HR · 16 July 2015

What kind of employment law exists for micro businesses?


Working relationships should always be clearly defined on paper

It is a misconception that just because you are small you will be exempt from employment law. And the simple fact is that if you do not comply with the law you will put your business at financial risk. Many people think there are special dispensations for the smaller business? From Tribunals I have attended, or case law decisions I have read, very little account is given to the size and resources of a business if a Tribunal decides a law has been broken.

When I first meet a micro or small business their story is often similar. They have employed people and found odd documents or contracts off the internet, and have organised how to pay people and make the required HRMC deductions and make payments to the HRMC. But they know as employment legislation constantly grows and changes, they are most likely not fully compliant with all employment legislation out there, and do not do everything that they are supposed to do. Sound familiar?

Eight times out of ten when an employer first picks up the phone to HR Support for Business I hear how the employee-employer relationship has broken down causing a workforce problem, which is now costing them money and time. They feel backed into a corner, not sure how to move forward, which is why they have turned to a HR professional.

A root cause is often that the working relationship had not been described clearly on paper – if it had been, it would have saved the conflict and headaches now being experienced. The solution is to have good and legally compliant foundations in place in the form of a management system to work from. It gives clear guidance to both employer and employee – what is expected of each party, what will not be tolerated and how the business will manage elements of the working relationship. This will normally include contracts of employment, and an employee handbook with key policies and procedures, and aligned documentation to implement the procedures. Combined, these will ensure your legal compliance, but also help you manage the lifespan of your workforce.

Many people have experienced overly complex and hard to understand legalistic procedures. But a good handbook and procedures should not be intrusive, or get in the way of your business. They should be a guide for how you will manage your workforce and deal with issues. Most employers tell me they spend more time managing workforce issues than any other element of their business. Having a good documented foundation to follow will ultimately prevent this waste of time and money.


Employing people can be the most expensive fixed business cost

It is a simple fact that your employees can also easily fall from being your greatest asset to your biggest headache. And there is no use denying there is a wealth of regulations surrounding employing people and, if needed, dismissing people. And despite the government saying they want to simplify employment law for small businesses, many are still incredibly complex. You only have to look at the recently introduced Shared Parental Leave to see this in action. And, is there any dispensation for smaller businesses? No.

Much of people management is based on common sense, but the underpinning legislation is in place to ensure that employees’ basic rights are respected. And if you break this law you do put your business at an unnecessary risk. Having good employment foundations in place to follow and having access to ad hoc professional advice when needed will help small business get it right first time. Not only the law, but the management processes and techniques that will help you find the right people (legally) and then align the skills and performance of your people to achieve the outcomes your business needs. And, if it is no longer working to be able fairly and legally terminate a contract when legally justified. Good procedures will not only prevent you from unintentionally breaking the law, they will save your valuable time, reduced risk and help you get the best out of your people.

It is quite impossible in a short article, and an ever-changing employment law to cover everything you will need to know to employ someone, but let us start at the beginning with recruitment and then actually employing someone.

Recruiting the right person – and doing so lawfully

We all have our own pre-conceived ideas and prejudices – as we are all human and our past experiences will have helped form these (sometimes supported by no actual evidence). However, in recruitment you cannot allow any prejudice to affect your decisions. On the legal side your risk is a discrimination claim, regardless of whether your alleged act of discrimination was an intentional, or an unintentional behaviour. Discrimination on any basis is not a good business practice, but certain discrimination has legal protection. For instance: race, colour, nationality or ethnic origin, sex, sexual orientation, gender reassignment, disability, religious or philosophical beliefs, membership or non-membership of a trade union, political beliefs, marital or civil partnership status, pregnancy, maternity, parental responsibilities and age. And more recently case law has included caste.

But let us not forget you are recruiting a person to achieve a needed outcome for you in your business. And employing people is possibly the most expensive fixed business cost for most businesses – no matter your size. How that person behaves, performs and ultimately achieves the outcomes needed in your business can mean the difference between your business growth, and business failure.

It is therefore essential you find the best people, with the right skills and work attitude to deliver the outcomes you need in your business regardless of anything else. This takes a little pre-thought, planning and interview techniques to get the evidence to match the person to the needs of your position and achieve the outcomes you want to achieve. A good recruitment and selection procedure and supporting documentation will guide you to achieve both legal compliance and help you get the evidence to get the right person for the job.

And what is the cost of getting it wrong? The CIPD put the cost of recruitment and induction of a new employee at a minimum of £5,000 rising with seniority and complexity of the position. Get taken to a tribunal and again just preparing to defend yourself against a discrimination claim starts at around £5,000 in management and professional time. And, if you lose, then a discrimination case the award can be unlimited. I have certainly seen some disturbing six figure sums reported – although the average tends to be between £5,000 and £10,000.

As a final note I would recommend you store recruitment records for 6 months – just in case your recruitment does not work out and you want to re-look at previous candidates, particularly if there was a close second. And just in case a discrimination claim lands on your desk so you have your defense ready.

Employing someone part one: The offer

Please be aware that a legal contract of employment exists as soon as you offer a job — even verbally. It is vital that your offer and subsequent offer letter is conditional and subject to at least: the full written terms and conditions being agreed, the candidate providing evidence of suitability (such as adequate references, licences, certificates and qualifications), and evidence of their right to work in the UK. If the conditions are not met and the employee has not yet started work for you, the contract does not take effect. It may interest you that recent legal changes now see fines up to £20,000 applied for each illegal worker employed. Your only defence is if you have collected the required evidence of their right to work.

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ABOUT THE EXPERT

Carole is as a freelance senior HR consultant with over 18 years experience in supporting small businesses. She founded HR Support for Business to provide an affordable, but still professional, outsourced HR Support service for micro and small businesses looking for guidance.

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