Small Business Employment Law For Dummies®


by Liz Barclay




About the Author

Liz Barclay is presenter of BBC Radio 4’s daily consumer and social affairs programme You and Yours. Before joining the BBC she worked for Citizens Advice specialising in Employment and Family Law and Money Advice. She writes on business issues for BBC Online and has written on business and personal finance for various national newspapers, magazines, and Web sites over the past 10 years. Liz has also produced and presented 60 small business and 10 occupational health and safety programmes for BBC2 and written several booklets on work and personal finance to accompany BBC television and radio programmes. She chairs and speaks at conferences and seminars on work and business, is a trained counsellor, and lives in London.



Author’s Acknowledgements

Thanks to Stephen Alambritis, Head of Policy at the Federation of Small Businesses for all his encouragement, support, advice, and practical suggestions. The book wouldn’t have happened without that.

Also thanks to Murray Fairclough, Director of Legal Services at Abbey Protection Group Limited, legal advisers to the Federation of Small Businesses, for access to reams of useful information; Claire Birkinshaw at Abbey Protection Group Limited for all her practical help; and last but definitely not least, employment lawyer David Jones for running a beady legal eye over what I’ve written and patiently answering all my daft questions.


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Welcome to Small Business Employment Law For Dummies. If you’re running your own business and already have some employees or you’re just starting out and are planning to employ some staff, you need to know where you stand legally and what your obligations and responsibilities are. That’s where this book comes in, explaining the areas of law you need to be aware of and as many of the intricacies of that law as can be fitted between its yellow and black covers.

About This Book

This book will give you a good basic knowledge of how you need to apply the law to your employees, but if any disputes arise between you and your employees don’t hesitate. Get advice from some of the organisations mentioned in this book, because ultimately the outcome of any claim made against you by an employee will be down to the very fine detail of that individual case and the way it has been handled.

Running a business, even when you do have employees around the place, can be a lonely experience. If you’re a really small operation there may be just you to worry about getting the deliveries out on time, paying the invoices, and managing the cash-flow. Employment law might not be your immediate priority. This book is meant to be a useful and caring companion, on hand to give a bit of advice when you need it, rather than nagging for constant attention. Sometimes the best place for a book like this is in the loo, where you can pick it up when you’re having a necessary break from the day-to-day operation of the business!

Finally, remember that court and tribunal cases go on all the time and their outcomes have an impact on the law. The law is changing all the time and some aspects may be out-of-date almost as soon as this book reaches the shelves. New laws on age discrimination, for example, will be introduced in October 2006, although there are no details yet. The government mentions the law on maternity and paternity leave, parental rights, and flexible working almost every month, so there will be changes there that we won’t know the details of by the time this goes to print. There will be changes to the Disability Discrimination Act too in December 2005, which will extend protection of the Act to some people with cancer and HIV as well as mental illnesses that aren’t covered at the moment.

Conventions Used in This Book

To help you navigate this book, I’ve set up a few conventions:

bullet Italic is used for emphasis and to highlight new words or terms that are defined for the first time; this includes a lot of the ‘legalese’ you’ll come across.

bullet Monofont is used for Web addresses.

bullet Sidebars (the shaded grey boxes) contain information that, although helpful, might not apply to all readers – check out these sidebars by all means, but don’t worry if the information within them doesn’t seem applicable right now (it may in the future).

Foolish Assumptions

They say you should never assume as it makes an ass out of ‘u’ and an ass out of ‘me’, but I’ve had to make a few assumptions, such as:

bullet You’re reading this book in the first place, so you’ll agree that in these days of skills shortages it’s difficult to find staff you need, therefore making sure you look after your employees has to be a priority. Look after your staff and they’ll look after your customers.

bullet You’re running a business of some sort and, while you know that any employees you take on have rights, you aren’t fully aware of all of those rights or what your obligations are to deliver them.

bullet You take your employees and their welfare seriously. You want to keep them, so you’d like to stay on the right side of the law.

bullet Ultimately you’d like not just to do the bare minimum for your staff but, if you’re in a position to, be a bit more generous than the law expects and would like to aspire to what people see as best practice.

bullet You’ll appreciate my warnings as to the dire consequences of getting it all terribly wrong, but you’ll also see from what I’ve written that it’s easier to get it right if getting it right is part of your business culture. It can simply become second nature. It needn’t be nearly as hard for employers to get it right as stories in the press sometimes suggest.

How This Book Is Organised

Small Business Employment Law For Dummies is organised into six parts. The chapters in each part cover specific topics in as much detail as possible given the limitations of space and given that I’ve tried not to get overly technical.

