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Employment Law for Small Businesses


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This is a presentation from last year someone asked me about the other day - I have published it because it helps raise awareness of employment law issues for SME\'s.

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Employment Law for Small Businesses

  1. 1. CIPD SEMINAR FOR SIG issues for smaller businessesSpeaker: Paul Bennett 0844 472 2378 © Copyright Bennetts Legal Limited 2011
  2. 2. What is a small business?• Start up to 50 people;• Often owner managed;• Often run by family and friends;• Focus on what they know;• Fall outs and failures come at a high price. © Copyright Bennetts Legal Limited 2011
  3. 3. Business StructureSole Trader Partnership• If they intend to be a sole • In a partnership, two or trader, they are self- more self-employed people employed, with no special work together as partners legal structure. and share the profits (or• The trader is the business. losses). • No legal personality meaning the partners are liable for the businesses debts. © Copyright Bennetts Legal Limited 2011
  4. 4. Structure Part 2Limited Company Limited Liability Partnership• A limited company is a • A limited liability separate legal entity, distinct partnership has some of the from its shareholders, advantages (and directors and employees. disadvantages) of both a• Unlike a sole trader or company and a partnership. partnership, it is not the same • It has a separate legal entity as the individuals who own or run it. For example, it is a and therefore can continue separate legal entity and can despite the resignation or sue or be sued in its own death of some members. name. © Copyright Bennetts Legal Limited 2011
  5. 5. Structure• We have seen three recent cases were the wrong structure is claimed against by employees/former employees;• Self prepared contacts;• Or worse no contracts;The employer wants to get this right – itprotects them and manages risk. SME’s are the onlyone who get it wrong. © Copyright Bennetts Legal Limited 2011
  6. 6. Do they need to be employed?Employees Workers• Full time; • Consultants;• Part Time; • Project workers;• Employment rights • Self employed; accrued. • Temporary staff (if you get things right); © Copyright Bennetts Legal Limited 2011
  7. 7. Keys Tips1. Train the interviewer – smaller employers often lack the skills to shortlist and interview;2. Give SME’s a structure (interview forms, key questions, interview, reference requests);3. If you are an independent consultant – offer to sit in at second stage interview or to conduct preliminary interviews;4. Recruitment agencies – they cost if successful but can be used to reduce no hope applications by SME’s; © Copyright Bennetts Legal Limited 2011
  8. 8. Key Tips – Part 25. Offer letters and statement of terms can be combined (it reduces the paperwork);6. Probationary periods of 6 months are often useful because smaller employers take longer to settle into;7. Review – 1 week, 1 month and as appropriate thereafter;8. Think beyond employees; © Copyright Bennetts Legal Limited 2011
  9. 9. Key Tips – Part 39. Register with HMRC as an employer – you get free software to help with payroll (or outsource this to your accountant);10. SME’s often fail to deal with grievances, discipline and performance issues – the barriers are confidence, knowledge and training – all are easy to remedy. © Copyright Bennetts Legal Limited 2011
  10. 10. Flexible Working Solutions• Not all workers need to be employees;• Different rights and obligations exist between the two;• Employees have far better rights;• Employers can make use of these differences to reduce the cost of employing staff;• SME’s often fail to take advantage of the differences – so tonights aim it to remind you of them and suggest uses for them. © Copyright Bennetts Legal Limited 2011
  11. 11. Flexible Working SolutionsEmployees Workers• Written particulars of • Not need a statement of employment (Section 1 ERA terms; 1996 within 8 weeks).• Statutory Sick Pay(SSP) • No SSP, SMP, SPP, SAP needs to be paid.• Statutory Maternity Pay (SMP), Paternity (SPP), Adoption(SAP) needs to be paid. © Copyright Bennetts Legal Limited 2011
  12. 12. Employment Status Overview (continued)Employees Workers• Time off for public duties, • No such “rights”. trade union etc; • No such protection rights.• Notice Pay on termination, written reasons for dismissal, right not to be unfairly dismissed, redundancy payment right (after 2 year qualifying period). © Copyright Bennetts Legal Limited 2011
  13. 13. Does it matter?• It may do to the employee or worker;• It affects HMRC Taxation and National Insurance position (you can save money and some workers can to!);• Employment Tribunals have to apply the rights applicable to the status of the worker. Using workers reduces the risks; © Copyright Bennetts Legal Limited 2011
  14. 14. Full Time In house• I see businesses trying to claim all staff are self employed;• Full Time, part of the furniture workers are employees both for HMRC and ET purposes. Trying to argue not is foolish and destroys credibility. © Copyright Bennetts Legal Limited 2011
  15. 15. Not employed – the key question• Anyone not working a typical way. I mean work which does not fit the classic or traditional concept of an employee working full-time for a single employer under a contract of indefinite length;• For example:- Casual, Home Workers, Consultants, Self Employed or Multi- Employed. © Copyright Bennetts Legal Limited 2011
  16. 16. CasualThe flexibility in such arrangements may suit both employerand worker and often takes the form of:• One-off tasks or events;• Being available on an on-call basis: the employer contacting the worker when work becomes available, but there being no obligation on the worker to accept the work;• Working under a zero hours contract, under which the employer does not guarantee to provide work and pays only for work actually done can be useful in some sectors (care work, bar, shop staff etc); © Copyright Bennetts Legal Limited 2011
  17. 17. How to do casual working?• Zero hours contracts • Zero hours contract the with individuals; ideal if recruiting direct;• Target skill shortages • Agency workers – and those for whom it “temps” ensuring may appeal i.e. neither the agent or Students, parents with business have them as child care issues, older employees (a paper trail workers, self-employed test. ET/HMRC check if people looking to top such arrangement are a up income. sham). © Copyright Bennetts Legal Limited 2011
