So you’ve finally found the courage to follow your dreams and start your own business. You’ve re-mortgaged your house, borrowed your in-laws life savings and ordered yourself some impressive embossed business cards. After a year of hard slog, no sleep, no salary and a few more grey hairs, you are at the stage where you are ready to take on some employees to share the burden.
What many start-ups fail to do at this stage is stop and take a moment to gain some advice on becoming an employer. You might think that this can wait because you don’t have time for this at present; but what if the ghost of Christmas future was to appear and tell you that a year from now you would be standing in a Tribunal with an ex-employee, who was being awarded £20,000 from the Employment Judge? £20,000 that effectively wipes out your profits for the year and reduces all of your hard efforts and sleepless nights to a waste of time. This is all too common a scenario. I have on many occasion been asked by clients who have been ordered to pay large Tribunal awards “But of course I can’t pay this, it would mean I will have to go bankrupt?” and my answer to them is that the Judge does not care. If the award isn’t paid, a County Court judgement will be sought and appropriate action taken to obtain payment.
So, if you are at the stage where you are employing for the first time, then here are the top five things to consider beforehand; ‘things’ that could literally save your business. Please be aware this is not an exhaustive list however, but just the critical things to consider at the outset.
Someone does not even need to be an employee to lodge a claim against you at a Tribunal if they feel you have discriminated against a protective characteristic that they have. Protective characteristics refer to sexual orientation, religion, gender and age, to name a few. So when writing that new job advert, you might want to think about running it past someone with knowledge of employment legislation to ensure that you are not putting yourself at risk. Some people actually make a lot of money hunting for adverts that potentially exclude them from applying for the post on the grounds of their protective characteristic.
You have received applications and you are whittling these down to the people that you would like to invite for an interview. It is important at this stage to have a list of the skills, qualifications and qualities (a job description would help with this) that you are looking for and then scoring the applications based on which boxes the applicant ticks. This is important so that you can justify your decision as to who you are willing to interview. If an applicant were to make a claim against you because they had included in their CV that they were required to wear religious attire and pray during the day and had not received an interview, then it would support your defence to show that the applicant had been scored and had a lower score than those selected for interview. This process would then need to be repeated at the interview stage. Also, when it comes to reasonable adjustments for disabilities, do not assume that this duty only exists when someone becomes an employee. It is essential to ask a candidate prior to an interview whether they have any specific requirements to enable them to attend the interview.
Contracts of employment
It is a common misconception that issuing a contract of employment to an employee will tie the hands of the employer. Frequently I will be asked by clients if they can delay issuing contracts until they are sure that they want to retain a particular employee. The first thing to bear in mind with this scenario is that employees are entitled to written particulars of employment within two months of their start date. Failure to provide these can result in a fine for the employer. The second benefit to issuing contracts is that employees then know exactly where they stand. They know all of your rules, procedures and policies and can then act accordingly. If you don’t issue them with a contract/handbook and you want to discipline them for talking about work on their Facebook page for example, how can you then prove that they knew this was against company policy? Thirdly, a contract of employment will not tie you to that employee for the rest of your life. If there are concerns with the employee’s suitability for the role or their performance/conduct, then these can be dealt with during their probation period or in a disciplinary/capability hearing respectively. It should be noted that employee’s with less than two years’ service have fewer rights at Tribunal and cannot in most circumstances make an unfair dismissal claim (they can make other claims though), so this gives you scope to consider dismissal in the first instance. Again though, I would always recommend taking advice from an Employment law specialist prior to dismissing a member of staff.
When considering whether to become an employer, it is not just the costs of someone’s salary that you need to account for. Bear in mind if they are sick then you are liable for 28 weeks of statutory sick pay, in addition to the cost of temporary cover. Pension auto enrolment has already kicked in for larger companies and it is gradually coming into place for smaller companies. This will mean an additional percentage of the employee’s pay that you will need to account for also. Add to this holiday pay, maternity pay, paternity pay etc. and you start to get a feel for the additional costs you need to be prepared for.
Custom & Practice
Your business might be small to begin with, but it’s important to project how it may look in five, ten or even twenty years’ time. Small companies generally have a more relaxed approach. If someone wants to have several cigarette breaks a day, then the impact on the business will be nominal and the employer more likely to accommodate this. You need to bear in mind though that even if these breaks are not written into the contract they become what is known as “custom & practice” and will form part of the contract. Imagine if in five years you have two hundred employees though? What would the impact and cost be of them all taking several cigarette breaks a day? You always have the option of bringing new employees on board under different terms and conditions, but the downside to this can be one employee looking on longingly as their colleague slopes off for their tenth cigarette break of the day. Therefore, think big at the outset, so you can set out policies and procedures that will grow with you.
The moral to this story is, be “Employee ready” and protect your hard earned profits!