The prospect of becoming a new employer, either as a new business or if you have grown your business to the point that you now need to take on staff to help, can be rather daunting. There are so many things you need to know and so many things you need to do, but where should you start?
The reality is that there is no comprehensive check-list as each business has different needs and operates in different ways. However, there are some key things that an employer should know, should consider or have in place when employing people, here is a brief summary of five of them.
1. Employment Status
Decide if you are engaging an employee, a worker or a self-employed contractor?
An employee is bound by an employment contract or contract for services, and is somewhat ‘controlled’ or restricted by the employer. A worker is subject to a contract to provide personal services but has more autonomy than an employee in how they go about fulfilling the terms of the contract. They may be brought in for a particular project or to do a one off piece of work, but are paid directly and not through a company structure; and cannot send a substitute if they are unavailable. In reality, the difference is very subtle as both are entitled to minimum wage and holiday pay ect, and are protected from discrimination and less favourable treatment too.
A self-employed contractor will generally trade as a company in their own right and can delegate the work to be done to another member of their team. They would be responsible for their own tax and national insurance contributions and have no entitlement to holiday or sick pay.
Whichever model is chosen, the correct title will be based on the reality of the relationship.
2. Written terms of employment
This can be in the form of a contract of employment, or a letter setting out the basic terms under which your staff is employed. It is a legal requirement that an employer provides written terms of employment within the first two months of an employee starting. Although an employee cannot bring an independent claim for not receiving written terms of employment, if the employee brings a claim for, let’s say, unfair dismissal, the employment tribunal can award up to an additional four weeks wages for the failure to give written terms of employment.
3. Do you want a probation period?
A probation period should be thought of as a period of review, allowing an assessment of how your staff have performed, whether they are the right fit and whether they need extra help or additional training. Generally, probation periods range from 3 to 6 months and a contract can be drafted to allow a period of extension if a little more time is needed to assess how things are going with your new employee. Additionally, the contract of employment can include a ‘break-clause’ allowing employment to be terminated after a period of probation, but only after a fair procedure is followed. Failure to follow a fair procedure could render dismissal unfair or wrongful.
4. Holiday pay entitlement
Every employee or worker is entitled to paid time off and it is unlawful to roll holiday pay entitlement into weekly wages. As a general rule, staff accrue a fraction of a day off for every day worked. The basic calculation is days worked per week x 5.6. The calculation for zero hour workers is different as their days and hours of work will vary from week to week.
Holiday pay is essentially the equivalent to a day’s pay. However, if your staff work compulsory overtime, receive performance related commission, are available on-call or travel directly from home to a client’s site, then the value of a week’s pay will be higher. Failure to pay holiday pay or correctly calculate entitlement can result in a claim for unlawful deduction from wages.
5. Sick leave and the right to sick pay
You will have to decide if you want to pay staff their normal contractual pay for any period that they are off sick and for how many days or weeks per year. There is no legal requirement to pay full pay for staff on sick leave unless your contract states that you will do so. However, staff who earn on average £113 per week currently, are entitled to statutory sick pay subject to the rules which apply at the time.
In my next blog I’ll be adding another 5 points for new employers to consider.
Law for the online generation starts here.
Employing people - a guide for new employers Employing people seems a perfectly straightforward matter: hire them, then set them to work, but is it so easy?Many employers find the list of legal rights and responsibilities daunting. But complying with the law and looking after your staff will make you more efficient and more profitable.Getting the 'people' part of your new business wrong could cost you time, money or lost profitability