Employment law


Treating your people right

As an employer you have a number of legal obligations and it’s your duty to carry them out. Our checklist takes a look at your responsibilities from recruitment to pay and terms, giving you essential information and best practice guidelines.


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 Recruitment

Employing new staff

It is illegal to employ anyone who does not have the right to work in the UK. You should follow these three steps:

Step 1:

Potential employees must provide documentation from two lists given on the Home Office website:

  • One original document from List 1, (a passport or document showing the holder is a national of a European Economic Area country).

or

  • Two original documents from List 2, such as a full birth certificate, P60, P45 or National Insurance card.

All your employees should provide documentation. If you only check those who you feel may not have the right to work here, you may face a claim for discrimination.

Step 2:

Make sure your candidate is the rightful owner of the document(s).

Step 3:

Make a copy of the parts that provide personal details and any page containing a United Kingdom Government stamp.

Providing a contract of employment

You must issue basic terms of employment within the first two months of taking on staff or be liable to pay compensation. Once an oral agreement has been made, it's good practice to confirm the details in writing as soon as possible to avoid confusion or dispute. This contract should be signed and dated by you and your employee. It should include:

  • The full names and addresses of the parties involved.
  • Start date.
  • Job title or description.
  • Pay, including holiday entitlement and sick pay.
  • Place of work.
  • Hours of employment.
  • Disciplinary, grievance and appeal procedures.
  • Pension information.
  • Notice periods.
  • Any collective agreements.
  • Duration of the contract if it’s not permanent.
  • Whether the employee is expected to work outside the UK for more than a month (and, if so, under what terms).

The contract doesn’t cover all the obligations between employer and employee, so:

  • Nothing in a contract can detract from an employee's statutory rights and the employer's statutory obligations.
  • If the contract does not mention an employee's rights in a particular area, that doesn't mean they don't have any.

Job description

Always provide a formal job description, detailing the type of role and the duties involved. To allow your employees to carry out a number of different tasks without breaching their contract, make sure the description covers the full scope of the job. If you try to change the nature of an employee's job without their agreement, it may be considered a breach of contract and 'constructive unfair dismissal', for which you could face an Employment Tribunal claim.

Qualifications and skills

All workers must have the necessary qualifications and the skills that they’re legally required to have in order to do their jobs. Make sure they have the relevant practice certificates and professional insurance. Keep these certificates or copies as part of their personnel records.

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 Terms of employment

Part-time workers

Part-time workers are entitled to the same benefits, bonuses and opportunities as full-time workers, calculated on a pro-rata basis.

Temporary fixed-term contracts

Employees on fixed-term contracts enjoy most of the rights of those on permanent contracts, so if you employ the same person on an ongoing basis, it's worth making them permanent. After four years or more of consecutive fixed-term contracts, the employee can claim permanent status.

Probation

For the first four weeks of employment, there is no statutory right to notice. Setting this as a probation period means that, if your chosen candidate turns out to be unsuitable, you can terminate the contract immediately. Equally, they are under no obligation to give you notice should they wish to leave. After four weeks, an employee is entitled to receive statutory minimum notice of dismissal unless they commit gross misconduct.

Working hours

Working Time Regulations set a legal limit of 48 working hours a week in most jobs, as well as rules for night work, daily rest and days off per week. You should keep up-to-date records of the hours your employees are working. By signed, mutual consent, employees can opt out of these terms, but you must ensure that Health & Safety requirements are still being met.

Pay

You are obliged to pay your workforce fairly, to meet legal requirements and ensure that any necessary contributions are made on their behalf. These are the key items to cover.

National Minimum Wage (NMW)

There are three rates:

  • The main NMW.
  • A development rate for those aged 18-21.
  • A NMW for 16-17 year olds.

No business is exempt from paying the minimum wage. Profit and performance-related pay that goes through the payroll may also be included.

  • Check the current NMW rates

Tax

You must:

  • Tell HM Revenue & Customs (HMRC) whenever you employ someone, even if that person is you.
  • Deduct PAYE (Pay As You Earn) income tax and National Insurance contributions from their earnings.
  • Provide your employees with a P60 tax form every year and a P45 at the end of their employment.
  • Provide HMRC with an annual return for every employee in addition to the business return and/or your personal return.

Other deductions may include pension schemes, student loan repayments, money ordered by Court, the Child Support Agency and GAYE (Give As You Earn) contributions to charity.

HMRC will also want to know about any non-cash benefits such as company cars or health insurance, which may be taxable.

National Insurance

There are three levels of National Insurance Contributions (NICs): Class 1, Class 1A and Class 1B. Class 1 NIC is generally collected at the same time as PAYE income tax. For information on which apply to you, contact HMRC.

Pay statements

You are legally obliged to give each employee a written, itemised pay statements detailing:

  • Gross salary.
  • Any deductions.
  • The employee's net pay.

Equal pay

Before setting the rate of pay and even starting the recruitment process, it's wise to grade each position according to criteria such as:

  • Level of supervision.
  • The skills and qualifications required.
  • Risk.
  • The initiative that employees will need to show.

This will help you to determine the different roles that carry "equal value" and should therefore be paid the same amount. Men and women must be paid the same amount for doing similar work. Any pay differential must be justifiable by genuine and objective material factors.

