Employing Staff in England
With English employment law increasing in complexity and tribunal awards made to employees where employers fail to comply with the legislation becoming greater each year, employers are advised to have in place procedures and policies to deal with the issues highlighted below.
1. The contract of employment
Statement of Terms and Conditions pursuant to S1 Employment Rights Act 1996. While UK law does not require the contract of employment to be in writing, an employer must provide each employee with a written statement of certain terms of their contractual relationship within two months of the start of the employee’s employment. The statement must contain, amongst other things, details of:
- Salary and benefits;
- hours of work;
- holiday entitlement;
- entitlement to sick leave and any provisions for sick pay;
- provisions for stakeholder pension arrangement, if applicable;
- grievance and disciplinary procedures; and
- the period of notice required to terminate the employment. The minimum notice which may be given is one week’s notice for each year of employment, subject to a maximum of 12 weeks.
Staff handbook
In addition to these basic terms and in order to minimise the risk of potential claims it is recommended that employers issue their employees with a Staff Handbook containing policies and procedures addressing workplace issues such as:-
- Disciplinary policy and procedure
- Grievance policy and procedure
- Equal Opportunities policy
- Maternity/Paternity/Adoption policy
- Poor performance procedure
- Sickness policy
- Bullying policy
- Data Protection policy
- Alcohol and Drug use policy
- No Smoking policy
- Health and Safety rules
- Parental Leave and Emergency Leave for Dependants Policy
2. Employment protection rights
Working Time
The maximum number of hours workers (i.e. employees and the self employed) are allowed to work per week is 48 hours). Although at present an individual has the right to agree to work longer hours, this is subject to the UK being successful in its lobbying of the European Council to maintain the UK’s ‘opt out’ as the European Parliament has recently voted to scrap the opt-out from the 48-hour working week currently contained in the Working Time Directive (2003/88/EC). Workers have the right to 4.8 weeks’ paid annual leave and to regular rest breaks during the working day, and within every 24 and 7 day period. Further rights are extended to night and shift workers and to adolescents.
Holidays
The statutory minimum paid holiday entitlement is 5.6 weeks (28 days) which includes the 8 UK Bank Holidays: Christmas Day, Boxing Day, New Year’s Day, Good Friday, Easter Monday, Early May Bank Holiday, Spring Bank Holiday and Summer Bank Holiday.
National Minimum Wage
UK employment law provides that a national minimum wage applies to employees and “workers”, currently £5.80 per hour for those over 22, £4.83 per hour for those between 18 and 21 and £3.57 for workers aged under 18 but above the compulsory school age.
Fixed Term Contracts
Employees working under fixed term contracts must be treated in the same way as comparable employees working under a contract for an indefinite term unless there is an objective reason for any difference in treatment.
Part time employees
English employment law requires that part-time employees are not treated less favourably than comparable full-time employees, unless it is objectively justified. This means part-timers are entitled, for example, to the same hourly rate of pay, the same access to company pension schemes, the same entitlement to contractual sick pay, the same entitlements to annual leave (on a pro rata basis) and no less favourable treatment in access to training.
Maternity, Paternity and Parental Leave
All pregnant employees are entitled to take up to one year’s (52 weeks) maternity leave, regardless of how long they have worked for their employer.
A woman on ordinary and additional maternity leave will be entitled to Statutory Maternity Pay from her employer provided she fulfils the following conditions: She must be employed by the employer in the qualifying week which is the 15th week before the week her baby is due. Furthermore she must be employed by the same employer without a break for at least 26 weeks up to the 15th week before the week her baby is due. The rate of Statutory Maternity Pay is 90% of a woman’s average weekly earnings for the first six weeks, followed by the lesser of a flat rate of – currently £123.06 a week – or 90% of her average weekly earnings for the remaining 33 weeks, whichever is the lower. Additional maternity leave after the 39th week will now also attract Statutory Maternity Pay.
Expectant fathers, who have worked continuously for their employer for 26 weeks ending with the 15th week before the baby is due, are entitled to take up to two weeks paid paternity leave around the birth of their baby. Statutory Paternity Pay is currently £123.06 per week (or 90% average earnings for the full 26 weeks if this is less than £123.06 a week). Statutory Adoption Pay is paid to either adoptive parents on the same basis as Statutory Paternity Pay.
Finally, employees are entitled to 13 weeks usually unpaid parental leave once he or she has completed one year’s service for the purpose of caring for his or her child until the child’s 5th birthday. A maximum of 4 weeks’ leave in a year can normally be taken in respect of any individual child.
Flexible Working
Currently, employees with young children aged 16 and under are entitled to request alterations in their terms and conditions of employment including to the number of hours they work and whether to work at home to accommodate their young families. There are circumstances in which the request can be denied by an employer but only if the employer can show that it has duly considered the request and has adequate reasons for refusing the request.
