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5 mistakes SMEs make in employment law that could cost them thousands

In this article, Kirsty Senior, co-founder and director of CitrusHR, lays out five common problems that SMEs create when they don't properly lay out job contracts; etc.
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1. Not Issuing A Contract

Not issuing a contract might seem like a simple mistake, but it can cause real problems for your company. Even if you’ve got details from emails, conversations, or even just the custom and practice of what happens day to day, not issuing a written contract to a new employee within two months of them starting is a breach of employment law. It’s also missing an opportunity to make clear what you expect from them. You should include pay rates, place and hours of work, holiday allowance, sick pay, and notice requirements in the contract.

2. Failing to follow proper disciplinary procedures

One of the most commons mistakes we see is employers rushing into dismissing someone without following the proper process. 

It might be easy to say “you’re fired”, and we know there will be times when you have good reason to feel like doing just that– but not following the proper process risks you paying thousands in compensation for what could easily be deemed to unfair dismissal. Alan Sugar’s “Boardroom” conversations in The Apprentice aren’t a good example of how to conduct one of these meetings!

The main steps to follow are:

  • Carry out an investigation – establish what really happened, then talk to any witnesses, look at paperwork/emails that are relevant. Invite your employee by letter to a disciplinary meeting, giving reasonable notice of the date (we suggest a minimum of 2 working days). This should clearly outline the allegation, provide the evidence, a copy of your disciplinary policy, and outline what the potential outcome could be
  • Hold the meeting. Explain the reason for it, giving the employee the chance to respond to the allegations, reviewing all evidence with time for questions, and giving the employee an opportunity to add anything further before you take a break to consider what to do

Notify the employee of the outcome of a disciplinary meeting and their right to appeal and confirm this in writing.

3. Refusing flexible working requests without any proper justification

Since the 30th June 2014 all employees have had the right to request flexible working hours from their employers, but some businesses feel they can refuse on whatever grounds work for them. 

You may not know it, but any refusal of these requests should be justified by proper business reasons, like: 

  • An extra cost burden;
  • Not being able to reorganise work amongst existing staff, or recruit additional staff;
  • Negative impact on quality, performance, or the ability to meet customer demand;
  • You don’t have enough work for the periods the employee proposes;
  • You’re planning any structural changes to your business.

4. Paying full instead of statutory sick pay when staff are ill

You might have heard of Statutory Sick Pay – or SSP – but are you actually enforcing it on your staff when they’re sick?

Some businesses just pay staff their normal rate when they’re off to save admin or to avoid having an awkward conversation – but it can cause problems should anyone regularly take sick leave. Should you decide to enforce it later you may also surprise your employees come pay day, and they may even be able to argue that as you’ve done it in the past they are in fact entitled to full pay despite what their contract says (if you’ve made sure they have one!). 

So save a headache – treat everyone the same and don’t set expectations for full pay.

5. Not communicating expectations effectively

We know that time is so tight at many small businesses that they don’t take the time to induct someone properly. But a good induction can make life much simpler in the long term, and save you time by setting up your new staff properly, so that you don’t need to spend time correcting them or even replacing them later.

We suggest you go through the job description with each new starter and help them understand their role’s impact on your business. It’s a really good chance to tell them what you expect of them, covering codes of conduct, work methods and what you would consider to be good performance. Doing this properly will make any future issues much simpler to resolve – and ideally, write it down so you can refer back to it if you ever have to.

Kirsty Senior is co-founder and Director of citrusHR, the UK’s most comprehensive HR software & support service for new and smaller businesses. 

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