This is the third part in our series ‘What You Do and Don’t Need A Solicitor For’ when starting your own business. We’ve already covered Setting Up Your Company and Financing a Business – but now you’ve got those sorted and your start-up is running, you might find you need to hire employees to get the work done and maximise your growth potential.
Many employers fall foul of employment law because they’re not sure what they do and don’t need legal advice on when it comes to hiring and employing staff. Find out if and when you’ll be needing our expert employment law solicitors.
Here we’ll be looking at:
- Data protection on job applicants and staff
- Employment checks
- Employment contracts – or written statements of employment particulars
- Registering as an employer with HMRC
- Employment regulations: discrimination
- Employment regulations: health and safety at work
- Employers’ liability insurance
Data protection on job applicants and staff
During the recruitment stage, your business must comply with data protection rules. As the law stands, employers can find out about their current data protection obligations here. Employers must comply with the Data Protection act and related guidance published by the Information Commissioner’s Office.
However, the way organisations use personal (and employee) data must comply with the updated General Data Protection Rules which came into force on 25th May 2018. As a result of this updated legislation, penalties for breaching the rules have become much more severe. Alongside this, the Government has introduced the Data Protection Bill (an update to the Data Protection Act).
Most start-ups and SMEs are still unclear about data protection, as the law is complex in this area – particularly with the new GDPR legislation. For more information on data protection, find out about our data protection services, or check out our advice posts:
- Get your business prepared for the GDPR
- Is Brexit going to affect data protection and GDPR?
- Data protection – what is personal data?
You don’t always need a solicitor to ensure data protection compliance, but if you’re unsure or your business handles either complex or large volumes of personal data, it’s best to get legal advice from a data protection solicitor.
When you have decided who to recruit, you must first:
- Check that those staff have the legal right to work in the UK
- Apply for a Disclosure and Barring Service (DBS – formerly known as CRB) check if your business operates in a field that needs one
- Check whether any potential employees have non-compete restrictions imposed on them by former employees
Legal right to work in the UK
You must show that you’ve made the correct ‘right to work’ checks on employees. You don’t need a solicitor for to make these checks. You can find a 3 step guide here, and right to work checklist here and an employers’ guide here. If you hire staff that don’t have the legal right to work in the UK, you could face a penalty for employing illegal workers – it could be going to jail for 5 years and an unlimited fine. You can find out more about the penalties here. If you are confused about whether a potential employee has the right to work in the UK, you can use gov.uk’s checking tool to work it out.
However, sometimes start-ups need very specialist staff, and you might not always be able to find these employees in the UK (or within the EEA or Switzerland). Or, your business may, from the outset, be international or crossborder in nature (you may have investors from outside the UK), and it may be beneficial for your staff to reflect this. If you really want to hire a particular person who doesn’t already have the right to work legally in the UK, you will need advice from an employment solicitor who specialises in immigration. It is likely that your business will have to apply for a licence for visa sponsorship via the Points Based System (PBS) – so you may need legal advice from a solicitor on doing this.
You don’t need a solicitor to make a DBS check. You can request a DBS check if the role is in:
- healthcare or hospitals,
- working with children or in a school, or
- working with elderly, ill or disabled adults.
If you’re not sure whether you should request a DBS check, or whether you are entitled to request one, you can use gov.uk’s checking tool. You can’t refuse to employ someone for ‘spent convictions’, unless you’re eligible to check their criminal record.
There are three different types of checks, ranging from:
- standard (spent and unspent convictions)
- enhanced (as standard with any information held by the police that’s relevant to the role)
- enhanced with barred lists (same as enhanced, plus any lists on which the employee is barred from doing the role)
However, DBS checks don’t cover any time the potential employee has spent living outside the UK. For this information, you’ll have to apply to the relevant embassy in the UK. This process can be complex – you may want to get legal help from a solicitor on employing staff from overseas who need a DBS check.
Types of workers a business can hire
You don’t need a solicitor to advise you on what types of workers to hire, but you do need to know what your legal responsibilities are to each type of staff member, to avoid any disputes, grievances or employment tribunals. If you don’t respect each type of workers’ rights and they raise a claim against you as an employer, you’ll definitely need legal advice from an employment law solicitor who specialises in acting for employers.
