The biggest HY DIY mistakes for SME’s
You know you don’t have the skills for the legal bit, so you hire a solicitor when you need to. You also recognise that when it comes to filing year-end accounts and tax advice you probably need an accountant. So why do so many business owners think that they can DIY employment law and HR?
If you’re lucky, you might save time and money taking on certain business tasks, but there are many jobs where it would definitely work out cheaper in the long run to call in the experts, like HR employment contracts!
Employment contracts are the most important legal arrangement between you and your employee and is designed to protect both of you. All employees must have an employment contract It sets out employment conditions, rights, responsibilities and duties.
Many small businesses use free downloads or templates to use as employment contracts, but many times they aren’t suitable for their specific business, often having key clauses missing that would protect you. So, we’ll discuss the employment contract DIY mistakes you’re opening yourself up to and let you decide whether you want to call in the experts!
1. Wrong employment status
The first big mistake comes when choosing the nature of the employment itself - self-employed, employee, part-time, zero-hours etc. Employers often engage people on the wrong type of contract, opening themselves up to holiday or sick pay claim. It can be complex, as recent high-profile cases like Uber show. Get expert advice on the best status of your staff to save you time, money and stress later on.
2. Extra liabilities
Borrowing contracts from other companies, or cutting and pasting a contract you were employed on in a previous life, can lead to unintended or extreme generosity!
SME’s can find themselves offering expensive executive level benefits in a contract by accident, leaving themselves open to huge costs.
Contracts borrowed from the public sector can be even more costly to an SME with clauses like high levels of sick pay. Unless you’re ready to be generous, make sure you read the contract carefully.
3. Making disciplinary and grievance procedures contractual
It is in your interest not to have the disciplinary and grievance procedure contractually binding. There are likely to be times you don’t want or need to follow these processes. Putting it in the contact means you either have to act on it or breach your own contract!
4. Missing vital clauses
Specific clauses in relation to the business requirements are called express clauses. For example, if your business is retail then a handling cash responsibility clause would be required for your staff. Or if your company has employees driving vehicles, then driving clauses need to be added.
A downloaded generic template will not have the specific clauses you need for your industry or employee make up. If you have these missing, you have little to guide you if things go wrong.
5. Missing statutory minimums
It’s illegal to miss out certain clauses, or to contradict what employees have a legal right to. Don’t put yourself at risk by not including or being aware of these.
6. Make sure you include a ‘dismissal for gross misconduct’ clause
This can be damaging to forget, because if you dismiss someone due to gross misconduct but didn’t put this in the contract, you can be sued.
5. Going overboard
Borrowed or template contracts can have inappropriate or unnecessary clauses placed on staff. You could end up with contracting your cleaner to not work in finance for 12 months after they leave, which makes no sense to you! Also be aware that if you accidentally put restrictive clauses in everyone’s contracts, it could make them all completely unenforceable!
6. Out-of-date clauses
If you borrow or download a contract you run the risk of it being incorrect and out-of-date to start with. For example, including a retirement age of 65 (which has not been legal for a while now) is age discriminatory.
7. Holiday entitlement
You can’t contradict an employee’s legal rights to holiday in your employment contract, but many SME’s do without realising. There are legal minimums, and rules around sickness on holiday which you must set out clearly - mistakes can cost the business and possibly put you at risk of breaking the law!
8. Making the staff handbook contractual
Big mistake! This is totally unnecessary and can leave you wide open to breach of contract claims. You are essentially making all your company polices contractual. If and when you want to change them you have contractual negotiations to do with staff! SMEs need the flexibility to add and change their business policies as needed.
9. Contract is not GDPR compliant
With GDPR now fully in force there are lots of HR items that businesses will need to do to be compliant. One of those is make sure their employment contracts and handbooks include a reference to GDPR and update any data protection clauses and policies. The government is cracking down on those who are in breach of GDPR, so you need to get it right.
Ultimately it is up to you whether you want to use a template or download and amend it yourself, or hire a professional to make your employment contracts for you. Cost has to be a factor, as hiring professionals can be expensive, but also consider the potential costs of making mistakes.
If you want to chat with a couple of HR companies, and get some free advice in Employment Masterclasses, why not visit the Northern Business Expo on 17th & 18th March 2020. It’s all free to attend, and can you really afford not to? Get your free ticket online now.