UK Employment Law
Which UK Employment Laws Affect Your Business? - employment laws have evolved to protect both employees from management exploitation, and employers from business failure. Regulation is unavoidable, and so it is sensible to embrace regulation designed to help organising business in a fair manner, (as opposed to viewing them as unnecessary red tape). By providing attractive UK employment conditions and a transparent set of company policies, potential employees will be more attracted to working for your company. The biggest challenge for a small business is trying to keep with the seemingly endless series of new rules and regulations, encapsulated in statutory acts. Some of these laws may seem more relevant to your business than others, depending upon which industry sector your business is in. Other employment laws and regulations (such as redundancy laws and employees rights) apply to all businesses, regardless of industry sector. The challenge for a any new small business start-up, is to gain an initial understanding of which laws apply, and then keep up to date with any changes in UK employment law cases.
Seeking Legal Advice - it is a vital first step that you seek professional legal advice on specific employment issues. You may need to first gain an overall understanding of the type of behaviour and best practice encouraged by authorities as well as specific laws related to your individual situation. There are also many law training courses and legal consultants available, who can assist the novice employer, in organising their business lawfully and professionally. Most small businesses do not have the luxury of employing a dedicated person to deal with Human Resources (HR) issues. As a small business owner, there are useful sources of advice and guidance in the area of UK employment law and the employee issues generally. These include, ACAS ( the Advisory, Conciliation and Arbitration Service), The Department for Business Enterprise & Regulatory Reform BERR and Businesslink.
Employees Employment Rights - there are many employment rights which, as an employer, you will need to familiarise yourself with. In general terms, full-time and part-time employees are entitled to basic employment rights. The main areas to review are as follows:- The national minimum wage, the maximum hours employees should work per week (via the Working Time Regulations), equality and equal pay, discrimination laws, health and safety laws, statutory maternity and paternity pay, the written statement of employment particulars, redundancy pay and paid holiday. As a small business employer, failure to provide these employment rights, has repercussions; In particular, denial of employees rights may result in prosecution under common law or statutory law, or a financial claim brought against you, in an employment tribunal, by an employee who feels they have been treated unfairly. Different UK employment law applies to different types of groups of people. The main groups are as follows:-
- Employees - Employee's rights are encapsulated under their 'contract of employment'. This is an agreement between an employer and an employee which outlines the employee and the employer's rights and duties, (contractual terms). Once the offer of employment is made and then accepted, the contract of employment is deemed to exist. As an employer, you must provide a written notification of the 'written statement of employment particulars' within two months of the start date of the employee. From day one, the employee then has the rights to be paid a minimum wage, and begin accruing holiday pay, as well as to begin their new job in a workplace that conforms to all the latest health and safety laws. Employers sometimes get confused between the employment rights of full-time employees versus part-time employees. Part-time employees do have statutory employment rights. In practice, part-time jobs are usually offered at a lower hourly rate of pay and tend to be concentrated in the service sector. However, to avoid discriminating against part-time groups of employees, it is important to offer payment of wages on a pro-rata calculation, (relative to full-time rates of pay).
- Self Employed Workers - many people, particularly white collar professionals with a technical qualification, (such as accountants, project managers or surveyors), choose to work as independent consultants for a number of companies at once. They will usually invoice the company for their services at the end of the job or at pre-agreed stages. During the time they are paid by the company, they are working under a ' contract for service' and consequently have different employment rights, than full-time employees. To avoid a disagreement regarding those rights, it is important to ensure they are genuinely self-employed. If a person is classified by the Inland Revenue as an employee, the employer must make payroll deductions from their pay, such as national insurance, income tax etc. A person is self-employed when they work for more than one company, could send a replacement, work flexible hours, pays for their own support tools and equipment and produces their own profit and loss as a separate business entity.
