Employment Law: A Checklist for Employers
When you employ someone, you take on a number of legal obligations and it is your responsibility to make sure you fulfill them.
This guide provides an overview of your responsibilities, with a specific focus on:
- Terms of employment.
- Your ongoing responsibilities as an employer.
- Taking on new staff.
- Contract of employment.
- Job description.
- Qualifications and skills.
Taking on new staff
It is a criminal offence to employ anyone who does not have the right to work in the UK. You are required to follow these three steps:
Step 1: Potential employees must provide documentation specified in two lists on the Home Office website:
- One of the original documents from List 1, (typically a passport or document showing the holder is a national of a European Economic Area country).
- Two of the original documents described in List 2, such as a full birth certificate, P60, P45 or National Insurance card.
All of your employees should be subject to this check. If you check only those who you feel may not have the right to work here, you may face a claim for discrimination.
Step 2: Ensure that your candidate is the rightful owner of the document(s).
Step 3: Make a copy of the parts that provide personal details and any page containing a United Kingdom Government stamp.
Contract of employment
You are required to issue basic terms of employment within the first two months of employment or be liable to pay compensation.
Once an oral agreement has been made, it’s good practice to clarify the terms in writing as soon as possible to avoid confusion or dispute.
This contract should be signed and dated by you and your employee. It should include:
- The full names and addresses of the parties involved.
- Start date.
- Job title or description.
- Pay, including holiday entitlement and sick pay.
- Place of work.
- Hours of employment.
- Disciplinary, grievance and appeal procedures.
- Pension information.
- Notice periods.
- Any collective agreements.
- Duration of contract if not permanent.
- Whether the employee is expected to work outside the UK for more than a month (and, if so, under what terms).
The contract does not cover all the obligations between employer and employee. Note that:
- Nothing in a contract can detract from an employee’s statutory rights and the employer’s statutory obligations.
- If the contract does not mention an employee’s rights in a particular area, that doesn’t mean they don’t have any.
You should always provide a formal job description, detailing the type of role and the duties involved.
To allow your employees to carry out a number of different tasks without breaching their contract, make sure the description covers the full scope of the job.
If you try to change the nature of an employee’s job, it may be considered a breach of contract and ‘constructive unfair dismissal’, for which you could face an Employment Tribunal claim.
Qualifications and skills
All workers must have the necessary qualifications and skills legally required to do their jobs. Make sure they have the relevant practice certificates and professional insurance. Keep these certificates or copies as part of their personnel records.
Terms of employment
- Part-time workers.
- Temporary fixed-term contracts.
- Working hours.
Part-time workers are entitled to the same benefits, bonuses and opportunities as full-time workers, calculated on a pro-rata basis.
Temporary fixed-term contracts
Employees on fixed-term contracts enjoy most of the rights of those on permanent contracts, so if you employ the same person on an ongoing basis, it’s worth making them permanent.
After four years or more of consecutive fixed-term contracts, the employee can claim permanent status.
For the first four weeks of employment, there is no statutory right to notice. Setting this as a probation period means that you can terminate the contract immediately if your chosen candidate turns out to be unsuitable. Equally, they are under no obligation to give you notice should they wish to leave.
After four weeks, an employee is entitled to receive statutory minimum notice of dismissal unless they commit gross misconduct.
Working Time Regulations set a statutory limit of 48 working hours a week in most jobs, as well as rules for night work, daily rest and days off per week. You should keep up-to-date records of the hours your employees are working.
By signed, mutual consent, employees can opt out of these terms, but you must ensure that Health & Safety requirements are still being met.
As an employer, you are obliged to pay your workforce fairly, whilst meeting legal requirements and ensuring that any necessary contributions are made on their behalf. These are the key items to cover:
- National Minimum Wage (NMW).
- National Insurance.
- Pay statements.
- Equal pay.
- Paid holidays.
- Sick pay.
- Health & safety.
National Minimum Wage (NMW)
There are three rates:
- The main NMW.
- A development rate for those aged 18-21.
- A NMW for 16-17 year olds.
No business is exempt from paying the minimum wage. Profit and performance-related pay that go through the payroll may be included.
Check the current NMW rates: http://www.dti.gov.uk/employment/pay/national-minimum-wage/index.html
You are required to:
- Tell HM Revenue & Customs whenever you employ someone, even if that person is you.
