. Payroll, CIS and employment-status decisions stay with your accountant. We're honest about that line on purpose.

This article is general information for UK trades owners and is not legal, tax or financial advice. Employment status and tax are fact-specific — use HMRC's CEST tool and speak to an accountant or solicitor about your situation. Figures are current at the time of writing and several (minimum wage, NI thresholds, pension triggers) change each year.