Starting a successful business is difficult enough without having to worry about the legal obligations of employing people. But the reality is that the cost of getting things wrong could be ending up paying a large fine or ending up in an employment tribunal. In this blog we’re hoping to rid you of those fears by clearly setting out a list of the steps to consider when setting up your small business.

1 – Contract of employment and Health and Safety Requirements

Once you have hired a new employee, you need to provide them with a written statement of terms and conditions of employment within two months of their start date. This is usually delivered in the form of an employment contract which lists the main conditions, agreements and responsibilities agreed between you and your new hire.

The clauses you must include are:

  • Name and address of employer and employee
  • Start date
  • Date contract will apply from
  • Continuous services date
  • When the contract is expected to end if temporary or fixed term
  • Job title or a brief description of duties
  • Place of work
  • Requirement to work overseas
  • Hours of work
  • Pay – how often and when
  • Holiday entitlement
  • Sickness absence and pay
  • Notice period
  • Pension arrangements
  • Disciplinary and grievance procedures (or explanation on where to find information about these)
  • Collective Agreements

Additionally, for businesses with five or more employees, it is the law to have a written health and safety policy for the company to follow. This should lay out your aims for maintaining a safe working environment, how you will ensure this happens and who is responsible for doing it.

2 – National Minimum Wage and Pensions

All businesses are legally required to pay all workers at least the National Minimum Wage, which can vary on the basis of the worker’s age or if they are an apprentice. Those over the age of 25 will be entitled to receive the National Living Wage.

The minimum wage for each worker can be easily calculated using GOV UK’s wage checker. If you discover you have underpaid any of your workers, you must pay the arrears immediately, or risk a fine of up to £20,000 per individual.

For employees over the age of 22 and earning over £10,000 a year, you will also need to enrol them in a workplace pension scheme. A scheme needs to be put in place as soon as you hire your first employee, and you must pay at least 3% of your employee’s ‘qualifying earnings’ into it. 

3 – Insurance

Employer’s liability insurance is a legal requirement for all businesses (unless you have no employees, or only employ family members). It’s designed to cover any compensation costs that crop up if an employee becomes injured or ill in the workplace.

4 – Equal Opportunities

It is unlawful for employers to discriminate against anyone on the basis of their protected characteristics (ethnicity, gender, age etc). During the recruitment process, there are multiple stages where employers can inadvertently make mistakes, so it’s important to get clued up on discrimination law from the start.

5 – Data Law Compliance

It’s not just big companies that need to know about GDPR. Small businesses also have a legal responsibility to keep personal data safe and provide a clear policy on how that data will be used and why. Have a clear Privacy Policy and keep it accessible and up-to-date to ensure your staff are fully aware of how their personal data will be stored, for what purpose, and how long it will be kept.

6 – Obligation to check employees right to work

If you hire someone without first checking they have the right to work in the UK, you’ll be taking the risk of receiving a severe penalty, with fines of up to £20,000 per employee.

Before offering the role to a candidate, it must be made clear to them that the offer is subject to proof of their right to work, which should be provided before their start date (for example, in the form of a passport or residence card). If this can’t be provided, you may not be able to hire them to work for your company.

If you would like more information on this or any other HR topic please contact Optima HR www.optimahr.co.uk for your FREE 30-minute HR consultation.