- Deduct PAYE (Pay As You Earn) income tax and National Insurance contributions from their earnings.
- Provide your employees with a P60 tax form every year and a P45 at the end of their employment.
- Provide HM Revenue & Customs with an annual return for every employee in addition to the business return and/or your personal return.
Other deductions may include pension schemes, student loan repayments, money ordered by Court, the Child Support Agency and GAYE (Give As You Earn) contributions to charity.
HM Revenue & Customs will also want to know about non-cash benefits such as company car or health insurance, which may be taxable.
There are three levels of National Insurance Contributions (NICs): Class 1, Class 1A and Class 1B. Class 1 NIC is generally collected at the same time as PAYE income tax. For information on which apply to you, contact HM Revenue & Customs (HMRC).
You are legally obliged to give each employee a written itemised pay statement detailing:
- Gross salary.
- Any deductions.
- The employee’s net pay.
Before setting the rate of pay and even starting the recruitment process, it’s wise to grade each position according to criteria such as:
- Level of supervision.
- The skills and qualifications required.
- The initiative that employees will need to show.
This will enable you to determine the different roles that carry “equal value” and which should therefore be paid the same amount.
Men and women must be paid the same amount for doing similar work. Any pay differential can be justified by genuine and objective material factors.
Employees are entitled to a minimum of 4.8 weeks’ holiday a year, increasing to 5.6 weeks from 1 April 2009.
Those working a five-day week are entitled to 24 days holiday a year (28 days from April 2009).
You control when your employees take their holiday and it is up to you to decide how much notice they give.
Employees do not have a statutory right to paid leave on the eight bank/public holidays. If you decide to give paid leave on those days, this can count towards the minimum holiday entitlement. Alternatively, you may wish to offer time off in lieu.
Employees start building up holiday as soon as they start work. If they leave the job, they should get paid for any holiday not taken.
Your employees are entitled to statutory sick pay from the fourth consecutive day they are off, provided they meet the qualifying conditions.
Dismissing someone who has been off sick regularly or for a long time should be done with sensitivity and with respect for their rights. Fail to do this and you could be liable to pay compensation for unfair dismissal and/or disability discrimination.
You are not obliged to contribute towards an employee pension plan, but if you employ five or more people, you may need to offer them access to a pension scheme and collect their contributions on behalf of the pension company.
Your ongoing responsibilities as an employer
Once you have recruited your staff, you are responsible for their wellbeing at work, taking out the necessary insurance policies and guarding against discrimination or harassment.
- Health and safety.
- Discipline and grievances.
- Harassment and bullying.
- Maternity leave.
- Adoption leave.
- Paternity leave.
- Parental leave.
- Emergency leave.
- Other types of leave.
- Flexible working.
- Young people.
Health and Safety
To comply with the Health and Safety at Work Act, you are obliged to:
- Carry out a thorough risk assessment.
- Draw up a health and safety policy (in writing if you employ five or more people).
- Ensure your workplace meets minimum standards of comfort and cleanliness.
- Record injuries, accidents and diseases in an accident book.
For more information, contact the Health and Safety Executive.
In the event of an accident or injury occurring in the workplace, you need to make sure you have the necessary cover.
- Employer’s Liability Insurance is essential. The policy must be renewed annually and the certificate prominently displayed.
- Public Liability Insurance is essential if members of the public or customers come to your premises or you go to theirs. For certain businesses, such as riding schools, it’s always required.
Discipline and grievances
By law, you must set out dismissal, disciplinary and grievance rules in writing. They must reflect the minimum statutory requirements.
If you fail to follow these requirements, any dismissal will be automatically held to be unfair, and the employee will be entitled to an increase of 10-50 per cent in any compensation they would have got for an unfair dismissal claim.
You must also be able to demonstrate that any complaints are taken seriously and fully investigated. If you do nothing, you could be held responsible.
Neither you nor any member of your staff may discriminate against other employees or potential employees on grounds of gender, sexual orientation, marital status, age, race, colour, ethnic origin, nationality, beliefs or because of a disability, pregnancy or trade union membership.
Harassment and bullying
You may be liable if an employee suffers sexual, racial or other harassment or bullying at work – even if you had no knowledge of it. To discourage such behaviour, it is a good idea to have a bullying and harassment policy.
Your employees are entitled to certain time off work over and above holidays and sick leave.
