Employment Law: The Basics

One of the most pervasive areas of business law, if you have staff you need to know your employment law. We take a look...

Employment Law: The Basics

If you run a business with staff, you need to know your employment law – it’s that simple. Keeping in touch with developments and developing smart policies in line with the law may seem tedious, but failing to do so can be disastrous for your business.

In this article, you will find a helpful run-down of the basics of employment law in all the areas you will run into it as a business, and what to do when things go wrong.

What should I be aware of when looking for staff?

At the interview and selection stage, you must take care to avoid letting prejudice affect your decisions. Discrimination is illegal on the grounds of age, disability, gender reassignment, marriage and civil partnership (marital status), pregnancy and maternity, race, religion or belief, sex and sexual orientation.

When interviewing candidates, you must be blind to all of the above and focus completely on their suitability for the job. Remember that you might have to justify why you selected one person over another if you are accused of discrimination – so keep detailed records of your criteria and decisions.

What to be aware of when offering a job

You must tread carefully when offering a candidate a job. When you offer someone a job (orally or in writing) and they accept, a binding contract of employment is created – meaning you can’t go back on your decision. In practice, you should clarify during the interview that you are not offering a job at that stage.

When writing a formal job-offer letter, explain that the contract of employment will be governed by terms and conditions to be provided later. Make any employment contracts conditional on certain requirements being fulfilled, like references. If, for example, a candidate’s reference doesn’t come through before they start work, you are not bound by the contract of employment

The law also requires you to provide a written statement of terms and conditions within two months of a new employee starting work. The terms and conditions must cover specified areas, including salary, holiday entitlement, working hours, job title and place of work.

When drafting these terms and conditions, include a statement that you reserve the right to amend the job description, and the employee’s place of work. This is extremely important – if you don’t include this caveat and subsequently change an employee’s role or workplace, you are in breach of contract and the employee can claim constructive dismissal.

You should avoid changing the terms of an employee’s contract without their consent, as there is a real risk that you will, again, be in breach of contract for doing so.

What rights do my employees have?

Employees have a number of rights that are automatically implied into their contracts. These are:

  • Employers cannot take any action that would erode the ‘mutual trust and confidence’ with their employees – this is a reciprocal duty, and means you and your employees must not act in a way that is likely to destroy your relationship.
  • Employees have the right to a safe, secure and healthy working environment.
  • Employees have the right to blow the whistle on their employer’s wrongdoings – this means you cannot dismiss or discipline employees for reporting you.
  • Employees have the right to belong to a trade union. In businesses with more than 21 employees, you must officially recognise a trade union when a certain percentage of the workforce votes for it.
  • Employees are entitled to protection from discrimination, both direct and indirect – see below.
  • Employees are entitled to a reasonable degree of privacy – Monitoring phone calls, email and internet use of staff is restricted under the Data Protection Act and the Regulation of Investigatory Powers Act.

How do I stay within discrimination law?

Remember, treating someone less favourably in any way on the basis of a protected characteristic is illegal, and doing so could land you in hot water. The protected characteristics are – as stated before – age, disability, gender reassignment, marriage and civil partnership (marital status), pregnancy and maternity, race, religion or belief, sex, and sexual orientation.

As well as overt, or ‘direct’ discrimination, you should be aware of ‘indirect’ discrimination. Indirect discrimination occurs when you impose a rule, criterion or practice at work that may apply to all equally in theory, but in fact disadvantages one group significantly more than others. An example of this is if you put out an advertisement for a cleaner but require them to speak and write excellent English – this is likely to disadvantage certain racial groups, and cannot be justified as a genuine requirement of a cleaning job.

For staff with disabilities, you have a further requirement to consider making ‘reasonable adjustments’ to the workplace to accommodate their needs, such as a ramp for a wheelchair user or an ergonomic chair for a member of staff with a back issue. In some circumstances, such as where the cost would be too high, you might be justified in refusing to make a reasonable adjustment.

It used to be the case that you could compulsorily retire employees after 65, but since the introduction of new rules following the Equality Act 2010, you can no longer do so unless you can objectively justify it.

As an employer, you are considered legally responsible for any discrimination, harassment or victimisation practised by your employees, so make sure staff are aware of and follow the relevant law.

How much can I pay my staff?

