The Top 7 Legal Steps to Employing Staff

From pensions to contracts, here’s seven legal tips to consider when your small business is recruiting

The Top 7 Legal Steps to Employing Staff

For many small or medium-sized business, navigating around employment legislation can seem rather daunting as of all the branches of law, it’s the one that seems to change every time a bell strikes.

However, as a small business owner, getting it wrong can result in you finding yourself facing a claim that may have costly implications – both financially and for your business’s reputation.

The following guide highlights the key bases that you need to get right in order to keep your company safe.

Advertising a job role and interviewing: Beware discrimination

When crafting job adverts, you must avoid using words or descriptions that might imply discrimination, so only mention those attributes specifically required for the job. Specifying ‘a recent graduate’ or ‘very experienced person’ can be interpreted as age-related discrimination unless it is a requirement of the post.

When interviewing candidates, you must not ask them about ‘protected characteristics’ (defined as: age, gender, sexual orientation, ethnicity, religious beliefs or marital status) unless it is directly relevant. In addition you cannot ask them about trade union membership, or any spent convictions (unless the role involves care of children or vulnerable adults). Again you can only ask about disability or health if it is directly relevant to the job.

Contracts of employment

Although a contract of employment can exist even if it is not in writing, you are legally required to provide a written statement of the main terms of employment within two months of the employee starting work for you. There are a number of key elements common to all contracts that should be included: the start date; rate and frequency of pay; hours of work; holiday and sick leave entitlements; place of work (including multiple locations – and overseas if applicable); pension scheme; and the notice period (on both sides).

The terms of individual contracts will vary depending on seniority and responsibility and the more complicated the terms and conditions (particularly service agreements, which are essentially employment contracts for senior personnel), the more important it is to have them legally drafted.

Having a staff handbook and workplace policies in your small business

There are an increasing number of statutory rights to which employees are entitled as well as company policies and procedures which do not need to be expressly laid out in contracts of employment but should be included in a non-contractual staff handbook.

All employees must know where and how to access the staff handbook (most employers tend to store this online so that it can be easily updated). The handbook should contain details of the company’s policies for which there are minimum statutory requirements (in particular health & safety, equal opportunities, working hours, absence, flexible working and paternity leave) as well as general policies such as dress code and internet and social media use.

The company’s disciplinary/dismissal and grievance procedures must also be included in the handbook alongside its rules on what constitutes misconduct and gross misconduct.

Equal pay in your company

It is a legal requirement to pay the minimum wage and HMRC has started a policy of naming and shaming those employers who do not pay it and have increased their enforcement budget to deal with non-compliant employers. It is also a legal requirement to adhere to an equal pay policy.

Penalties can be levied on employers which, after losing a claim for equal pay, do not carry out an equal pay audit properly when instructed to do by an Employment Tribunal. There are a number of elements to this audit including the identification of different pay levels between the sexes and any reasons for those differences.

Calculating holiday pay to include regular overtime payments

Following recent case law, non-guaranteed overtime which an employee is required to work should be taken into account when calculating holiday pay. The government introduced regulations, effective from 8 January 2015, introducing a limit of two years for back-dated claims for holiday pay, lodged on or after 1 July 2015, from the date the claim is filed.

Pension auto-enrolment

All UK employers are required to enrol eligible job holders into a qualifying workplace pension scheme or National Employment Savings Trust (NEST), to which the employer must contribute. The enrolment process has been carried out in stages; the largest employers have already implemented auto-enrolment and employers with fewer than 50 employees will be required to implement auto-enrolment between now and February 2018 according to their PAYE scheme size or reference.

Employee data protection rules

All organisations that store and handle personal data on individuals (including employees) must comply with the Data Protection Act. Most of the requirements can be satisfied by following the eight Data Protection Principles and adopting a common sense approach to the ways you collect, use and store data.

Though dense and sometimes confusing, ensuring that you have the correct legal procedures in place is essential for any business employing staff and it may be worth getting external advice to ensure you have everything completed correctly.

For more advice on recruitment and employment have a look at’s section on taking on staff here.

This article was written by Emma Wellard, the employment law specialist at Wright Hassall LLP.

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