15 February 2017
In this podcast, we cover the key employment issues affecting businesses setting up or expanding in the UK, whether from the US or elsewhere. We discuss the 'must know' areas for any General Counsel, HR Director, or anyone responsible for implementing a UK strategy on the ground. Members of our Employment, Labour & Equalities team consider the Top 10 issues to consider when employing staff in the UK, ensuring compliance and protecting your business.
On Friday 24 June 2016, it was announced that Britain had voted to leave the EU. We have numerous articles on the impact of this decision in different sectors plus a report on the impact of Brexit on transatlantic trade.
We also have a 'Brexit team' of legal experts who are on hand to answer your questions as they arise. They can work with you to tackle the challenges, but also seek the potential opportunities, that Brexit will bring.
Jennifer Harper: Hello, welcome to our 'Getting Started in the UK podcast'. I'm Jennifer Harper, a senior associate at Gowling WLG and today we are going to be looking at the top ten tips for employing staff in the UK, considering the life cycle of an employment relationship from hiring to managing employees and expanding and potentially parting ways. These issues will be relevant to General Counsel, VPs, HR professionals and anyone who is looking to launch or expand in the UK. If you get these issues wrong, it can mean your organisation is exposed to expensive claims. Whereas getting it right, should hopefully lead to a successful and smooth start in the UK.
I would like to introduce Ruth Ormston from our Combined Human Resources Solutions team and Hannah Swindle and Tessa Livock from our employment team.
Firstly, Ruth, tip number one, what do employers need to think about when hiring in the UK?
Ruth Ormston: Thanks Jen, well in terms of planning your recruitment and hiring staff in the UK there are a number of things you need to think about really. So, think about where you are looking for your staff; what medium you are using. And are you basing your procedures and your recruitment processes on their talents and skills? So, avoiding any discriminatory wording in your job adverts, for example. So, you've done all that well, it's gone smoothly, brilliant, you've found a candidate, great stuff. It is important to check that they have the right to work in the UK and that sounds obvious but there are incredibly serious consequences of failing to do that, including an unlimited fine or up to five years in jail.
Tip number two, Tessa, you've hired someone in the UK, you're off to a great start but how do you define your relationship with that individual?
Tessa Livock: Well Jen, this will depend on the sort of business and what your staffing need is, what the person's role is. Because you need to think about how much control you are going to have over this person and how much work they are going to do for you, as this will determine their rights and your obligations towards them under UK law and it is important to get their status right at the outset to ensure that your business isn't undermined by starting off on the wrong footing. Think about whether the contract with the individual will be with the UK company or the US parent and, assuming that you hire employees, you will need to provide them with a statement of the key terms of their employment. Remember also they will have minimum statutory rights to certain benefits under UK law, but think about what the appropriate level of benefits might be in your sector and what the commercial drivers might be in terms of informing the terms that you offer.
Jennifer: Great okay, so tip number three, assuming you've decided how you want to proceed, what do you need to think about in terms of protecting the employment relationship?
Tessa: So, in the contract of employment you should think about the business interests that you are going to need to protect. What sort of access will this person have to your confidential information and if, on termination, they're able to go and work for a competitor, what kind of impact could that have on your business? Think about tailoring the protections in your contract to this person's role and what exactly you are trying to protect, because if you don't, you may find that the contractual restraints on them just don't stand up.
So, for example, think about how long, if this person were to leave, if they're a key person, it would take you to replace them with somebody suitable? Make sure that their notice period is long enough to give you a lead up time. If you don't plan for these risks you could lose sensitive information or be exposed to competition that could be damaging to your business.
Jennifer: Thanks Tess.
So Hannah, what about day-to-day considerations, managing the workforce? What are the sorts of issues that we need to be aware of as tip number four?
Hannah Swindle: Well Jen, once you've employed them you need to treat them fairly and not on a discriminatory basis. In the UK there are a number of protected characteristics such as age, disability, gender, race and religion. This is going to be relevant when you're dealing with staff, perhaps on training or promotion or day-to-day business.
It is important to remember that this could also include making positive changes for disabled staff. It is also important for employers to make sure that their pay practices don't discriminate between men and women. There's actually going to be an obligation to report on gender pay gap, for larger employers, coming into play shortly.
If employees are unwell, there is a minimum level of sick pay. There's no obligation for companies to pay over and above that but often people do. It is also advisable for employers to have certain procedures in place to tackle disciplinary issues, that might be conduct or performance issues, and deal with any complaints or grievances brought by employees.
Jennifer: Okay, thank you Hannah. Some of our listeners may have heard about family friendly rights that we have in the UK. What can you tell us about those, as tip number five?
Tessa: So Jen, it is important to be aware in the UK there are extensive and specific rights for people who are starting or supporting a family or adopting. So, we have a statutory maternity and adoption leave framework, as well as provision for parents to share parental leave on the birth or adoption of a child. There are also rights for parents to take limited periods of unpaid leave to support their children or dependants, as well as rights to unpaid leave in an emergency situation. There are rights to minimum pay in some, not all, of those circumstances, as well as protection from being subjected to a detriment for taking advantage of those rights. So it is important to be aware, when the personal circumstances of one of your staff members changes, to ensure that you don't fail to provide these statutory entitlements.