You must pay your employees at least the National Minimum Wage (NMW) to comply with the law. This varies depending on the age and status of the worker. The current rates are for staff aged 21 and over £6.31 per hour, £5.03 per hour for workers aged 18 to 20, £3.72 per hour for staff under 18 and £2.68 per hour for an apprentice (under 19, or older and in the first year of apprenticeship).

If you run a restaurant or hospitality business, don’t fall into the trap of assuming tips collected by your staff will contribute towards their National Minimum Wage: tips, service charges and cover charges paid to workers do not count towards NMW. For more information what the NMW means for your business, check out our guide here.

How much time can my staff take off?

Most workers in the UK have the right to a maximum 48-hour working week, which means you can’t legally require them to work any longer than that without their consent. Employees can signify in writing that they wish to work longer than this, but pressuring them to do so is against the law.

To give yourself added flexibility as a business, you can agree an annualised hours system with an employee where they may be required to work longer than 48 hours in a week as long as it evens out over the year.

Employees also have the right to at least 5.6 weeks’ paid holiday a year, or a maximum of 28 days. You can include bank holidays as part of this.

In addition, employees are also entitled to paid maternity, paternity and adoption leave, as well as unpaid family or parental leave. There are limits on how much of the latter two can be taken, and when.

Parents and carers of children under 17, disabled children under 18, or dependent adults have the right to make a ‘flexible working request’ in which you must consider whether to allow a worker to work in a way that suits their needs, such as working a reduced number of hours or working from home. They have the legal right to ask for this, but you don’t have to agree to the request.

You also can’t treat part-time workers less favourably than full-time ones when it comes to calculating holiday – they are entitled to holiday calculated in the same way as full-timers.

What happens when an employee is off sick?

Most employees qualify for Statutory Sick Pay (SSP) as long as they earn at least £109 per week. This means you must pay them £86.70 per week as a minimum, up to a maximum period of 28 weeks. SSP kicks in from the fourth day of sickness onwards, and only if the worker has informed you of their sickness before your deadline; if you don’t have one, this is seven days.

It is important to note that most employers pay higher levels than the legal minimum – it is not uncommon to give employees full pay for periods of months or more. Try and match what others in your industry are doing or you risk putting yourself at a competitive disadvantage.

If a worker’s continued or repeated sickness absences are causing significant disruption to your business, you can dismiss them in certain circumstances. Before doing so, you must look for ways to support employees and adjust for their illness, and give them reasonable time to recover from it.

What do I do when I want to discipline or dismiss an employee?

Before taking on staff, you should have written disciplinary and grievance procedures in place which conform to the ACAS Code of Practice.

If a situation occurs where you need to dismiss an employee, you must prove that the reason you did so was potentially fair (such as gross misconduct) and that you acted fairly and reasonably in dismissing them.

When making redundancies, the reason for the redundancy must be genuine – use redundancy as a response to pressing financial need rather than just another version of dismissal. You can make an employee redundant when you no longer carry out the business they’re employed for, carry out business in the place where they’re employed (for example, closing a branch), and need them to carry out work of a particular kind (for example, replacing cashiers with an electronic self-service system).

It is essential that your redundancy selection process is fair and objective, and you have a number of additional obligations when making an employee redundant, such as the obligation to try to find them suitable alternative employment within your company. Read more about this here.

If an employee accuses you of unlawful dismissal

If an employee accuses you of unlawful dismissal, this may land you in front of a tribunal. Remember it is illegal to discriminate against employees, and dismissing them in a discriminatory way is likely to land you in serious hot water – there is no upper limit for how much an employment tribunal can award in this instance, and it is not unusual for them to award in the millions of pounds.

An employee can claim ‘unfair’ dismissal if they have been dismissed for a reason that the Tribunal deems ‘unfair’ or if you don’t follow proper procedure when dismissing them. They must have had two years’ service at your company to qualify for unfair dismissal protection.

If you have breached a fundamental term of the employment contract, for example refusing to pay an employee, they can claim ‘constructive dismissal’ – giving them the right to walk out of the job and bring an unfair dismissal claim against you. The basic award for unfair dismissal can be up to £13,500, with additional compensation for financial loss incurred by an employee pushing this up to as much as £74,200.

Employment law may appear straightforward but getting it wrong might lead to an employee tribunal which could mean a hefty fee and potential closure of your business or, at the very least, damage to your reputation. It’s worth considering seeking expert legal advice if employing your first staff member, if you run into trouble or when drawing up a contract. Also make sure to stay up-to-date and within employment law if you have any staff at all.

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