Employment Law for Small Businesses

CIPD SEMINAR FOR SIG
www.bennettslegal.co.uk
Staffing issues for smaller businesses
Speaker: Paul Bennett 0844 472 2378
contactus@bennettslegal.co.uk

© Copyright Bennett's Legal Limited 2011

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.


Business Structure
Sole 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.


Structure Part 2
Limited 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.


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 – it
protects them and manages risk. SME’s are the only
one who get it wrong.


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);


Keys Tips
1. 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;

Key Tips – Part 2
5. 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;


Key Tips – Part 3
9. 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.


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 tonight's aim it to remind you
of them and suggest uses for them.

Flexible Working Solutions
Employees 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.


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).


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;


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.


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.


Casual
The flexibility in such arrangements may suit both employer
and 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);


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).

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;


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;


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.


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.


SME Insurance
Risk Taxation
• Is it covered by insurance? • Company and individual
• Key man? Life? Illness? cover?
• Health insurance?
• Employee Insurance?
• Public Liability Insurance?


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?


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.

Examples
The 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.


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.


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.


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.

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.


Health & Safety Checklist – Part 1
1. 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;

Data Protection
• Information Commissioners Registration
required if the business handles personal
data?
• Annual registration fee – Typically, £35 for
SME’s.


Employment Law
The starting point with employment law is as
always -
“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.


Employment Law Part 2
5. 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 and
SME’s are either very good or very poor at this
so HR Consultants – it may need to be you who
follows things up.


Employment Law
• Remember the legislation protects applicants
as well as employees;
• Workers (including self-employed people)
have certain employment rights.


Question & Answer Session


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;

www.bennettslegal.co.uk

Employment Law for Small Businesses

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