EMPLOYMENT ISSUES
Employment legislation places considerable demands on a small business but a failure t comply may have serious financial implications. It is essential that small businesses are aware of the legal regulations affecting their employees and ignorance of the law will not be a defence. Mistakes can be catastrophic for a small business with Employment Tribunals now able to award over £65,000.00 compensation for unfair dismissal and in cases of proven discrimination awards of compensation are uncapped.Small employers should be, at least, aware of the following :-
Taking staff on
When advertising for staff employers should not show an intention to discriminate unlawfully on the grounds of sex, race or disability. Job descriptions such as “salesman” or “waitress” may indicate an intention to discriminate and non-gender based descriptions such as “sales person” should be used.At interview questions about candidates family commitments, marriage plans or intentions to start a family should be avoided as potentially discriminatory.
Disabled applicants invited for interview should not be discriminated against in arrangements made for the interview to take place.
Written statement of particulars of employment
Employers are required to provide employees within two months of commencement of work, with a written statement of particulars of employment. The statement must include :-
- The name of the employer and the employee
- Job Title
- The date when the employment began
- Information about pay, hours of work, holidays, sickness pay, pensions, periods of notice and place of work.
- The disciplinary rules applicable
- The grievance process including the name of a person to whom the employee can apply for the purpose of seeking redress
An employer may wish to provide a more detailed contract of employment imposing additional terms and conditions on the employee which may include, for example :-
- Restricting the behavior of former employees after they leave.
- Keeping trade secrets confidential
- Commission and bonus payment clauses
- Fringe benefits and incentive procedures
- Probationary periods
Rights during employment
Paid Holidays
4.2 weeks paid holiday in 2007 was compulsory under EU Legislation and will increase to 5.6 weeks as from 1st April 2009. Holiday pay is paid at the normal rate of pay. No statutory right exists to take bank holidays off.
Hours of Work
A maximum average working week of 48 hours over a 17 week period exists unless the “worker” agrees to work longer hours. No exemption exists for small employers. If an employee is to be required to work longer hours a written agreement should be obtained for the worker to opt out of the forty eight hour week.An employee must be able to terminate the opt out agreement on not more than three months notice. The EU is seeking to force the UK to remove the 48 hour week opt out.
Itemised Pay Statement
All employees are entitled to an itemized pay statement detailing deductions for tax and NIC, tax credit payments and student loan reductions.
Stakeholder Pensions
Access to a stakeholder pension scheme must be offered by employers with five or more employees unless an exemption exists.
Maternity rights
The dismissal of an employee on grounds of pregnancy will be unfair and discriminatory. Maternity rights include time off for ante natal care, maternity leave and most pregnant employees are entitled to statutory maternity pay.Parental Leave
Following employment for at least one year workers with responsibility for a child are entitled to unpaid parental leave.
Time off for dependants
Reasonable time off to deal with an emergency involving a dependant is available to all workers.
Health and Safety
Employers are responsible for providing a safe working environment for their employees.
Equal Opportunities
Discrimination on grounds of sex, colour, race, nationality, ethnic or national origin, disability, religion or belief and sexual orientation is unlawful. Employment, training and promotion must be open to all.
Part Time Workers
Less favourable treatment of part time workers is not allowed in terms of pay, pensions, holidays and training.
Trade Union Activities
All employees have a right to join or not join a Trade Union.
Termination of Employment
A statutory minimum period of notice must be given dependent on the length of an employee’s service. An employee is entitled to one weeks notice for each complete `year of employment up to a maximum of twelve weeks.An employee with one years continuous service is given statutory protection against unfair dismissal. Whether a dismissal is fair or unfair will depend upon the reason for the dismissal and whether the procedure followed by the employer was fair. Six potentially fair reasons for dismissal exist:-
- A reason related to the capability or qualifications of the employee
- A reason related to the conduct of the employee
- Redundancy
- That the employee could not continue to work in that position without contravention of a legislative provision
- Retirement
- Some other substantial reason of a kind so as to justify the dismissal.
An employee with a minimum of two years continuous service is entitled to a redundancy payment if his or her job ceases to exist and suitable alternative employment is not available.
RUNNING THE BUSINESS
It is important to have in place carefully considered written contractual terms before starting to trade with customers and suppliers.
Terms and conditions of trading need to be brought to the attention of the other party before the contract is entered into or the terms will not be binding. To ensure terms are effective have the other party sign a copy. Check the standard terms and conditions of the other party to ensure there is no confusion as to whose terms and conditions will apply.
