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Dodging the employment law minefield
Employment law can be a pain. There is a lot of detail and traps for the unwary. This article provides some thoughts on ...
Employment law can be a pain. There is a lot of detail and traps for the unwary. This article provides some thoughts on how to make it work for installation businesses.
It’s hard to believe the following story, but not only is it true, it happened recently. My friend worked for a large law firm. According to their web site they have an “award-winning employment team specialising in all aspects of employment law”.
My friend held a fairly senior position and one day was called to a meeting with his boss and the HR Director. Expecting to be asked about someone in their team, they were stunned when they were told that they were being made redundant.
It might have ended there. But if there is more than one person doing the same role, the law says that there must be a consultation period before any redundancies are made. Everyone in the role must be included.
A few months earlier, someone much more junior had been recruited with the same job title as my friend. But there had been no consultation, so the employer hadn’t followed the law. It gets better. What was my friend’s wife’s job? Senior employment lawyer at a rival firm. You couldn’t make this up.
The last time I saw my friend was over a cup of coffee. He seemed relaxed, as anyone tends to be who has received 12 months salary mostly tax free in a settlement. Their employer seemed very generous but was actually avoiding a very embarrassing employment tribunal.
The top legal points
There are a whole host of legal requirements when it comes to employing people. Here is a quick summary:
- Check all employees have the legal right to work in the UK before they start work plus keep copies of the documents e.g. passport, work permit, proving it.
- Provide a basic statement of terms and conditions of employment within two months.
- Register as an employer with HM Revenue & Customs (HMRC) before the first pay day of your first employee.
- Run a payroll and issue employees with a payslip detailing earnings before and after itemised deductions including tax and National Insurance i.e. operate PAYE.
- Report your payroll information to HMRC electronically each time you pay anyone.
- Pay all tax and NI owing to HMRC according to their timetable.
- 'Auto-enrol' eligible employees into, and contribute towards, a workplace pension.
- Treat employees fairly.
- Do not hold back salaries of staff.
- Pay at least minimum wage.
- Act responsibly towards the health and safety of all employees.
- Do not discriminate on the grounds of sex, sexual orientation, ethnicity, race, religion or belief, disability, age, gender re-assignment, marriage or civil partnership, pregnancy or maternity.
- Do not discipline anyone who is standing up for health and safety standards.
- Provide pregnant employees paid time off for ante-natal care, including parenting and relaxation classes.
- Provide a minimum of 28 (including public holidays) working days paid holiday per annum.
- Pay a minimum of Statutory Sick Pay (SSP) if an employee is ill for four or more days including weekends. Note there is no legal compulsion to pay beyond SSP although many employers do.
- Provide maternity leave of up to 52 weeks, 39 weeks of which the employee will be entitled to Statutory Maternity Pay (SMP) which is 90% of the employee’s average weekly wage for the first 6 weeks and then £148.68 per week (as at 2019) for the remaining 33 weeks.
- Allow pregnant women returning to work to come back in the same or a similar role.
- Allow fathers to take paternity leave of up to two weeks at the same SMP rate.
- Allow employees (including part-time employees) with a minimum of 26 weeks' continuous service to request flexible working. The request must be considered but acceptance is not mandatory.
If you do not have a formal employment contract in place then one will be deemed to exist. This will normally be to the employer’s disadvantage. Employment contracts must include at a minimum:
- Name of employer, place of work, job title, hours of work.
- Salary. This is usually paid in arrears in 12 equal monthly instalments and must conform to minimum wage legislation.
- Notice period on each side. If you don’t provide this:
- Installation companies must give notice of 1 - 12 weeks depending on how long the employee has worked for them.
- Employees are only required to give one week’s notice whatever their length of service.
Claims in the UK are fairly common as an ex-employee can issue a claim without having to prove that the case has any merit.
It can be very, very painful to be taken to court by an ex-employee. That’s both in money terms for legal advice but also in the sheer distraction from running your business. Even unsuccessful claims rarely result in the employer recovering their costs.
The number one claim is for unfair dismissal. There must be a statutory or fair reason to dismiss an individual. The valid reasons are: redundancy, conduct, capability, statutory illegality or “some other substantial reason”. You must follow a set and fair process to terminate employment and also to discipline an employee. If this is not followed the individual probably has the right to claim they have been unfairly dismissed. The maximum award for unfair dismissal in 2019 is over £86k or 52 weeks gross pay if lower. Discrimination claims on the grounds of gender, race, etc. are uncapped so can be extremely expensive.
Formal unfair dismissal complaints cannot be made and redundancy payments are not due until employees have been employed for two years. There is no qualifying period for discrimination complaints.
Advice to avoid legal hazards
There are a number of things that you can do to help avoid the legal hazards. When it comes to this, preparation is the key. Careful preparation makes it less likely you will lose a case, which in turn makes it less likely you will ever be taken to a tribunal in the first place. Get advice from an HR Advisor when drawing up:
- Your employment contract and company handbook. The aim is to provide as much flexibility as possible to you.
- A written disciplinary and grievance procedure. There is an ACAS code of advice for these. It is not compulsory to follow the code, but it is likely to go against you at any tribunal if you don’t.
- Cover additional things in your contract of employment such as:
- Probationary period, during which the normal disciplinary process should not apply. This should be up to 6 months, with the job offer subject to satisfactory completion of the probation period. You should have a shorter notice period during probation.
- Job description, reporting structure, details of incentives, bonuses or commissions which should also be clearly defined and also subject to management discretion.
- Confidentiality provisions and restrictions following termination and protecting the goodwill of the business. You may restrict the right to work for a direct competitor or entice other employees to leave for a period of 6 months after employment ceases.
- Reserve the right to change the employee's contract.
The iron rules
In many years in business, including dismissals, redundancies and more, I have never been taken to an employment tribunal. That is because I have always followed a few simple iron rules:
- Before I do anything that could be contentious, I consult a professional employment advisor or lawyer.
- I never say to any member of staff, at any time, anything which I would be embarrassed by if it was mentioned in a tribunal.
- If there is a hint of a dispute with an employee, I keep dated, written notes.
- I have my interactions witnessed. This piece of advice alone can save a fortune if an employee makes an allegation which isn’t true.
The settlement agreement
A settlement agreement, which can bypass the disciplinary and redundancy processes can seem attractive. However, remember that you should consult an advisor before discussing such an agreement with an employee and you have to pay for them to get legal advice. If you fail to do this any agreement will be invalid in law.
Pulling it together
There are a lot of tank traps around employment. But they can be avoided with preparation and care. Business objectives can nearly always be achieved while treating employees fairly. All of the best.