- Agency Workers - many lower paid, unskilled jobs, such as cleaners and maintenance staff, are sometimes supplied on mass, to larger companies, by a employment agency. In this situation, a contract exists between the company and the agency for the provision of services. The worker has an employment contract with the employment agency. Many 'outsourced services'use this method of service delivery, where businesses do not have the skills in-house or the time or know-how to find, recruit and retain staff. To protect these type off workers, the European Union (EU), has introduced the Agency Workers Directive, guaranteeing equal pay and conditions for agency based workers. However, the UK has an 'opt out', and is coming under increasing pressure to adopt subsequent proposed legislation (Temporary and Agency Workers (Equal Treatment) Bill), to create a more level playing field, for what is a more vulnerable section of workers.
- Younger Workers - many young people starting out in work will start with the lowest rates of pay offered in the market. The National Minimum Wage was set up in order to protect the rights of these young people to ensure they receive a fair and ethical level of remuneration. The rules and rates change slightly every year, depending upon negotiations between national lobbying groups and the government. From 1/10/08 the main rates were as follows:-
Setting Company and Employment Policies - by thinking through and documenting a set of company and employment policies and procedures, employees know what they can expect from their employer. It is important to clarify for the employee, your company policies on pay, holidays, sickness and working hours. It would seem impractical and inefficient to expect each employee to research the law themselves as well as second-guess what the company may or may not expect from them. As a minimum, the law requires that you have written documents outlining your disciplinary and grievance procedure as well as discrimination and health and safety policies. Sometimes the law does not practically cover all aspects of running a business. It is therefore necessary to implement a policy to restrict or encourage certain types of employee behaviour. For instance, you may wish to prohibit unacceptable types of behaviour (such as drug use), restrict the miss-use of confidential company information or perhaps limit employee personal usage of office computers and internet for personal reasons. Company policies are not just there to stop people from miss-using company resources. Company policies can be used to enhance existing employment contracts and reward programmes, to motivate and satisfy employee aspirations. Many employers offer more than the national minimum wage, in order to attract a better class of employment candidate. Many employers offer special incentives such as flexible working hours, company cars, gym memberships, flexible benefit programmes etc. Laid out in a clear and accessible document, (which is communicated effectively), company policies are a vital means of ensuring everyone is motivated and clear about the company's business objectives.
- £5.73 per hour for workers aged 22 years and older
- A development rate of £4.77 per hour for workers aged 18-21 inclusive
- £3.53 per hour for all workers under the age of 18, who are no longer of compulsory school age.
Recruiting Policies - finding the right person for the job, at the right salary level is becoming increasingly difficult. The skills gap in certain areas of the economy is expanding, forcing small businesses to compete more intensively with larger enterprises (organisations that possess bigger recruitment budgets and expertise). In light recessionary pressures, many small businesses are offering a job sharing arrangement or reducing full time employees' hours or opting to recruit more part-time staff, in an attempt to reduce the overall wages bill. Despite the rising unemployment, the process job of recruiting goes on. Staff must be replaced if they unexpectedly leave, causing a skills gap. Staff leaves for many reasons including maternity, retirement, bereavement, career enhancement elsewhere etc. The cost of a poor staff retention rate can become a major headache. Therefore, getting the recruitment process right first time is vital for small businesses.
Advertising a Job Vacancy - any job advertising should give an accurate and fair job description, that includes the job title, the reporting procedure, how to apply, the location of the work, and most importantly the duties and overall goals of the role. Most job adverts also include the deadline for any applications, the remuneration package and the skills and experience desired. Some may also indicate the necessary academic qualifications that will be suited to the role. Many job websites and online classifieds also include the application process (whether submission of a curriculum vitae or completion of a job application form). As a potential employer, if you choose to advertise via a third-party job website, you should vet the security and data protection policies carefully, (to ensure any potential online failings do not rub off badly on your company). Most employers choose to use a local recruitment agency, with access to a wider range of suitable local applicants, as well as an existing advertising programme in place. Alternatively, you may choose to advertise your vacancy using a local job centre. When drafting the job advertisement, be very careful not to isolate or exclude groups of potential applicants, which may be interpreted as discrimination. In particular, your description must not discriminate based on the applicants sex, religion, disability, age, race and sexual preferences. The key test as to whether an advert is discriminatory or not, is whether an 'ordinary, reasonable person with no special knowledge' will interpret the job advertisement as being discriminatory. There are various statutory acts, designed to protect people from discrimination in the context of recruitment. Depending upon the circumstances of the job, exceptions to the following Acts may apply. Seek legal advice on how to interpret the Acts in the context of your business. These include the Sex Discrimination Act, Disability Discrimination Act, Race Relations Act and Employment Equality (age) Regulations.
