Opinion

The changes to employment that SMEs don’t know about

6 min read

21 October 2015

October is one of those times of the year that traditionally gives rise to yet more changes in employment law.

Large companies with in-house legal departments or lawyers on a retainer are often aware of these changes.

However, unless they’re widely publicised, SMEs are often unaware of them and this can lead to breaches and ultimately, employers being sued by their employees, believes Zee Hussain, employment partner at Simpson Millar.

He argued that small and medium-sized businesses have much to deal with in getting started and running to day-to-day, it is important to take note of the following changes, many of which took effect from 1 October, to avoid any potential risks.

His view is backed up by research conducted in August, which showed that three-quarters of those SMEs surveyed believed that keeping up with legislation is a “significant drain on time”. Just over a third (39 per cent) of small business respondents said they would hire more people if employment law was not so complicated. According to the survey by consultants Citrus HR, just one quarter thought employment law was acceptable as is.

Some are pretty obscure such as Sikhs and safety helmets but must be taken seriously, argued Hussain. “The exemption from wearing a safety helmet on construction sites for all Sikhs who wear turbans is now extended to all workplaces,” he added.

“There are still some limited circumstances where a Sikh worker will be required to wear safety head protection, however, these are largely limited to members of the armed forces or working in emergency response roles for obvious reasons.

“So, if there is a requirement within your workplace for safety helmets to be worn, it is important to educate all staff as a matter of urgency that Sikhs will be able to wear turbans and will not be required to wear a safety helmet, unless of course the workplace is one of the exclusions to the new rule.”

The Citrus HR survey found that less than a third of those SMEs asked could quote the current National Minimum Wage rates, although they risk risk a fine of up to £20,000 for not paying it.

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Hussain also stated that too many smaller companies are at risk of confusion over the new living wage. “It’s important to remember that the government’s new mandatory National Minimum Wage, for workers aged 25 and above, is due to come into force in April 2016,” he said. “This will initially be set at £7.20 per hour and employers will need to consider the impact that this will have on their wage bills.”

“The National Living Wage is not to be confused with the living wage set by the Living Wage Foundation, the campaigning organisation that promotes a voluntary UK Living Wage (and a higher London Living Wage), calculated according to the basic cost of living.”

The new rates are now:

Aged 21 plus From £6.50 to £6.70
Aged 18 to 20 From £5.13 to £5.30
Aged under 18 From £3.79 to £3.87
Apprentice* From £2.73 to £3.30

Hussain urged SMEs to note that the rate is for apprentices aged 16-18, and those aged 19 and over who are in their first year. All other apprentices are entitled to the National Minimum Wage for their age.

He advised small and medium-sized business carry out an urgent payroll review with accountants or financial controllers to ensure that all employees who are paid the National Minimum Wage have their rate of pay increased accordingly.

“Where an employee’s rate of pay is being increased, a letter should be sent to highlight the pay increase and to confirm that all other terms and conditions of employment remain the same,” he added.

“It is important to remember that the government’s new mandatory National Minimum Wage, for workers aged 25 and above, is due to come into force in April 2016. This will initially be set at £7.20 per hour and employers will need to consider the impact that this will have on their wage bills,” explained Hussein.

“Whilst it may seem strange to hear the term ‘slavery’ being spoken in 2015, sadly modern slavery still exists to some extent via means such as human trafficking and compulsory labour,” commented Hussain.

Employers with an annual turnover of £36m plus are obliged to publish a slavery statement each year, starting this month. But SMEs shouldn’t feel that that they are not affected, he said.

“While this is only likely to impact large employers given the turnover caveat, we would urge all smaller businesses to be alive to this change as a matter of best practice,” he commented. “Guidance on what is to be included specifically in the statements is anticipated to be released by the government.”

Hussain concluded by saying that although SMEs managers don’t have the support of large HR functions, they must still ensure that they’re completely compliant with the law in order to avoid fines and other legal problems.