Clauses that need to be considered include :-
- Price, date payment is due and method of payment
- Delivery details and non-liability of seller for delay beyond its control
- Seller retaining ownership until goods are paid for but requiring buyer to carry risk for them and to insure them.
- Limitation on sellers liability for some mistakes.
- Provision for interest to be charged on late payment.
It is important to understand some basic principles of contract law :-
- Certain rights are imposed by law e.g. goods must be “fit for the purpose” for which they are sold and be of “suitable quality”. Goods must match samples or descriptions in brochures.
- If private consumers are dealt with as customers or clients any standard terms whether in a letter or a printed contract or subject to the European Directive on unfair contract terms and must be “fair” or they will be of no legal effect at all.
- Where an agreement is not kept a breach of contract will occur. A sufficiently serious breach may entitle the innocent party to reject the contract.
A non-serious breach may entitle the innocent party to compensation.
- If terms are printed on the back of a document the front should clearly draw attention to the terms on the back.
- Goods or services sold by telephone/mail order/internet are affected by the Consumer Protection (Distance Selling) Regulations 2000 by which consumers must be provided with specific information and given a seven working day cooling off period.
Managing cash flow is the secret to a successful business. Poor cash flow even when trade is buoyant can cause significant difficulties to a small business and in extreme cases force closure. A carefully planned enforced credit control process is a necessity and might include :-
- Vetting a potential customers credit worthiness before opening an account with them.
- Drawing up written contracts and/or terms and conditions of trading emphasizing when payment is due and providing a penalty for late payment although consideration might also be given to offering discounts for prompt or early payment. The Late Payment of Commercial Debts (Interest) Act 1998 allows small businesses to claim late payment interest at 8% above Bank of England base rate.
- Operating a blacklist of customers with an unacceptable payment record unless payment is made in advance.
- Getting to know and complying with the procedures of your customers invoicing and accounts department.
- Maintaining regular credit checks on existing customers.
- Ensuring all dispatch notes and invoices are accurate, are delivered to the right customer and sent to the correct address.
- Introducing a “stop” procedure for supplying customers who are late in payment.
- Sending reminders at appropriate stages and following up by phone/fax/email/contact by sales force as necessary.
- Taking legal action by issuing proceedings in the “small claims court” where the disputed sum is under £5,000.00 and/or instructing a Solicitor to recover the amount outstanding on your behalf. A Solicitors letter in the first instance, in any event, should always be considered before the issue of court proceedings.
Protecting business products and ideas
In the course of your business you may develop or design original products processes marks and ideas which others may subsequently seek to copy. A range of possibilities exist for protecting the businesses rights :-
Copyright
Copyright is used to protect, for example, written musical and artistic work such as sound recordings, films and drawings and computer programmes. Copyright arises automatically giving the right to control the use of the work protected and to prevent it being copied.
Patents
A patent may be registerable to protect a unique technical process which has not previously been available. Great care must be taken to ensure that details of the process are not disclosed before a patent is registered. A formal patent registration process exists which can be expensive and takes time.
Trademarks
A distinguishing mark may be registered as a trademark (e.g. a logo or slogan) which confers exclusive rights for the business to use the mark for the business’s goods or services.
Confidentiality
It may be sensible for a business to enter into a confidentiality agreement with any person or business to whom a business idea is to be disclosed.
DISPUTE RESOLUTION
Running a business can be a minefield. Disputes do arise and Maxwell Hodge provide a range of services designed to assist with dispute resolution for all aspects of the small business. Disputes may arise about :-
- Contracts
- Debts
- Professional negligence
- Patents, copyright and trademarks
- Partnerships
- Quality of goods and services
- Property
- Loans, guarantees and securities.
- Employment issues
- Regulatory and tax investigations
- Actions against directors
- Property/landlord and tenant disputes
- Breach of contract
- Partnership and shareholder disputes
- Employment
- Insolvency and director disqualification
- Professional negligence claims
When pursuing a claim a carefully worded and accurate demand letter should always be sent before issuing court proceedings.
Any attempt to compromise a claim either verbally or by letter should be clearly stated to be “without prejudice”.
Maxwell Hodge adopts a proactive, commercial and cost effective approach to the resolution of all disputes seeking to avoid, where possible, the need for determination by a Court.
The approach of Maxwell Hodge is to resolve business disputes in a manner which is appropriate, economic and speedy. We seek to defend and retain the rights of our clients and protect or recover their assets. Every effort is made to provide businesses with reliable advice upon the prospects of success of any anticipated action and upon the most suitable dispute resolution process available.
Our aim is a rapid and committed defence of your business interests tempered by a consideration of the wider picture.
To contact the commercial team please ring 0800 371 407 or click here.
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