  18. 18. Consultants• Many self-employed workers are engaged on a consultancy basis. However, a person who works in a consultancy or advisory capacity may also be an employee – so be clear and sure of status;• Whether an individual is self-employed or an employee will depend on the circumstances and the application of relevant case law. Get a written agreement in place and stick to it – include status clause and Tax and NI indemnity for business; © Copyright Bennetts Legal Limited 2011
  19. 19. Consultants• SME’s can obtain highly skilled individuals for a limited time period per week/month;• SME’s can secure specialist skills PR, Sales, Marketing even HR for a modest fee set against full time employment; © Copyright Bennetts Legal Limited 2011
  20. 20. Why consider this?• Self Employed • No PAYE; Consultants; • Payment by results;• Experts selling their • No tax contribution by skills to the business; employer;• Project based work; • No NI contribution by• Temporary workers employer; being used to bridge • No long term gaps; overheads;• Payment on invoice – • Limited cost reduced PAYE/payroll commitments. © Copyright Bennetts Legal Limited 2011
  21. 21. Why now?• Flexibility for both parties;• Income from various sources for experts;• It bridges the gap between permanent new roles for the recently unemployed;• Economic situation causes both sides to consider “new” ways of working. © Copyright Bennetts Legal Limited 2011
  22. 22. SME InsuranceRisk Taxation• Is it covered by insurance? • Company and individual• Key man? Life? Illness? cover?• Health insurance?• Employee Insurance?• Public Liability Insurance? © Copyright Bennetts Legal Limited 2011
  23. 23. Insurance• Businesses (of whatever structure) need to consider what risks they need to be insured against and they would like to be insured against;• As a someone advising small businesses this is a crucial first meeting issue – What have they got? What must they have? What do they really need? © Copyright Bennetts Legal Limited 2011
  24. 24. Public Liability Insurance• This covers those in contact with the public for accidents, mishaps and claims against the business;• A slip, trip or accident;• Typically all businesses will need this and it can be purchased cheaply;• Details of the insurance should be kept by the business for 40 years (it is a requirement);• Applies to SME’s. © Copyright Bennetts Legal Limited 2011
  25. 25. ExamplesThe Painter and The Party DJ Decorator • Held in a hall/pub;• People visiting the site • Someone falling over having an accident; equipment;• Injury; • Liability may be split• Losses from the actions with others (i.e. Venue); of the painter; • Likely that responsible• The householder who venues will require purchased the service. service from someone with insurance. © Copyright Bennetts Legal Limited 2011
  26. 26. Employers Liability Insurance• Usually sold with PLI;• A requirement of being an employer or having “workers” – it needed for both;• Covers injury type claims sustained in the workplace;• Covers the actions of your business and your workforce against third parties. © Copyright Bennetts Legal Limited 2011
  27. 27. Professional Indemnity Insurance• Covers advice and actions of the business to its clients;• Growing importance to small businesses – most SME’s require this for example the website designer with defective software would need this type of insurance;• Typical costs are a few hundred pounds. © Copyright Bennetts Legal Limited 2011
  28. 28. Red Tape – The Business Barrier• 99% of my clients resent “red tape” and the costs of compliance when they make their first appointment;• SME’s in particular suffer from a fear factor;• Many are relieved when they know the reality and not the perception;• Key issues for small business are insurance, health & safety, data protection and employment law. © Copyright Bennetts Legal Limited 2011
  29. 29. Health & Safety• Its a two way thing; • With my clients I offer to• The business sets the guide them through the policy and manage risk; HSE material in the• The Employees must take context of their business care of themselves and or get a specialist each other!; consultant to do so;• Free resources are made available by the Health & Safety Executive – these cover common risk and industry. © Copyright Bennetts Legal Limited 2011
  30. 30. Health & Safety Checklist – Part 11. Have you considered the industry and known risks on the HSE website?2. Has the small business considered the issues?3. Is the process documented?4. Are records kept? By whom and where?5. Risk assessments – has one been done? Is it up to date; © Copyright Bennetts Legal Limited 2011
  31. 31. Data Protection• Information Commissioners Registration required if the business handles personal data?• Annual registration fee – Typically, £35 for SME’s. © Copyright Bennetts Legal Limited 2011
  32. 32. Employment LawThe starting point with employment law is asalways -“Have what you have done documented!”1. Offer of Employment Letters;2. Contract or Statement of Terms;3. Have policies in a Staff Handbook;4. Document and take notes at any discussions with staff – what was said, when, why, and confirm any agreements/objectives. © Copyright Bennetts Legal Limited 2011
  33. 33. Employment Law Part 25. Have redundancy and disciplinary criteria documented;6. Get staff to sign, acknowledge and agree handbooks, policies and agreed actions.It is basic but it manages an SME’s risk andSME’s are either very good or very poor at thisso HR Consultants – it may need to be you whofollows things up. © Copyright Bennetts Legal Limited 2011
  34. 34. Employment Law• Remember the legislation protects applicants as well as employees;• Workers (including self-employed people) have certain employment rights. © Copyright Bennetts Legal Limited 2011
  35. 35. Question & Answer Session © Copyright Bennetts Legal Limited 2011
  36. 36. About Bennett’s Legal• Boutique Law Firm – services include Employment Law, HR Support, business advice including consultancy and commercial law;• Based in Shrewsbury with clients from all over the UK;• International clients in the financial sector;• Our clients include central government; © Copyright Bennetts Legal Limited 2011