Can a Sole Trader Have Employees?

A common misconception is that sole traders must work alone. In reality, sole traders can legally hire employees and grow their business just like any other employer. The term “sole trader” refers to the ownership structure, not the number of people working within the business.

This guide covers what being a sole trader means, what defines an employee, how to register as an employer, and what employment laws you must follow.

What Is a Sole Trader?

A sole trader is a self-employed person who runs their own business as an individual. You’re personally responsible for the business’s finances, including any profits or losses. You don’t form a limited company, and there is no legal separation between you and your business.

Being a sole trader is one of the simplest and most common ways to set up a business in the UK, especially for freelancers, tradespeople and small service providers.

What Is an Employee?

An employee is someone who works under an employment contract and is entitled to certain rights under UK law, including:

• National Minimum Wage or National Living Wage

• Holiday pay and sick pay

• A written statement of terms and conditions

• Pension contributions if eligible

• Protection from unfair dismissal (after qualifying period)

If you're hiring someone who works for you regularly under your direction, they’re probably an employee rather than a self-employed contractor.

Can a Sole Trader Have Employees?

Yes, absolutely. A sole trader can hire employees and contractors. There’s no limit to how many staff you can employ. You just need to follow the same procedures as any other employer.

You’ll remain personally responsible for the business, including paying staff wages, deducting tax and National Insurance, and providing employment rights.

What Counts as Self-Employment?

You’re considered self-employed if you run your own business and aren’t directly employed by someone else. Sole traders fall under this category, along with partners in a business partnership.

Being self-employed doesn’t prevent you from hiring others. It simply means you are not employed by someone else, and you’re responsible for your own tax and business obligations.

How to Register as an Employer

Once you’ve decided to take on staff, you must register as an employer with HMRC. You should do this before the first payday, and it can be done online.

After registering, you’ll receive a PAYE reference number, which allows you to set up payroll. Through PAYE, you’ll deduct income tax and employee National Insurance, and submit this information to HMRC every time you pay your staff.

You’ll also need to:                         

• Provide payslips

• Keep payroll records

• Report to HMRC on or before payday

• Pay employer’s National Insurance if staff earn above the threshold

If you’re employing people earning less than £123 per week (2024/25 threshold), you may not need to operate PAYE—but you must still keep records and check their employment status.

What Employment Laws Apply to Sole Traders with Staff?

Once you hire staff, you must comply with employment law. This includes:

• Checking your employee’s right to work in the UK

• Providing a written statement of employment within two months

• Enrolling eligible staff into a workplace pension (auto-enrolment)

• Paying at least the minimum wage

• Giving statutory holiday entitlement

• Paying sick pay and maternity or paternity pay where applicable

• Ensuring safe working conditions under health and safety law

Even though you’re a sole trader, your legal responsibilities as an employer are the same as any other business.

When Is Someone a Worker, Not an Employee?

A worker has fewer rights than an employee but is still entitled to core protections such as minimum wage, holiday pay and protection against discrimination. Someone is classed as a worker if:

• They have a contract or arrangement to do work or services personally

• They’re not doing the work as part of their own business

• You provide them with the work and equipment

For example, someone working regular hours for your business, but not under a formal employment contract, may still be classed as a worker and entitled to key rights.

Final Thoughts

Being a sole trader doesn’t mean you have to work alone. You can hire staff, pay wages, and grow your business just like any limited company. But with that comes legal obligations—from setting up PAYE to ensuring your staff receive the rights they’re entitled to.

Before hiring, make sure you’ve registered with HMRC and have a clear understanding of what makes someone an employee or a worker. If in doubt, speak to an accountant or HR adviser to make sure you're meeting your responsibilities as an employer.