TAKING ON YOUR FIRST EMPLOYEE
TAKING ON YOUR FIRST EMPLOYEE
To employ or not to employ?
For a new business the first year is all about survival, but what happens when year on year your business is doing more than just surviving and is starting to flourish? As a business grows it is inevitable that the amount of time that needs to be invested into the business to secure its future is too much for one person, particularly if that person is a working parent wanting to maintain a sensible work / life balance – which was probably what attracted them to set up their business in the first place!
Employing someone to invest their time and skills can be hugely beneficial to a business. As the saying go “two brains are better than one” and “a problem shared is a problem halved”, but on a practical level it is good to share the workload and allow for time off for holidays, attending the children’s school events, sickness and general R&R without bringing the business to a halt. Positives aside, business owners are often nervous about taking on their first employee, but what are the most commonly feared risks?
EMPLOYEES HAVE TOO MANY RIGHTS.
Yes, living in a modern society does mean the age of being flogged in a factory or sent up a chimney as a child is behind us! However, an employee does not actually accrue enhanced employment rights such as unfair and constructive dismissal until they have 2 years’ continuous service. There are exceptions to this rule if an employee is dismissed for a protected reason, but ordinarily their protection is limited in the first 2 years.
The right not to be discriminated against on the grounds of age, disability, gender reassignment, pregnancy and maternity, race or religious beliefs, sex or sexual orientation, exists without the need for any length of service. Whilst the law is there to stop an employee from being unfairly treated, if employees underperform or conduct themselves in an unacceptable way you can fairly terminate their employment (whether they have 2 years’ service or not). ACAS offers good free guidance on how to conduct disciplinary and capability procedures, and you can always take specialist legal advice.
EMPLOYMENT CONTRACTS ARE NOT WORTH THE PAPER THEY ARE WRITTEN ON.
Certainly not true! Within the first 2 months’ of employment, employees should be given a written statement of the main terms of their employment, which need to include certain information to be legally compliant. It is useful to incorporate this into a contract, which sets out what is expected of the employee and can include clauses to protect your business even after the relationship has come to an end, such as deterring the employee from stealing your customers when they leave. Preparing the contract correctly and using it as a working document along with other policies and procedures can be a very effective tool for employers.
I CAN SUBCONTRACT THE WORK; AS LONG AS THEY PAY THEIR OWN TAXES THEY ARE SELF EMPLOYED.
One way of developing your business is to subcontract particular areas of work. This can certainly be effective for short-term projects, but if your business needs more regular assistance it is important to engage people in the correct way. Labelling someone as self-employed does not guarantee they will be viewed as self-employed by an employment tribunal or HMRC, especially if they are being treated as an employee.
Issues around employment status have hit the headlines on many occasions over the last few years with Uber, Pimlico Plumbers and Deliveroo, who have defended claims brought by contractors who were found to be workers and entitled to basic rights such as holiday pay and National Minimum Wage.
It is much better to be clear on the purpose of any working relationship from the outset. Putting the correct contract in place will show the intention of both parties and help to reduce the risk of future claims.
I CAN’T AFFORD TO EMPLOY SOMEBODY
Take sound financial advice before recruiting your first employee to understand the costs you are responsible for which will include salary, income tax and National Insurance contributions, pension and holiday pay. Whilst there is a financial cost to employing staff, this should be outweighed by the skills and knowledge they bring and the income they generate.