Whatever type of company you are, there are different types of workers that you could hire as staff. The broad categories are: employee, worker or self-employed.
- An employee is a type of worker, but may have more rights than a worker, and they work under an employment contract.
- A worker doesn’t have to be an employee – and they don’t usually have rights to notice periods, flexible working, emergency time off, or statutory redundancy pay.
- A contractor is usually self-employed. If your business hires a self-employed contractor, then most employment law may not apply directly from you to them – as their boss is themselves, not your business. However, there are certain cases where a self-employed contractor can be classified as a worker, and therefore entitled to certain workers’ rights.
The law, as you’d necessarily expect, is notoriously complex in definitions of employment, worker or self-employed status and is constantly changing, for example there are current cases involving the “gig economy” that are impacting on this area. To confuse matters further, someone can have different statuses in employment law and for tax purposes: for example, they could be exempt from PAYE but still be entitled to employees’ rights just by how their job works in practice. If you’re confused about what kind of hire you’re making, it’s always wise to get specialist employment advice. For an introduction to the basics of employment statuses and tax statuses, you could read Gov.uk’s guides to employment status and use the tool for checking employment status for tax but you may still need to get advice from an employment solicitor.
Here’s a simplified comparison of the different rights of employees, workers and self-employed/contractors:
|Worker (casual, zero-hours, as required)||Employee (permanent, fixed term, full-time or part-time)||Self-employed/contractor (for tax purposes)|
|Employment contract||No, just a contract or arrangement, doesn’t have to be written||Yes||No – a contract with the client to provide services.|
|Entitled to pay/rewards||At least the National Minimum Wage||At least the National Minimum Wage, plus any additional contractual.||As agreed in a contract or quote.|
|Health and safety||Yes||Yes||Yes|
|Statutory minimum paid holiday||Yes||Yes, plus any additional as conferred by employment contract.||No – unless also classed as a worker (despite self-employed tax status).|
|Statutory minimum length of rest breaks||Yes||Yes, plus any additional as conferred by employment contract.||No – unless also classed as a worker (despite self-employed tax status).|
|Can subcontract (send a substitute to do the work)||Limited rights||No||Yes, if agreed in a contract.|
|Protection against unlawful deductions from wages||Yes||Yes||A self-employed contractor has the right to receive payment from the client for the work they’ve done.|
|Protection against unlawful discrimination||Yes||Yes||Yes, in certain circumstances for those contracted personally to do the work.|
|Protection against unfair dismissal||No||Yes||No|
|Protection for whistleblowing||Yes||Yes||No|
|Right to request flexible working||No||Yes||No, as they are their own boss and decide when they work and how much work to take on.|
|Right to not work more than an average of 48 hours a week (plus the right to opt out)||Yes||Yes||No – you have autonomy as to how many hours you work.|
|Minimum notice period on termination of employment||No||Yes||No, but if there is a contract, there may be a termination clause detailing minimum notice.|
|Statutory Redundancy Pay||No||Yes||No|
|Other statutory pay (Statutory Sick Pay, Statutory Maternity Pay, Statutory Paternity Pay, Statutory Adoption Pay, Shared Parental Pay) and statutory leave||Not usually but is dependent on kind of worker.||Yes, both pay and leave – but some may require a minimum length of service before the employee qualifies for them.||No, but a self-employed person may be entitled to statutory maternity allowance if they’ve recently left a job.|
|Should they provide their own equipment, business assets, running costs?||Sometimes||No||Yes|
|Responsible for fixing mistakes in their own time and/or at their own cost?||Sometimes||No||Yes|
|Should they be paid through PAYE?||Yes||Yes||No|
You can also hire employees through employment agencies (not recruitment agencies). Technically, agency workers will be contractors employed by the employment agency. They have workers’ employment rights from their first day until they have worked for 12 weeks. Up until that point, it is the agency’s responsibility to ensure they get their working time rights.
After 12 weeks in the job, agency workers qualify for the same basic working and employment conditions as if they had been recruited directly as an employee (subject to a derogation if they’re on a ‘pay between assignments’ contract, in which case they’ll remain as an employee of the agency). That means that an agency worker who has worked for you for 12 weeks or more will have certain entitlements a directly recruited employee to the role has including equal pay, paid holidays and automatic pension enrolment.