Paid holidays

Employees are entitled to a minimum of 5.6 weeks' holiday a year. For those working a five-day week this means 28 days holiday a year. You control when your employees take their holiday and it is up to you to decide how much notice they need to give you. Employees do not have a statutory right to paid leave on the eight bank/public holidays. If you decide to give paid leave on those days, this can count towards the minimum holiday entitlement or you can offer time off in lieu. Employees start to earn holiday as soon as they start work. If they leave the job, they should get paid for any holiday not taken.

Sick pay

Your employees are entitled to statutory sick pay from the fourth consecutive day they are off, provided they meet the qualifying conditions. If you have to dismiss someone who has been off sick regularly or for a long time this should be done with sensitivity and with respect for their rights. If not, you could be liable to pay compensation for unfair dismissal and/or disability discrimination.

Pensions

You’re not obliged to contribute towards an employee pension plan, but if you employ five or more people, you may need to offer them access to a pension scheme and collect their contributions on behalf of the pension company.

Your ongoing responsibilities as an employer

Once you’ve recruited your staff, you are responsible for their wellbeing at work, taking out the necessary insurance policies and guarding against discrimination or harassment.

Health and Safety

To comply with the Health & Safety at Work Act 1974, you must:

  • Carry out a thorough risk assessment.
  • Draw up a Health & Safety policy (in writing if you employ five or more people).
  • Ensure your workplace meets minimum standards of comfort and cleanliness.
  • Record injuries, accidents and diseases in an accident book.

For more information, contact the Health & Safety Executive.

Insurance

You should make sure you have the cover necessary to protect your employees if an accident or injury occurs in the workplace:

  • Employer's Liability Insurance is essential. The policy must be renewed annually and the certificate prominently displayed in the workplace.
  • Public Liability Insurance is essential if members of the public or customers come into your premises or you go to theirs to carry out work.

Discipline and grievances

By law, you must set out dismissal, disciplinary and grievance rules in writing. They must reflect the minimum statutory requirements. If you fail to follow these then any dismissal will be automatically held to be unfair, and the employee will be entitled to an increase of 10-50 per cent in any compensation they would have got for an unfair dismissal claim. You must also be able to demonstrate that any complaints are taken seriously and fully investigated. If you do nothing, you could be held responsible.

Discrimination

Neither you nor any member of your staff may discriminate against other employees or potential employees on grounds of gender, sexual orientation, marital status, age, race, colour, ethnic origin, nationality, beliefs or because of a disability, pregnancy or trade union membership.

Harassment and bullying

You may be liable if an employee suffers sexual, racial or other harassment or bullying at work – even if you had no knowledge of it. A bullying and harassment policy can help discourage such behaviour.

Leave

Your employees are entitled to certain time off work over and above holidays and sick leave.

Maternity leave

Rights for pregnant women will vary depending on the expected week of childbirth, how much she earns and the length of time you have employed her. A pregnant employee is entitled to one of the following:

  • Statutory Maternity Pay (SMP).
  • Contractual (company) maternity pay.
  • Other family benefits depending on her situation.

Adoption leave

  • If an employee has worked for you for 26 weeks when the adoption agency certifies that a match has been made, they are entitled to Ordinary and Additional Adoption Leave.
  • Statutory Adoption Pay (SAP) is paid at the same standard rate as SMP.

Paternity leave

  • The father of a child or the mother's husband/partner is allowed to take one or two consecutive weeks leave within 56 days of the birth or placement for adoption.
  • Eligibility for Statutory Paternity Pay (SPP) is assessed on the same terms as SMP and paid at the same weekly rate.

Parental leave

If an employee has worked for you for at least a year, they are entitled to:

  • 13 weeks off work (in total, not per year) for each child, up to their fifth birthday (or up to five years after the placement date of an adopted child).
  • 18 weeks for each disabled child, up to the child's 18th birthday.

You are obliged to hold the employee's job open for them or provide them with a broadly similar job on their return from parental leave.

Emergency leave

All employees have a right to take reasonable time off work to deal with emergencies involving a dependant.

Other types of leave

Time off must also be allowed for:

  • Public duties.
  • Union activities.
  • Training.
  • Job hunting or training when their role is at risk of redundancy.
  • Jury service (although you do not have to pay staff unless you have stated otherwise in their contract).

Flexible working

Employees are eligible for flexible working if:

  • They have been continuously working for 26 weeks.
  • They have a child under the age of six (or a disabled child under the age of 18).

Reasons for refusing an employee flexible working must be set out in writing and be legally justified.

Young people

There are separate rules for workers under 18. These cover issues such as parental consultation and consent, working hours and higher standards of Health & Safety.

Redundancy

Generally, it is fair to dismiss someone when the job (rather than the person) is no longer economically viable and the business no longer requires that role to be fulfilled. You must make a redundancy payment to employees who have been with you for more than two years.

You could be liable to a claim of unfair dismissal if it can be shown that:

  • You used redundancy as a pretext for dismissal for other reasons.
  • You failed to follow the correct redundancy procedure, for instance by failing to offer a suitable alternative position in the business.
  • You failed to follow a fair procedure in selecting an employee for redundancy.

Running a law-abiding business

As an employer, the legislation you follow is set out by a number of different authorities, including:

  • Department for Business.
  • Enterprise and Regulatory Reform.
  • HM Revenue & Customs.
  • Health & Safety Executive.

The law frequently changes so if you are concerned about a particular issue, contact the relevant authority or speak to ACAS (the Advisory, Conciliation and Arbitration Service).

Ignorance of the law is not a defence. In individual cases, especially if you want to dismiss someone, it is sensible to consult a solicitor who specialises in employment law.

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