If you’re an employer, it’s essential to stay on the right side of the law, but employment law is notoriously complex. Here, I give you five simple tips for being a good employer – and staying out of court or the tribunal.
1. The National Minimum Wage
The National Minimum Wage applies to all adult workers in the UK, although not in the Channel Islands or the Isle of Man. It covers all kinds of workers, including part-time, agency and casual. The only exceptions are the genuinely self-employed and voluntary workers. You can find out the current rates at the Department for Business Enterprise & Regulatory Reform (BERR) web site.
To work out if you are paying enough, you need to take the total gross pay, subtract payments and deductions that don’t count as gross pay, and divide this amount by the total number of hours worked in the "pay reference period" - a week, fortnight or four weeks.
Not all of an employees pay count as National Minimum Wage pay. For example, loans, pension payments, overtime and extra payments for unpopular shifts don’t count as “wages” in this context. Neither do benefits in kind, such as meals, fuel, or a car.
If your employees are paid according to their output – i.e. “piece workers” – they are entitled either to the minimum wage for the hours they work, or to a fair piece rate which means that workers who are slightly slower than average will still receive the minimum wage. There’s a guide to how to work this out at the BERR web site.
2. Who’s eligible for maternity, paternity and adoption pay
Empoyees who become parents, even through adoption, are entitled to various statutory payments.
To qualify, employees must have been employed by you for at least 26 weeks up to and including the 15th week before the expected birth of the child, or by the week they are notified that they have been matched with a child for adoption. They must also have average weekly earnings at least equal to the lower earnings limit for National Insurance contributions.
You can find out the latest full entitlements in these circumstances at the BERR web site.
3. Statutory Sick Pay
If an employee is off work through illness, you must pay them Statutory Sick Pay (SSP). This is applicable to all employees, unless:
They are off sick for less than three days.
They are paid by you, but are not employees – ie freelancers, contractors.
They earn less than the lower earnings level for National Insurance Contributions (currently £90 per week).
The have recently claimed incapacity benefit of severe disablement allowance, and are entitled to reclaim those benefits.
The maximum time that an employee can claim SSP is 28 weeks. The current rate of pay is £75.40 per week, but you can find full details of current rates at the HMRC web site.
4. Dealing with contractors
In 2000, the government brought in a special set of rules over contractors and tax, known as IR35. This was designed to stop companies from effectively employing people as contractors and thus avoiding paying full National Insurance contributions for them.
The key test for whether IR35 applies is defined as this by HMRC:
“’If the partnership or limited company did not exist in this arrangement, would your work for the client business appear to be one of direct employment?’ If the answer to this question is yes, then IR35 rules may apply.”
This makes it quite likely that any long-term contractor who performs a job which could otherwise be performed by an employee will fall under IR35. If you suspect it does, you should seek the expert opinion of an accountant of independent tax advisor. You can also contact HMRC directly through the IR35 unit, online. They will also be able to help you work out what you need to do next.
5. Be aware of health and safety
Health and Safety law in the UK consists of a comprehensive set of rules for employers. If you have any employees or have company premises which are accessible to the public, you must register with the Health and Safety Executive (HSE). You may also need to register with your local authority’s environmental health department. HSE has an online flow chart which can help you work out who you need to register with, as well as comprehensive information on your responsibilities.
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