Find out more about employers’ responsibilities to the rights of agency workers in England with these guides from reputable sources:
- Agency Workers Regulations: Guidance
- Agency workers: what you need to know
- Additional rights for agency workers
- Agency workers
- Day one and 12 week rights for agency workers
Hiring apprentices and interns
You can also choose to hire less experienced people, such as apprentices or as interns who are looking to train, gain a qualification or experience.
- Apprentices have the same employment rights as any other direct, permanent employees – including during any redundancy proceedings. You also have to provide them with a full induction, a Statement of Commitment, an Individual Learning/Training Plan, release from work for training and studying, and regular assessments and progress reviews. You will need legal advice if you want to end an apprenticeship early for any reason (including misconduct and incapacity), other than redundancy.
- Interns’ rights depend on whether you are a charity, you are hiring them to do the same work as a regular paid employee, you promise them future work, they are a genuine volunteer, they come to you on a school or student placement, or they are only observing/shadowing and don’t do any actual work. They count as an employee if they do regular paid work for you, so would be entitled to employees’ rights. They count as a worker, and would be entitled to workers’ rights including the National Minimum Wage, if they’re doing work of economic benefit to you, are required to work set hours, set tasks and to deadlines.
While there is greater government funding available to your business for younger apprentices, you must take care not to discriminate on the basis of age if you are recruiting for an apprentice.
A note on internships: many cases have been fought and numerous interns have won the right to be recognised as workers, so entitling them to backpay. Also be aware that offering completely unpaid internships may be unfair to those who can’t afford to work for free.
You can also choose to hire someone as a director or an office-holder, but it’s likely that, as someone who is already running their own business, you will have already filled this role (with yourself, in the case of a directorship). An office-holder does not necessarily do regular work for regular payment.
Employment contracts – or written statements of employment particulars
If an employee works for you for more than one month, you have to provide them with a statement of employment particulars within 2 months of them starting work. The written statement of employment particulars must include the following information:
- The names of each party: employee and employer
- A job title or description of work
- Dates of when employment began and details of any previous jobs that count towards a period of continuous employment
- Details of the amount and frequency the employee will be paid
- Hours and days of work
- Details of holiday entitlement (and how this interacts with public holidays)
- Location of the work and any relocation issues
- Details of any other locations the employee will work at
You must also explain, if not already contained within the principal document, information about procedures and pay relating to sickness, discipline and dismissal, and grievances, information dealing with notice periods and pensions, terms related to working outside the UK for a continuous period of more than a month, terms regarding the length of temporary or fixed term work and details of any collective agreements.
You can use gov.uk’s employment contract template, but if you want the contract to be significantly different to this, including certain provisions regarding confidentiality, intellectual property and post-termination restrictions then you may want to seek advice from a solicitor specialising in employment law.
Registering as an employer with HMRC
You don’t need a solicitor to register as an employer with HMRC. Registering with HMRC usually results in enrolling in PAYE in order to send payroll information to HMRC. You’ll need to register with HMRC as an employer if any of your employees:
- Earn more than £113 each week
- Have a pension or an additional job, or
- Receive any expenses or benefits from you (such as accommodation, company cars, travel expenses)
The rules may be different depending on what type of employer you are, what type of legal structure your business takes (partnership, limited company etc), and HMRC may need you to register by a particular method as a result – for example, online, by post or by phone. Find out if you have to register your business (or yourself, if you’re a sole trader) as an employer and the way you have to do it (post, phone etc) with the ‘Register as an employer’ tool. If you find that you do have to register, you must do it before your staff’s first payday.
Employment regulations: discrimination
As an employer, you must comply with employment regulations. Part of this is your responsibility to prevent discrimination on the grounds of certain ’protected characteristics’. These are:
- race (including colour, ethnicity, nationality and national origin)
- religion or belief
- sexual orientation
- gender reassignment
- marital or civil partner status
- pregnancy or maternity.
You can only take certain positive action towards a suitable job applicant who is disabled or who has another protected characteristic, if you are using that positive action to counter underrepresentation in your industry, or if the person with the characteristic may suffer a disadvantage because of that characteristic. Please note unless in the very limited circumstances involving an individual’s disability, this must not amount to “positive discrimination”. If you’re not sure on this, you should seek advice from a solicitor specialising in employment law.