3. Restrictive covenants
In appropriate circumstances it may be important to include provisions within the contract which are designed to protect the employer’s business after an individual’s employment comes to an end, for example, restrictive covenants dealing with activities in a competing business, solicitation of customers and poaching of employees. The law of this area is highly technical, and the covenants need to be carefully drawn up if they are to be effective.
4. Notice periods
The Employment Rights Act 1996 provides that the minimum notice to terminate employment to be given by an employee who has been employed for one month or more is not less than one week. The statutory minimum notice to be given by the employer to terminate the employment is as follows:
- one week’s notice where the employee has more than one month but less than two years’ continuous employment;
- one week’s notice for each complete year of continuous employment where the period of employment is two years or more but less than 12 years; and
- 12 weeks’ notice where the period of continuous employment is 12 years or more.
These statutory minimum notice periods can of course be increased under the terms of the contract.
5. Termination of employment
It is possible to validly dismiss an employee under English employment law provided that the reason is “fair” and the dismissal was dealt with “fairly”. The six ‘fair’ reasons for dismissing an employee are as follows:
- Capability – in general terms, an employee may be regarded as incapable of performing the services required under his contract of employment because he does not have the necessary qualifications for the job, he is incompetent or his health renders him incapable.
- Conduct – many situations can give rise to good reasons for dismissal on conduct grounds; for example, theft, abusive behaviour, absenteeism or taking holidays without consent.
- Redundancy – this will be a fair reason for dismissal providing that the selection methods are fair.
- Contravention of a duty or restriction imposed by law.
- Age – if an employee has reached the normal retirement age.
- Some other substantial reason – this is a catch all provision and specialist advice should be sought before an employer seeks to rely on this as a fair reason for dismissal.
6. Unfair dismissal
One of the most common claims brought by employees against employers in the employment tribunal is for unfair dismissal. To manage the risk of unfair dismissal claims being successful, employers should put in place appropriate policies in their contracts of employment and follow proper procedures leading up to dismissal. If an unfair dismissal claim is successful in an employment tribunal the employee may be entitled to compensation for which the maximum award is currently £77,600 (£66,200 compensatory award plus 30 x £380 for maximum basic award).
7. Breach of contract and constructive dismissal
A breach of the contract of employment by the employer in such a way as to breach a fundamental term of the contract of employment, for example, failure to pay wages, or a failure to pay a bonus to which the employee is contractually entitled, can be regarded by the employee as a repudiatory breach of contract giving rise to a claim for damages for breach of contract and for constructive (unfair) dismissal.
8. Wrongful dismissal
Wrongful dismissal is where the employee is not in breach of his contract of employment but where the employer decides to terminate the contract of employment by dismissing the employee without notice. The claim by the employee is for damages for breach of contract.
9. Redundancy
Redundancy situations should be handled with care because failure to comply with the English employment law issues can result in a claim for unfair dismissal in the employment tribunal, which is usually more costly for an employer than following the proper selection and individual and collective consultation procedures.
10.Compromise Agreements
Compromise agreements record agreed terms of severance upon the termination of the employee’s employment. They are very common and popular with employers in that they give employers the means to lock out any potential claims the departing employee may have. For the employee, there are usually opportunities for tax savings on the severance package negotiated
11. Discrimination
Under English employment law legislation it is possible to bring claims in the employment tribunals for race discrimination, sex discrimination, disability discrimination, discrimination on grounds of sexual orientation, discrimination on grounds of religious beliefs and age discrimination.
Potential discrimination claims should always be carefully considered as there is no financial limit on the size of awards that can be made to those who have suffered discrimination at work.
12. Business sales and TUPE
Where there is a transfer of an undertaking (that is, of any trade or business) or of part of an undertaking, which was situated in the Great Britain immediately before the transfer, there will be a duty to inform and consult employees, or their representatives. Failure to do so may entitle the affected employees to claim a protective award of up to 13 weeks pay. More importantly, if employees are dismissed for a reason connected to the transfer, this will be treated as an unfair dismissal, subject to certain exceptions. The employee (unless s/he objects) is entitled to be employed after the transfer on the same terms and conditions s/he enjoyed before the transfer. English employment law in this area is complex and is subject to rapid change so legal advice in this area is essential.
13. Health and safety and employer’s liability insurance
A UK operation will be required to establish policies and procedures to ensure that the health and safety obligations imposed upon all employers by UK and EU legislation are complied with. An employer is liable for accidental injuries sustained by an employee in the course of his or her employment. The employer must therefore ensure that he provides his employees with safe place of work, a safe system of work and competent fellow workers.
There is an obligation on employers to take out insurance against disease or injury sustained by an employee during the course of his or her employment and against damage caused by its employees to third parties.
14. Taxation and social security
Employers must withhold income tax from their employees’ pay in accordance with the PAYE system. Employers must also pay National Insurance contributions in respect of every employee.
The material contained in this guide is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances.
© Miller Rosenfalck LLP October 2009
Please contact:
Emmanuelle Ries - Partner