Part I: Hiring and Firing

The first five chapters cover all you need to know to employ someone and get rid of them again. You can work out who has employment rights, what those rights are, and what other rules you may want to lay down about your workplace that will help you comply with the laws. You can read about recruiting staff; what to put in the employment contract; and what forms part of the contract even if you don’t write it down. At some point you may want to dismiss someone. The law has given employees more protection in recent years. The most recent and most important changes came into force in October 2004. There are now dismissal and disciplinary procedures that you must follow if you’re firing someone. Employers who take the ‘fire first and ask questions later’ approach can get themselves into serious trouble, but if you follow all the right procedures and are fair about your reasons you do have the right to get rid of employees. This part also covers what happens if the business isn’t doing so well and you have to make staff redundant.

Part II: Working Hours and Taking Time Off

The law has changed with the introduction of the European Working Time Directive. There are now rules about the maximum number of hours that people should work on average and about the breaks they have to be allowed. Employees also have the right to paid holidays. This part goes into the details of working hours, breaks, holidays, and all the other reasons for taking time off such as having a baby, becoming a father or an adoptive parent, or being off sick. There’s also information on time off for jury service, union duties, pension fund trustees, and magistrates.

Part III: Keeping the Workers Healthy and Safe

The three chapters in this part explain all you ever wanted to know and more about identifying hazards and making risk assessments. It’s your job to make sure the working environment is safe, so you’ve got to look out for the things that can cause the problems. Remove those hazards or, if you can’t, reduce the risks. If risks still exist, set about protecting people with goggles, ear plugs, non-slip shoes, machine guards, and such like. The law covers hazardous substances, dust, noise, temperature, lighting, uneven floors, forklift trucks – you name it! You also have a duty to make sure that work doesn’t cause illness or injury, and stress is one of the biggest problems here.

Part IV: Respecting and Consulting Staff

Respecting employees means keeping their personal information confidential and secure; not being intrusive if you are monitoring calls or e-mails; not discriminating against people because of sex, religion, race, disability, or sexual orientation (or age, from October 2006); making sure they aren’t victimised, harassed, or bullied. It also means consulting them if there are problems and changes around the workplace. Your employees are a wonderful source of good ideas and information that can make the whole operation run more efficiently and smoothly. Consulting and involving them will have positive business benefits and should help avoid disputes. You have to have a disciplinary policy in place that sets out how disputes will be dealt with so that everyone knows where they stand and what they might do that can lead to them getting the sack. You also have to have a grievance procedure that employees can follow if they have complaints to make. This part deals with all of those issues.

Part V: Paying Up – Everything to Do with Money

This part does what it says on the label – it deals with everything to do with employees and money, from their wages and holiday pay to sick pay, maternity pay, pay in lieu of notice, final payments when they leave, and pension plans. It deals with the amounts you pay people and the regular amounts you have to deduct for things like income tax and National Insurance. It also explains the circumstances in which you can deduct other amounts like overpayments or sums of money missing from the till.

Part VI: The Part of Tens

Two chapters with 10 sections each – the first covers how best to avoid conflict between you and your staff at work and stay out of the Employment Tribunals or courts; the second is a collection of 10 documents that I think you should find useful when it comes to dealing with your employees.

Icons Used in This Book

If you flick quickly through the book you’ll notice some little icons in the margins. These are there to highlight suggestions and cautions when it comes to dealing with employees.


This icon is a target to aim for – an insight into best practice that can help you to get the best from an employee or a situation.


Make a note when you see this icon – it highlights an important piece of information that you’ll do well to take in.


Stop and read this information to steer clear of mistakes and pitfalls that are common in employment law – following my tips and remembering the important pieces of information will help you to avoid these problems.


The icon that speaks for itself! It highlights points of law that you’ll want to become familiar with.


If you like as much in-depth information on a subject as possible, make a point of reading this material.

Where to Go from Here

The law is always a very serious matter and it can be quite daunting so I’ve tried to make this book as easy to read as possible. While it really does help you to avoid the pitfalls if you’ve got the law under your belt before you take on employees, you don’t need to read this book all at once. If you’re planning to recruit start with Part I; if you already have employees and some are having babies, Chapter 8 is the place to start. If you’re worried about how to set up a disciplinary procedure turn to Chapter 15. You can read the bits you need and then dip in and out of the rest as and when you’ve got the time. Don’t forget though that there’s only room for the very basic information in a book this size so follow up the leads I’ve given you for more information and advice. There are Web site and helpline numbers throughout.

Part I

Hiring and Firing

In this part . . .

I explain who has rights under employment law. I take  you through the process of recruiting, from advertising or using an agency, to interviewing and checking references and convictions. The contract between you and your employees may be in writing, or some may be written down while the rest is implied. Written down or not, a contract exists from the moment you make a job offer and the candidate accepts it; so if you’re about to employ your first member of staff or replace someone who has left, this is the place to start.

I then look at why you might want to get rid of employees by making them redundant, because you don’t have any work for them, or firing them because they’re incompetent or have been guilty of some unpardonable behaviour.

The idea is to stay on the right side of the law at all times so that you don’t end up in front of a tribunal panel accused of unfair dismissal, discrimination, or having selected the wrong person to be made redundant. Be forewarned!