As you are growing, your business may need more people. There are various ways in which you can employ staff so you’ll need to think about your specific requirements — for example, you may need seasonal hires, or one-off projects or work (known as a gig!) or more people in your team on an ongoing basis.
However, employment status can a tricky area, and we’ve outlined some of the different rights and obligations that come with hiring employees, workers and self-employed contractors — so you are informed from the onset.
1. First, ask yourself whether you need an employee, worker or self-employed contractor? — what’s the difference?
Will you need to control them and require them to be working regularly? If so you probably need an employee. If you are happier with less control and for them to be available less regularly, you could opt for a worker or even a consultant. Control isn’t the only criteria for deciding whether someone is an employee, but it is one of the most important issues.
Employee — if you decide to take someone on as an employee then you have to be aware that this will confer a number of different rights on them, not least the right not to be unfairly dismissed and the right to a redundancy payment.
Worker — although workers do not share these rights they do have certain rights in common with employees, such as the right not to be discriminated against, and enjoy protections relating to working time and the national minimum wage.
Self-employed contractor — will not have rights as a worker or employee.
2. Actions speak louder than words
Whilst you may choose the label of employee, worker or self-employed contractor you’ll need to bear in mind that this will not necessarily be determinative. It’s not just what the contract or agreement says, but the reality of the way in which the relationship works that will be indicative of an individual’s status.’
An important case to bear in mind…
The Supreme Court’s decision in Pimlico Plumbers and Mullins v Smith earlier this year proves how difficult it will be to argue that someone providing personal service is anything other than a worker and therefore any payments received by them, even via a personal service company, will have to be subject to a deduction of tax.
In Pimlico Plumbers the Court held that Mr Smith, a purportedly self-employed plumber, was in fact a worker in that he worked under a contract whereby he undertook to do or perform personally work or services for Pimlico Plumbers. The dominant feature of Mr Smith’s contract was an obligation of personal performance.
3. Recruiting an employee
Employing someone for the first time can be a daunting process. It’s certainly worth knowing the pitfalls and risks which are that if you get it wrong, you could face a claim for discrimination — the individual doesn’t need to be employed by you to bring a claim.
Here’s a quick step guide for you — so make sure you can demonstrate you have done this to protect yourselves against a potential discrimination claim:
a) Prepare a detailed written job description and a person specification.
b) Shortlisting — ensure that all the criteria stipulated are relevant, and that any shortlisting process is fair and consistent.
c) At the interview — avoid making stereotypical assumptions about people at interview, and avoid asking questions that could be discriminatory, such as details of childcare arrangements, living arrangements or plans to have children. So keep your recruitment methods as fair and transparent as possible should avoid any potential discrimination claims; protection from discrimination applies to job applicants as well as employees and workers!
d) Once you have made a job offer, it can be made subject to certain conditions such as the receipt of satisfactory references or confirmation that the individual is free to work in the UK.
e) Employee perks — to attract and retain people. We’ve already written about employee share incentive plans and share options, but ensure this is written into the contract for clarity and if certain conditions apply.
4. Contracts
You have to give employees a statement of terms of employment — it protects you and who you employ — job role, responsibilities, hours of work, benefits and basically define the working relationship.
Contracts can be written or verbal and we’ve recently been working with employers to develop modern contracts such as virtual or visual contracts (reflecting the changing patterns for the future of work), which still comply with the law and protect employers’ positions. It can be a great opportunity to set out the tone for a new working relationship and way in which you want to communicate with staff.
The contract must be signed by both parties to come into effect. It is an important document which shouldn’t be overlooked as it can be upheld in the Courts (should any future disputes arise).
5. And covenants
It’s also imperative to protect confidential information (Intellectual property, customer data etc.) and prevent former staff (or employees) setting themselves up in competition, so make sure you include some tightly worded restrictive covenants in your employment contracts focussing on the interests you wish to protect. So as an employer, make sure you have this covered!
Please contact the Trowers’ team for more information. We have also produced a series of fact sheets to help you, so click here to access our online resources.
