Help! I started a business in lockdown and now I’m being asked about employment rights!
First off, if the above person sounds like you, well done! It takes a lot to have the guts to start a new business and then to make it work! It’s no mean feat at all and, naturally, your focus will have been on getting the business off the ground.
However, as your friendly employment lawyer, I’d like to be the voice in your ear saying, “have you taken on people to help you with your work? If so, what agreements do you have in place with these people? Have you checked whether they are a worker, employee or self-employed? Do you know the difference between these different types of employment?”
It’s likely that as your business has grown you’ll have needed a bit of assistance. When you start involving other people in your business, even if it’s on a minimal basis, not only is it sensible to think about what sort of formal agreement you have in place with them, it’s essential.
Have I Taken On Employees Or Workers? What If We Just Agree Between Us That The Individual Is Self-Employed?
Broadly, if you have asked someone to assist you with an aspect of your business and they take instructions from you on what to do, how to do it and when to do it and you expect them personally to do the work, there is a good chance they would qualify (at the very least) as a worker. This would entitle them to receive paid holiday, the national minimum wage and to be auto-enrolled into a pension. Going a step further, if you have taken someone on with the expectation that they will work at agreed times for regular pay, they may even qualify as an employee, which comes with additional rights.
It can be tempting to agree with an individual that they are being brought into the business as a “self-employed” contractor in the hope that this would resolve the issue of needing to worry about employment law rights, whilst saving on tax costs for both you and them. However, put simply, both the Employment Tribunals and HMRC have thought of that and are not so easily put off the scent! There are a number of boxes that must be ticked before someone is likely to be accepted as truly self-employed and an investigation into someone’s true employment status may prove very uncomfortable and, ultimately, costly if it becomes clear they should have been treated as an employee or worker from the outset.
What should I do?
Seek advice on the employment status of your staff. Work out who may be a worker, who may be an employee and who is genuinely self-employed. Then familiarise yourself with the legal responsibilities you have to each person.
Get contracts drawn up that reflect the agreement your business has in place with each individual. In the case of employees and workers the right to a written statement of terms is, in any event, a day one right.
Take advice on what else is required of you as an employer. For example, you will need to think about whether you are protecting their personal data in a legally compliant manner, whether you need various forms of insurance and what steps you must take to protect the health and safety of your staff.
What If I Just Leave Things As They Are?
If you don’t check and formalise the employment status of your staff then you run the risk that at some point you may be sued by a staff member or challenged by HMRC and will have no paperwork to defend your position as to e.g. why you do not believe you owe them holiday or why you believe you have paid the correct tax regarding the status of your employees.
The longer your business remains informal when it comes to your staff the greater the risk of a costly legal battle or fine (or both) in the Employment Tribunals and Tax Courts, as unacknowledged employment rights continue to build up, staff develop expectations regarding their contracts that you did not intend, employment related tax goes unpaid and you fall short of your general obligations as an employer over an extended period.
There is a good chance that at some point it will become apparent that a staff member has honestly, but frustratingly, developed a different understanding to you as to the terms of their unwritten contract. This can be incredibly damaging for good working relationships and for your business overall. The best thing you can do to help protect your business is to work towards heading off these sorts of issues before they even arise.
So, find out about your obligations as an employer and get your staff contracts in place - it’ll help you sleep!!
