HR · 16 July 2015

What kind of employment law exists for micro businesses?

Employees can be your strongest asset
Employing someone part two: The contract of employment

Whilst you do not have to issue a contract of employment there is a minimum legal requirement of the information you must give (as detailed in section 1 of the Employment Rights Act) known as the principle written statement. And you must do this within the first two months of employment.

This covers many specified areas including: pay, working hours, holiday and sick pay entitlement, job title/description, place of work, how you deal with discipline (clearly stating what grounds an employee can be dismissed) or grievance issues etc. Fines for not doing this can be 1, 800 per employee so just four employees could see a bill of 7, 200. This is a significant bill for a small business.

A good contract of employment will include all this information, but it will also be bespoke to the needs of your business so designed to help protect your business in many ways. For instance, if you do not reserve the right to change an element of the contract, say place of work, you will be in breach of contract if the business relocates and you enforce the person to re-locate. Clauses can also be written in to give you the right to pay in lieu if needed, or it can help you protect elements of your business by putting in restrictive clauses. For instance; to protect your business data from being stolen by a deviant employee who leaves and sets up in competition but much more.

Remember that you cannot unilaterally change the terms of the contract so it is important that it is carefully written, not only in compliance to current law, but bespoke to your business. Altering fundamental terms and conditions without the employee’s consent can be a breach of contract. So unless the change benefits the employee, you could be sued for constructive dismissal, breach of contract or both.

You also have many legal obligations on employing someone. For instance: to pay the national minimum wage, adhere to the working hours regulations, and comply with statutory requirements on leave and sickness absence. Leave can be holiday entitlements as well as the range of family friendly statutory entitlements to leave and in some circumstance statutory pay.

Aligning your handbook to your contracts of employment will ensure you have systems in place to manage these areas and ensure your legal compliance. An example of one of the risks is if you do not pay the national minimum wage you will have reimburse any under payment, and the penalties for not paying the national minimum wage are now up to 20, 000 per person.

Also, not all policies are required to be given by law but sometimes you need an additional clear policy within your handbook to reduce potential risks in your business. For instance, a seldomtalked about area, but you are required to provide employees with a reasonable degree of privacy, in particular, the circumstances when you may monitor your employees? calls, emails or internet use. This is because they are regulated under the Data Protection Act, the Human Rights Acts and the Regulation of Investigatory Powers Act. If there is a particular business risk then drafting a good information technology and communication (ICT) policy to manage these areas, within the law, would be advised

And finally, ask yourself what would you do if a person was underperforming, or whose conduct is not acceptable to the business? Or what if someone asks about maternity, adoption, ordinary paternity, shared parental leave, or time off for dependants, or flexible working rights? An employee handbook would include all these areas as a guide to what you are required to do.



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.