If you’re an employer, you’ll know that employment law is notoriously complex. Here, we look at some legal pitfalls that companies fall into when employing people, and how you can avoid them.
Employee or contractor?
Any growing business has to use contractors at some point, as it’s simply not practical to hire new employees when you don’t know if you’ll have enough work for them six months from now.
Using contractors to effectively fill what you hope will eventually be full-time positions is a great method of managing growth. But one thing to be careful about is staying on the right side of employment law with regard to their National Insurance contributions.
Since 2000, under legislation referred to as IR35, contractors who are engaged in a way which is similar to a full-time employment relationship need to have National Insurance paid by their employer.
You can work out how much you need to pay using the HMRC’s IR35 calculator, or allow your accountants to do this for you. And, if you have any doubts over whether a contractor is covered by IR35, seek expert advice from your accountant, or direct from HMRC. But if you’re employing contractors, make sure you check: there are stiff penalties for not complying with the law.
Working out the wrong National Minimum Wage
For many employees, it’s obvious whether they are receiving the National Minimum wage. If you pay someone on an hourly basis with no bonuses or deductions, then you currently need to pay them £5.52 per hour if they are over 21, or £3.40 if they are aged 18-21.
However, things get more complex if there are bonuses or deductions. For example, tips can only count towards meeting the Minimum Wage if they are paid through the payroll, which means that if you run a scheme which simply shares out cash tips at the end of the day, this will not count.
There are also a range of special allowances which don’t count towards minimum wage, such as working in dangerous conditions, unsocial hours, shiftwork, and so on.
For example, suppose you employ someone and their regular hourly rate is £5 – less than the minimum wage. They also work unsocial hours, for which you pay a bonus of £2, which means that the total amount they earn over a 40 hour week comes to £280 - £7 a week, and above the minimum wage.
However, payments for unsocial hours are excluded from their pay when working out minimum wage – which means that you would technically be breaking the law.
The TUC has created a Minimum Wage Calculator which you can use to work out what you should be paying.
When you’re recruiting
When recruiting new staff, there are many legal responsibilities to take into account. Employers have the legal responsibility to ensure that no unlawful discrimination occurs in the recruitment and selection process on the grounds of sex, race, disability, age, sexual orientation, and religion or belief.
You should be aware that the provisions of the Disability Discrimination Act 1995 go further than this. Not only is it unlawful to discriminate against disabled individuals without justifiable reason but you must make reasonable adjustments to the workplace or working arrangements to cater for disabled employees. Using the excuse that your workplace is not able to cater for disabled employees in order to turn away a potential applicant could get you in hot water.
The Arbitration and Conciliation Service (ACAS) has prepared a booklet which details an ideal fair application process, which can be downloaded here. And Business Link has produced an online calculator which walks you through recruitment, showing you what your legal responsibilities are at each step.
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