At the recruitment stage, preventing discrimination means:
- Not stating or implying in the job advert that you’ll discriminate against anyone
- Not asking questions about health or disability (unless you’re using positive action, finding out if they need help, or how you can make reasonable adjustments to the job to accommodate them)
- Not asking for a date of birth unless the job requires someone to be over 18
- Not asking about spent criminal convictions
- Not asking about trade union membership
During employment, preventing discrimination is a longer-term strategy. Some of the aspects you will have to consider include:
- Paying people the same amount (including benefits like company cars) for doing jobs of equal value
- Introducing certain benefits that may discriminate against certain sections of workers (for example, something for married people but not for those in a civil partnership)
- Redundancy selection criteria that may disadvantage those with a particular protected characteristic.
- Firing someone that may be deemed for trade union membership, or making a discrimination allegation
- How to deal fairly with flexible working requests
- Making reasonable adjustments for employees with disabilities or health conditions
You must also ensure that employees are protected from harassment and bullying.
Much advice about the employer’s role in preventing discrimination and harassment is available online: useful resources are ACAS and Citizens Advice. With this knowledge, you don’t need a solicitor to avoid discrimination during the recruitment process, or during employment, but you might need legal advice if an employee alleges discrimination and raises a grievance or takes their case to an employment tribunal.
Employment regulations: health and safety at work
You don’t need a solicitor to manage health and safety at work, but you may need legal advice if workers make a complaint to the Health and Safety Executive (HSE) or to the local authority.
Employers are responsible for managing health and safety in the workplace for all types of staff (and also visitors), whether they are workers, employees, self-employed contractor, interns and volunteers. The laws that govern employers’ responsibilities include Management of Health and Safety at Work Regulations 1999, Workplace (Health, Safety and Welfare) Regulations 1992, and the Health and Safety At Work Act 1974. The HSE has produced useful guidance for employers on ensuring safety, and ensuring compliance with health and safety law:
What kind of workplace you operate will affect which authority enforces health and safety law on you. Check whether yours comes under the HSE or the local authority.
You must also report selected occupational disease, dangerous incidents, work-related accidents or deaths under the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013 (RIDDOR). Find out what kinds of accidents and incidents are reportable.
As an employer, you must also take responsibility for fire safety, carrying out fire risk assessments, communicating these, and ensure you have robust fire safety measures, including plans for any emergency. Find a short guide here. You could be issued with a fire safety order if your workplace doesn’t comply with fire safety regulations, resulting in a fine or prison sentence.
Employers’ liability insurance
As soon as you become an employer, you must also have employers’ liability insurance from an authorised insurer, covering you for up to £5million – unless you employ only closely-related family. This is to cover any compensation you may have to pay to staff who become ill or die as a result of their employment with you. You can be fined £2,500 per day for every day you aren’t properly insured. Find an authorised insurer on the Financial Conduct Authority register.
You don’t need a solicitor to get employers’ liability insurance, but you will need legal advice if an employee makes a liability claim against you, you are being investigated by the HSE or local authority, or you suspect a fraudulent claim.
You must provide a workplace pension to enrol staff who are eligible. Eligible staff will be those:
- earning at least £10,000 a year, and
- who normally work in the UK
You must make an employer contribution to their pension yourself (currently at least 1%, rising to 2% on 6 April 2019), as well as deducting an amount (currently at least 1%, rising to 3% on 6 April 2018) from the employee’s pay to pay into their pension.
When you need to enrol staff depends on when you became an employer. If it was on or after 1 October 2017, you must do it immediately. If it was between 2 April and 30 September, you’ll have a staging date by which to enrol people. Read more information about staging dates here, and read our advice, Are you ready for auto-enrolment?. The government has produced lots of useful information on workplace pensions for new employers, including what you have to do (and when). Other useful sources are the Pensions Regulator, and NEST, which is the workplace pension scheme set up by the government.
You don’t need a solicitor to set up and enrol eligible employees in a pension scheme – you can do it through a third party or agent. However, if you’re unsure of your legal obligations on auto-enrolment, what happens with occupational and final salary pensions, an employee raises a pension grievance, or you have other commercial issues that may affect any pension schemes, then it’s advisable to get legal advice.