Interviewing Candidates - regardless of whether you choose to receive CV's or completed application forms from candidates, it is vital you respect their legal rights under the Data Protection Act. Specifically, the information received must not be shared with anyone else and can only be used as part of the recruiting process search. Always confirm everything that has been verbally agreed with the candidate, to avoid any potential confusion. For instance, confirm in writing the details of the interview, including its location, the interviewer, date and time, instructions for any tests or additional information, that may be required on the day. Prepare for the interview by ensuring the candidate will be meeting the correct person. Also, make sure you have prepared a list of questions and make sure a follow-up process exists to confirm references and check any claims made. The interview questions must the carefully worded and primarily relate to the job (and not discriminate against an individual or group).
The Job Offer - if you find a suitable candidate and wish to make a job offer, you may wish to undertake a series of reference checks. It is important you inform candidates in writing, and receive their written permission to allow you to follow up on references. It is possible to check for criminal convictions, credit score, academic qualifications and employment background (from the candidates P45). The results of the reference checks cannot be shared and must be kept confidential. References are so vital in providing a more objective third party opinion on the suitability of the candidate for the role. If the references all checkout and you are satisfied, and you wish to make a job offer, make sure you have made up your mind. If you change your decision following the offer, and attempt to change the terms of the contract or even withdraw the offer altogether, the candidate may be able to sue.
Staff Morale & Motivation - the job of management is to motivate employees to implement the objectives of the business. Motivating individuals can sometimes be a challenging and difficult task. Everyone has their own hopes, dreams and aspirations and can be motivated entirely different ways. We all need a pay check, yet study after study shows that individual's motivations are also influenced by a large number of non financial considerations. Only by getting to know the personalities and hopes of your employees, can you understand their motivations. Many people crave status from their peers, other desire career enhancement and challenges. Others may be motivated by recognition of achievements. By praising and listening and coaching your teammates, team spirit can be fostered, and employees are more likely to share their aspirations with you. Sometimes, offering more status, (via an increase in responsibilities and job title) may reinvigorate a de-motivated employee. Small teams can become quickly de-motivated if one member bears some kind of grudge or has a negative attitude or is simply lazy and unhelpful. As a small business owner, is your responsibility to find out the root causes of de-motivation and address it before it infects other team members.
Reward Programs - everybody needs a pat on the back now and again from their boss, to let them know that they have done a good job and are a valuable member of the team. By constructing a reward programme that successfully motivates individuals and is highly appropriate to the job, business objectives can be achieved. Most firms use some form of incentive scheme which primarily consists of financial rewards. Some schemes include also include other rewards such as a weekend break away for spouse or partner, or gift vouchers and corporate event. When devising a scheme, ensure all members of that team understand the rules and can easily quantify what it means to them. The scheme has to be seen as being fair to all involved. Goals have to be challenging yet realistic, so that motivations remain high.
The main types of incentive are as follows; Firstly, 'commission' can be paid linked to sales achievements, by the individual or team. In the context of small business, sales are usually defined as a paid invoice, (as opposed to just a purchase order that may be cancelled by a customer). Secondly, a 'bonus' could be offered, associated with the achievement of a specific individual objective. This is particularly useful for non sales staff, which need recognition just as much. Larger companies usually have a company wide bonus, which represents a 'nice to have' end of year payment, but does not represent the bulk of an employees total remuneration package. Thirdly, offering a 'profit share' to employees can help motivate and influence their long term behaviour.