Rights for pregnant women will vary depending on the expected week of childbirth, how much she earns and the length of time you have employed her. A pregnant employee is entitled to one of the following:
- Statutory Maternity Pay (SMP).
- Contractual (company) maternity pay.
Other family benefits are also available depending on her situation.
- If an employee has worked for you for 26 weeks when the adoption agency certifies that a match has been made, they are entitled to Ordinary and Additional Adoption Leave.
- Statutory Adoption Pay (SAP) is paid at the same standard rate as SMP.
- The father of a child or the mother’s husband/partner is allowed to take one or two consecutive weeks leave within 56 days of the birth or placement for adoption.
- Eligibility for Statutory Paternity Pay (SPP) is assessed on the same terms as SMP and paid at the same weekly rate.
If an employee has worked for you for at least a year, they are entitled to:
- 13 weeks off work (in total, not per year) for each child, up to their fifth birthday (or up to five years after the placement date of an adopted child).
- 18 weeks for each disabled child, up to the child’s 18th birthday.
You are obliged to hold the employee’s job open for them or provide them with a broadly similar job on their return from parental leave.
All employees have a right to take reasonable time off work to deal with emergencies involving a dependant.
Other types of leave
Time off must also be allowed for:
- Public duties.
- Union activities.
- Job hunting or training when their role is at risk of redundancy.
- Jury service (although you do not have to pay staff unless you have stated otherwise in their contract).
Employees are eligible for flexible working if:
- They have been continuously working for 26 weeks.
- They have a child under the age of six (or a disabled child under the age of 18).
Reasons for refusing an employee flexible working must be set out in writing and be legally justified.
There are separate rules for workers under 18. These cover issues such as parental consultation and consent, hours and higher standards of health and safety.
Generally, it is fair to dismiss someone when the job (rather than the person) is no longer economically viable and the business no longer requires that role to be fulfilled.
You will have to make a redundancy payment to employees who have been with you for more than two years.
You could be liable to a claim of unfair dismissal if it can be shown that:
- You used redundancy as a pretext for dismissal for other reasons.
- You failed to follow the correct redundancy procedure, for instance by failing to offer a suitable alternative position in the business.
- You failed to follow a fair procedure in selecting an employee for redundancy.
How to be a law-abiding business
As an employer, the legislation you follow is set out by a number of different authorities, including:
- Department for Business.
- Enterprise and Regulatory Reform.
- HM Revenue & Customs.
- Health & Safety Executive.
Bear in mind that the law frequently changes. If you are concerned about a particular issue, contact the relevant authority or speak to ACAS (the Advisory, Conciliation and Arbitration Service).
Ignorance of the law is not a defence. In individual cases, especially if you want to dismiss someone, it is sensible to consult a solicitor who specialises in employment law.
Lawyers for Your Business
This scheme has 1200 participating solicitor firms in England and Wales who provide a free half-hour consultation on the legal issues and pitfalls of starting up or growing a business.
020 7242 1222
The Home Office
For a list of the documents that are acceptable as proof of entitlement to work in this country, see the Home Office website or call the Home Office Employers’ Helpline on 0845 010 6677 and ask for the leaflet: Changes to the law on preventing illegal working: short guidance for United Kingdom employers.
Business Link (England)
Practical advice on setting up and running a business.
0845 600 9006
Produced by the Central Office of Information, this site provides information from across UK government departments.
The Department for Business, Enterprise & Regulatory Reform
Formerly the Department of Trade and Industry (DTI), BERR is the voice for business across Government.
Enquiry Unit: 020 7215 5000
ACAS (Advisory, Conciliation and Arbitration Service)
ACAS produces a code of practice on disciplinary and grievance procedures (download a copy from the Publications section of its website).
Helpline: 08457 474747
Health & Safety Executive
Infoline: 0845 345 0055
HM Revenue & Customs
New Employers’ helpline: 0845 607 0143
The Employers Forum on Age
0845 456 2495
Equality and Human Rights Commission
The Equality and Human Rights Commission brings together in one body the work of the Commission for Racial Equality, the Disability Rights Commission and the Equal Opportunities Commission. The website’s Employers section details all your rights and responsibilities relating to equality, diversity and discrimination.
This Employment Law: A Checklist for Employers business advice article published in association with Lloyds TSB.
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