New businesses - overview of minimum requirements

Almost 200,000 businesses in the UK are new start-ups each year and a staggering 99% of businesses overall in this country employ less than 50 people. Such businesses dread hearing about employment legislation and the amount of red tape it entails and many are unaware of their obligations towards their employees - often they only find out the hard way when they have failed to do something, or handled a situation wrongly, and they are facing a potentially expensive tribunal claim.

We summarise below the key items small employers need to have in place and need to be aware of. Even more established businesses may find this a useful checklist!

Health and safety considerations

Even if you have no employees, you need to be aware of the health and safety issues which apply to all workers and also visitors to your premises.

Prior to employing anyone

Your candidates are entitled not to be discriminated against, or treated unfavourably, on the grounds of their race , sex , sexual orientation , religion or belief , disability , age , pregnancy or membership (or not) of a trade union .

And take care when recruiting because your candidates will have the right of access to any written personal data kept on file about them and may wish to read what you have said or thought at interview!

Taking on your first employees

As soon as you take on your first employee, you need the following in place:

Employer's Liability Insurance - it is compulsory to hold insurance against injury for the benefit of employees, to display your insurance certificate (or make it available electronically) and keep copies of these certificates for 40 years.

A written statement of main terms and conditions of employment: it is a legal requirement that within two months of the start of employment, you provide your employee with a statement of the written particulars of the contract of employment including the place of work, rate, frequency and method of pay, holiday entitlement, hours of work, notice periods, disciplinary rules and a number of other terms. This applies irrespective of the number of hours the employee works - the only exceptions are if the employee is contracted for less than one month or works wholly outside GB. (It is good practice to issue this prior to starting work - then any queries can be resolved more easily.)

Your employee is entitled to itemised pay slips and must receive at least the National Minimum Wage . He/she is also entitled to statutory paid holiday and his/her hours of work are governed by the Working Time Regulations which regulate breaks, length of the working day and week, and impose an average limit on the number of hours per week, unless the employee agrees to opt out of the latter. Minimum statutory notice periods will also apply, and your employee is entitled to take (unpaid) time off to care for dependants if a problem arises and also (subject to other qualifying criteria including earning more than the Lower Earnings Limit) to Statutory Sick Pay . Once you have five or more employees, you must offer them a designated stakeholder pension unless you have an approved alternative scheme in place.

The same rights not to be discriminated against (as set out above for candidates) apply to workers. Both male and female workers should receive equal pay for work of equal value, and part-time workers are entitled to what a full-time person would earn, on a pro rata basis. Those on fixed-term contracts are also entitled to receive the same benefits (or an overall package which is no less favourable) on a pro-rata basis as comparable full-time staff.

If your employee works nights , he/she is entitled to a free health assessment and if a young worker , the rules on breaks and working hours are different.

Immediately on starting work for you, your employee is entitled not to be dismissed for asserting a statutory right, for bringing a health and safety complaint, for whistle blowing (subject to following the precise rules set out in the legislation), and, if appropriate, to take maternity leave . The employee should receive pay during suspension on medical grounds and may take time off for public duties , for duties as an officially recognised trade union officer or to perform the duties of a safety representative.

Once working for you on the terms and conditions you have agreed, you cannot easily change these without your employee's agreement so care is needed in drawing up clear documents and policies which protect your business and with rules and procedures which enable you to manage your staff effectively.

Key statistics

Up to date rates for statutory sick pay, maternity and adoption pay, parental leave, minimum wage, redundancy pay etc are all outlined on our key statistics page.

Communications

The sensible employer will decide early the preferred methods of consulting with his/her employees and will put proper mechanisms in place for consultation and communication. Without these, the employees may decide they wish to have union representation and employers with 21 or more workers must recognise and negotiate with trade unions where a sufficient proportion of the workforce vote in favour of this.

Policies and procedures

Whilst at an early stage you may feel that you do not need a whole raft of procedures and policies, we would strongly recommend that you have the following as a minimum:

• grievance procedure
• disciplinary procedure
• equal opportunity policy
• bullying and harassment policy
• IT policy
• and, if you have five employees, it is a legal requirement that you have an up to date health and safety policy.

Other minimum requirements

You may wish to read our page on employment rights and on minimum health and safety requirements.