Jennifer: Okay, so tip number six - Hannah, what about vacations and breaks and holidays and other types of leave?
Hannah: Well Jen, firstly, it's important to know that anyone working for you is entitled to only work an average of 48 hours a week, but it is common for opt outs to be put in place around this. All full-time employees are entitled to 28 days' paid minimum holidays and so that is going to include the public holidays. Again, employers can give more holiday if they want to, but they don't have to. Holiday is paid at a normal rate of pay, but it is important to remember that now this may include regularly worked overtime or commission. There are also rules in place in the UK in connection with rest breaks and rest days.
Jennifer: So Ruth, another important benefit in the UK that listeners may be concerned about is pensions, what can you tell us about that?
Ruth: Jen that's a very good question. In the UK, we have statutory duties which apply to all employers, regardless of their size when it comes to pensions. And these duties require them to ensure that all eligible job holders are members of a qualifying pension scheme and the employer has to then pay contributions to that scheme. So, when these duties apply to an employer depends on its 'staging date' and that's a date which is set according to its size, so that's definitely something to check out and take some advice on. There are sort of 'prescribed duties' in relation to that pension scheme. So, aside from the contributions, there's prescribed information that you have to give to the employees about their benefits within the scheme and whilst you may think "well, I don't really need to care about this", actually, the penalties for non-compliance with that regime can be quite large and there can be escalating penalty notices issued by the pensions regulator for those employers who just simply decide they are not going to comply with this.
Turning aside from pensions, we also have other benefits in the UK that may not be that familiar to other people. I am aware that in some countries private health insurance is very common. In the UK that's not so common, partly because employers are of the view that the national health service here is sufficient for people. But with senior employees, sometimes private medical insurance will get given to them as some form of incentive for them to come on-board and part of their package will include private medical insurance.
Jennifer: Okay and following on from that, as tip number eight, are there any other things to think about in terms of succession planning?
Ruth: Yeah, well this sort of links, I guess, to pensions slightly in terms of retirement. In the UK, the statutory default retirement age was abolished in 2011, which means that from that time you can still have an employer retirement age, but you need to be able to objectively justify it, which a lot of employers in the UK have decided that they are just not going to do and they are not going to have an age at which people have to leave the business. So, with that in mind, employers need to think about their succession planning, so think about the key personnel that you have on-board in the UK and whether or not you need mentoring or training schemes to ensure that you have the right skillset spread across your business.
Jennifer: Okay that's really helpful to know and Hannah - tip number nine. If the relationship is no longer working out and you want to part ways with your employee, what are the top tips for achieving a smooth exit?
Hannah: Thanks Jen, obviously every business hopes that its employees will leave on good terms. But sometimes when things don't go to plan, it is important to ensure that the business is protected effectively. Importantly, there is no employment at will in the UK. There are minimum notice periods, which are implied by law, but the usual practice is that the more senior the employee, the longer the notice period required. You can't just fire employees without a fair reason, those fair reasons are specified in law and there's also a required process that you need to follow. These unfair dismissal protections normally employees with over two years service but that can be changed in certain circumstances. Compensation is also usually subject to a cap, if a successful claim is made, but again there are some circumstances where that cap is lifted. There is an option for employers to try and cut short the process by having what's called a "protected conversation" with employees and termination of employment is agreed with the employee and this is set out under a waiver document, which is called a settlement agreement and that means the employee can't bring any claims but it has to be in a special form for that to work. It is also important that employers take special care when any issues could involve discrimination. If a successful claim is brought by an employee, then compensation can be uncapped.
Jennifer: That sounds important to take into account. Tip number ten then, finally, looking to the future - hopefully things have gone well and you are maybe looking to expand or perhaps sell on the business. What are the sorts of things you need to be thinking about in those circumstances, Hannah?
Hannah: Well Jen, if you are looking to the future and potentially expanding your business, first of all you need to make sure that you've got key personnel and the right people in place to do that for you. If you are then thinking of expanding by way of acquisition, then there are certain regulations in place in the UK which protect employees on the transfer of a business. They mean that there's an automatic transfer of employees who work in the business transferring and there's extra protections given to them around dismissals, continuity of service and making changes to terms and conditions is much more difficult.
Jennifer: Okay, that's great thank you to Tess, Ruth and Hannah. Those were the top ten tips to think about and hopefully that's showed why it is important to prepare when looking to start up in the UK or looking to expand so that you can make the best start and avoid the most common pitfalls.
We hope you found this podcast useful and if you have any queries on the topics we've covered today, please contact us and we would be happy to help or, if you want to hear more from the team, you can subscribe to the Employment, Labour & Equalities team mailing list.
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