Here at Meaby&Co we help many start-ups and small businesses with their legal needs especially from a commercial and an employment perspective. It is often the position that the decision-makers are so busy and focused on developing their business models and maximising profits and that they also have multiple responsibilities for financial, HR and marketing and other matters.
As a start up or small business, hiring salaried HR professionals to deal with recruitment and staffing issues cannot be justified on the basis of cost and so Meaby&Co can act as a cost effective HR support function for such businesses with a view to minimising legal exposure and risk.
If you are considering taking on employees for the first time in your business then there are some very basic legal requirements that as an employer you need to be aware of to avoid breaking the law.
This article helpfully sets out some of the main responsibilities and obligations that you need to be aware of as a new employer.
Does your prospective employee have the right to work in the United Kingdom?
As a potential employer there is an obligation on you to check that your prospective employee has the right to work in the United Kingdom. This is fundamental otherwise you will place the business at risk of breaching immigration laws. You will need to ask the potential employee to provide evidence of the right to work in the country for example a passport and national insurance number and/or proof of visa or other relevant documentation. It is recommended that you take a copy of all documentation for your HR file and that you treat all prospective employees the same, even UK nationals to avoid breaching any discrimination laws.
Don’t forget to register as an Employer
You will need to register as an employer with HM Revenue & Customs and you also need to arrange payroll internally or to outsource it and arrange to issue an itemised payslip to your employee showing gross and net earnings and the tax and national insurance payments that have been deducted. There is a legal obligation to inform HMRC of all payroll information in advance and an obligation to issue an annual P60 to the employee at the end of each tax year.
A Written Statement of Employment Particulars
It is a legal requirement to provide employees with a written statement of employment particulars within two months of the commencement of their start date. This needs to detail salary, place of work, job title, holiday entitlement, and any disciplinary and grievance procedures and other information. The penalty for not providing this is an award of either two or four weeks pay in the event that your employee complains to the employment tribunal.
Creating an employment relationship
As an employer you create an employment relationship and employment contract (even if it is not in writing) once you have made an unconditional offer of employment to the employee which is accepted. This may take place before the employment starts. Even if there is no written contract of employment, there are likely to be implied terms and conditions for example hours of work and salary entitlement. You can also make an offer of employment conditional by making any employment subject to satisfactory references and in some instances subject to a satisfactory medical.
It is always sensible to have a probationary period and we would recommend a minimum of six months which is sufficient to monitor performance and to evaluate whether your employee is suitable for the role. Once the probationary period has been successfully competed it is a good idea to confirm that the role is permanent. We would also recommend that performance is regularly monitored and that any problems are discussed with the employee as and when they arise as opposed to ignoring any problems.
The National Minimum/Living Wage
There is also a legal requirement to pay minimum hourly rates depending on the age of the employee. The full time national living wage for employees aged 25 and over is now £7.83 with minimum hourly rates for younger employees whose rights are governed by the national minimum wage regulations. These payments usually increase every April and so it is important to be aware of any proposed increases set by the Government.
Holidays and Working Time Rights
Your employee is also entitled to protections under the Working Time Regulations which includes having a minimum full time holiday entitlement of 5.6 weeks per year. This equates to 20 days holiday plus the eight UK public holidays. Part time employees’ holiday entitlement is usually pro-rated. In addition your employee has the right not to work more than 48 hours per week (usually measured over a 17 week reference period) although they can opt out of this entitlement. There is also a legal entitlement to a 20 minute rest break if your employee works six hours or more or 30 minutes if they are under the age of 18. Your Employee is also entitled to one day off per week or two days every fortnight – assuming that they are contracted to work shift-patterns or more than five days per week. These rights are health and safety based.
All employers must enrol employees into a qualifying auto-enrolment pension scheme. It is a legal requirement that employees currently pay a minimum of 3% of their salary into the pension scheme and employers must contribute 2%. The Government NEST scheme is popular and the cheapest option for most start-ups and small businesses. Any failure to arrange a qualifying pension scheme can result in a fine from The Pension Regulator who now have more teeth to deal with any employers who fail to set up a qualifying pension scheme.
If your employee is signed off sick by a doctor with a fitness for work certificate then they might be entitled to the minimum payment of statutory sick pay which is currently £92.05 per week, although you might have more generous sick pay provisions in your contract of employment. Employees must also currently earn more than £116.00 per week to qualify and there is an entitlement to statutory sick pay for up to 28 weeks.
Pregnancy and family friendly rights
Your employee may be entitled to maternity leave and pay is she announces that she is pregnant. Qualifying employees are entitled to statutory maternity pay and leave of up to a year with a legal right to return to the same or an equivalent role. There are also statutory adoption and statutory paternity leave and pay too. These statutory maternity and adoption payments are 90% of salary for the first six weeks and then it reduces to £145.18 for the remaining 33 weeks. There are also other legal rights that these employees are entitled to including the right to shared parental leave arrangements with their spouse or partner and the right to paid time off to attend ante-natal appointments. You employee also has the right to request flexible working arrangements which can include seeking a change in working hours and/or working from home. There is a legal process to follow where such flexible working requests are made by your employee.
Place of work
It is important to clarify where the employee is expected to work. Usually it is at the work premises but it is also increasingly common for employees to work from home especially where there is only a virtual office. It is important as an employer to appreciate that you owe a duty of care to your employee and that there are health and safety obligations to fulfil to include arranging a risk assessment on the workplace including any home working. You will also need to take out sufficient employer’s indemnity insurance cover. If your employee works from home then they ought to also have insurance cover and to your satisfaction.
Performance and employee complaints
Your written particulars of employment needs to set out your disciplinary and grievance procedures. This is a legal requirement and there is an ACAS Code of Practice setting out the minimum requirements for dealing with performance and conduct issues and also employee complaints. Employees usually need to complete two years continuous service before attaining unfair dismissal rights but there are quite a few exceptions. It is good practice however to use a fair process such as a disciplinary procedure for dealing with performance and conduct issues which ensures that your employee knows what is expected of them.
There may be concerns at to what will happen to the employee if the business fails and you have to make them redundant. Employees are only entitled to statutory redundancy after two years’ continuous service and the current rate is £508 per week. The employee will in addition be entitled to a minimum period of notice either to be worked or paid in lieu of at least one week for each completed year of service up to a maximum of twelve weeks after twelve years’ continuous service.
The only statutory benefit that employees are entitled to are to be auto-enrolled into a qualifying pension scheme. Some Employers introduce for example additional private medical and dental schemes, subsidised gym membership, life assurance and bonuses. We would recommend that these additional benefits are clearly set out in any written policies as ‘non-contractual’.
Depending on the type of business you might decide to hire somebody as a contractor or a freelancer on a self-employed basis where they invoice for their payments and are responsible for their own tax and national insurance and where there is no intention to create an employment relationship. Even in this scenario you will need to be very careful because notwithstanding the label attached to the arrangements, the courts and employment tribunal can look behind this and declare that the contractor is in reality an employee or a hybrid category of worker. There is more of a risk if you control the work that the ‘contractor’ performs and if they are required to attend work at set hours and times. If a contractor is declared an employee or a worker then they are entitled to various legal rights and protections some of which have been set out in this article.
As ever it is important to seek timely legal advice if you have any concerns about taking on any employees to minimise any legal exposure and to understand your obligations as an employer.
You can contact Steven Eckett at Meaby&Co for timely advice: firstname.lastname@example.org or call 0207 703 5034.
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