I spoke to an owner of a small business the other day who told me that he never gets around to doing the HR (human resources) tasks for his staff, it always gets pushed down the priority list. His thinking was that, although he knew he had certain legal responsibilities, ‘nothing bad had happened yet’. Does that sound familiar?
We had a chat about some of the financial risks he was taking by ignoring his employment responsibilities and he very quickly became interested. So I thought it might be useful to share 7 of the most common HR risks that small businesses take and what the potential penalties are for ignoring them or getting them wrong.
1. Failing to provide a written employment contract
You are required by law to provide employees with a written statement of terms and conditions of employment (i.e. an employment contract) within 2 months of them starting work with you. Otherwise you could be taken to an employment tribunal and fined 2-4 weeks pay.
More importantly, if the terms of employment that have agreed with the employee are not put in writing, there could be a disagreement later on about what was agreed, leading to a breach of contract claim. Compensation for breach of contract claims can be up to £25,000 if taken to an employment tribunal, or £50,000 if taken to the High Court.
2. Failing to check an employee’s right to work evidence
You need to check that all your employees have the right to work in the UK (and take a copy of their evidence, such as their passport or work permit). If you don’t do this and it transpires that the person doesn’t have the right to work in the UK, you can be fined up to £20,000 per person for employing illegal workers.
3. Unfairly dismissing an employee
If you dismiss an employee without having a legally fair reason, or don’t follow the correct legal process, an employment tribunal can award the employee up to £74,000 compensation, or a year’s pay if this is lower. Plus you’ll have to pay your employment lawyer’s fees, even if you win the case, which for a tribunal case will amount to several thousand pounds.
Although employees need to have 2 years service to claim unfair dismissal, if the employee can show that they were discriminated against unfairly when being dismissed, they can make a tribunal claim regardless of their length of service (see below).
4. Unfairly discriminating against an employee
The law protects employees from being discriminated against on the grounds of age, disability, gender reassignment, marriage or civil partnership, pregnancy or maternity, race, ethnic origin, colour, nationality, national origin, religion or belief, sex and sexual orientation.
In cases of discrimination, employment tribunals can award unlimited compensation and there is no length of service requirement for employees to make a claim.
There is a particular risk with discrimination claims in that once the employee has shown that discrimination could have taken place, it is up to the employer to prove to the tribunal that they didn’t discriminate, which can be difficult to do.
5. Not having legally compliant employment policies in place
You are legally required to have a number of written employment policies in place such as a disciplinary and grievance procedure. Other policies such as equality / equal opportunities policy are also strongly recommended.
The biggest risk here is if an employee makes an unfair dismissal or discrimination claim, it would count against you at the tribunal if you did not have the appropriate employment policy in place, potentially leading to a larger compensation award.
6. Wasted management time dealing with employee complaints
If you don’t handle your HR responsibilities properly, you will inevitably encounter issues or complaints from your employees at some point. The management time required to sort these out is always significantly more than the time that would have been needed to do things right in the first place.
And if you are taken to an employment tribunal, the preparation required amounts to weeks of lost management time.
7. Demotivated staff
Information about employee rights is widely available on the internet, so employees tend to be fairly clued up about their rights at work and the processes that their employers should follow. So if you don’t do things properly, your employees will more than likely know and that can lead to demotivation and lower productivity. Whereas if you treat your staff fairly and lawfully, they are more likely to be happy and productive at work.
Written by Stuart Hearn, CEO of OneTouchTeam
Onetouchteam helps you to avoid these employment risks and saves you time by giving youpractical guidance on how to handle everyday HR tasks, as well as a full set of legally complianttemplate employment contracts, policies, letters and forms. www.onetouchteam.com