Chapter 11

Employing People

In This Chapter

Finding the best employees for your business

Deciding on motivations and rewards

Keeping on the right side of employment law

Unless you intend to work on your own, when running a business you’re involved in employing and motivating others to do what you want them to do. Even if you don’t employ people full-time, or if you outsource some portion of your work to others, you have to choose who to give those tasks to, how to get the best out of people and how to reward their achievements.

In recent years with high levels of unemployment, even among well-qualified graduates, recruitment has been a buyer’s market. But times change, and sometimes faster than you believed possible. Who’d have imagined in June 2013 that by September the number of jobs in real estate would have grown by 50,000 over the quarter to 562,000, the highest level since records began in 1978!

In any event, you’ll never find it easy to get the best people to work for a new or small enterprise. Poor promotion prospects and low job security, both hallmarks of the sector, aren’t exactly great pullers. So, you may find it better to work at getting your work proposition polished up.

In this chapter, I show you how to find the right people for your business, what to pay them and how to motivate and retain them.

Finding Great Employees

You may need to change your attitude to the whole hiring process. Most entrepreneurs dislike hiring employees, so they do it as little as possible and fit it around their other ‘more important’ tasks. You have lots of important factors to consider here: Do you need full-time or part-time employees, or a mix of both? How do you go about finding them? What exactly do you want your employees to do and how can you build that into a job description and your selection criteria?

Finding good staff is the number one job for a boss. You need good people to delegate to. And bringing new people into your current team can bring fresh and innovative ideas to stimulate everyone on to greater heights.

If you hope to grow your business, recruitment will become a routine task, like selling or monitoring cash flow, which you do every day. Furthermore, you need a budget to carry out recruitment and selection, just as you need a budget for equipment or rent. If you don’t have a recruitment budget, you shouldn’t be surprised if a task for which you’ve not allocated any money goes wrong.

Deciding on full- or part-timers

One important decision you need to make before you can start your search for staff is whether you need to hire a full-time person. Some good reasons may exist for not doing so. If, for example, the demand for your products is highly seasonal and has major peaks and troughs, keeping people on during slack periods may make no sense. This scenario may be the case if you’re selling heating oil, where you can expect demand to peak in the autumn and tail off in the late spring because of variations in the weather. Other examples of seasonal fluctuations are increased sales of garden furniture and barbeques in summer, and toys and luxury items before Christmas.

Using part-timers can open up whole new markets of job applicants, sometimes of a higher quality than you may expect on the general job market. Highly skilled and experienced retired workers, or women who’ve given up successful careers to have a family, can be tempted back into temporary or part-time work. You may sometimes be able to have two members of staff sharing one job, each working part-time. You can also use this tactic to retain key staff members who want to leave full-time employment. This solution makes for continuity in the work, allows people to fit in their job around their personal circumstances and brings to the business talents that it may lose if it insists on full-time work.

Part-time work is more prevalent than many people think. Up to a third of all those in employment in certain countries are working part-time. Most are working in small firms whose flexibility in this area can often be a key strength over larger firms when it comes to recruiting and retaining employees.

You can find part-time staff using the same methods as for full-time employees, which I discuss in the next sections.

Recruiting and selecting

To make sure that you get great people into your business, follow the tips in these sections.

Reviewing your business goals

The starting point for any recruitment activity is a review of your short- and medium-term business goals. If you’ve recently updated your business plan (see Chapter 6), your goals should be fresh in your mind. If not then you need to do so. You need to be sure of exactly who you’re going to recruit. For example, if you plan to sell and service software via your website, the people you need may be quite different from those required if you plan to supply physical products.

Defining the job(s)

Set out the scope and responsibilities of the job before you start recruiting. The job description should include the measurable outcomes that you expect, as well as a description of the tasks the person is to do. So, for a salesperson, spell out what the sales target is, how many calls you expect the person to make, what the customer retention target is and so on.

Too many small firms don’t get round to preparing a job description until the person is in place, or worse still they don’t have job descriptions at all. They argue that because jobs in the small business world have a short shelf-life because the company is growing and changing all the time, why bother? Well, if you don’t know what you want the person you recruit to be doing, he won’t know either.

Profiling the person

Flesh out your idea of the sort of person who can do the job well. If you’re looking for a salesperson, communication skills and appearance are important factors to consider, as are the person’s personal circumstances, because he may have to stay away from home frequently. Make sure that you pay regard to discrimination legislation when looking at candidates’ personal circumstances (I cover this topic in the section ‘Avoiding discrimination’, later in this chapter).

As well as qualifications and experience, keep in mind the person’s team skills and that all-too-rare attribute, business savvy.

Advertising the job

You can fill positions from outside your company but also from inside it – don’t overlook your existing staff. You may be able to promote from within, even if you have to provide additional training. Also, your staff, suppliers or other business contacts may know of someone in their network who may be suitable.

You can advertise in newspapers and also on the Internet, which has a proliferation of recruitment websites and is a major source of staff.

The type of vacancy you have determines the medium that’s best for you. The Internet may be right for design engineers, but a leaflet drop on a housing estate can be better when looking for shift workers.

Advertising for recruitment is subject to legal restrictions that vary from country to country. The laws most likely to apply are those relating to discrimination on the grounds of gender, race, age, religion or sexual orientation. Avoid sexist language or he or she, and select your words carefully to avoid stipulating characteristics that exclude potential applicants of a specific sex or race or in a particular age range. If in doubt, consult the Advertising Standards Authority (www.asa.org.uk) or take legal advice. Most restrictions apply to newspapers, magazines, radio and television; however, you’re wise to include the Internet on that list.

Making your selection

When you have a number of applicants, your first job is to screen out the people who don’t meet your specifications. Phone them if you need to clarify something; for example, to establish whether they’ve experience of a particular software package. Then interview your shortlist, perhaps using a test where relevant to your business. Many self-administered tests are available, designed for different types of work – I talk about tests in ‘Testing to find the best’, later in this chapter.

If the search process has been successful, you probably end up with more good applicants than you’ve time to interview. You need to evaluate all the applicants against cut-off criteria such as qualifications, experience, potential to grow with the job and travel time to work.

Set your criteria into a short-listing matrix – a table with criteria in the rows and candidates in the columns – and score candidates between one and three against each criterion, with three being a good rating and one being barely acceptable. (The Start Up Donut, a resource provided by the National Enterprise Network, has a number of useful recruitment templates at www.startupdonut.co.uk/startup/employees/hiring-employees.) You can set the cut-off point where applicants below a certain standard wouldn’t be offered a job under any circumstances. Raise the standard if this cut-off point still leaves you with an overly large list of candidates to interview.

You need to thoroughly prepare before interviewing job applicants. When interviewing:

• Have a pre-prepared list of the key questions you plan to ask.
• Allow the candidate to talk freely as long as he sticks to the point. If the candidate strays from dealing with areas on your list, bring him back by asking your questions.
• Give the applicant time to reply to your questions. Don’t fill every silence with another question, but if the silence persists for about ten seconds ask the candidate whether he’d like you to clarify the question.
• Look for specific evidence of the skills you’re seeking. Without this evidence, you can’t be sure that the candidate is suitable.
• Ask questions that give you an impression of the candidate’s motivation, such as, ‘What made you decide to … ?’
• Avoid asking leading questions, and be sensitive to potential discriminatory questions (for example, age, sex, religion and ethnic group).
• Avoid dominating the interview. The candidate should speak for at least 75 per cent of the interview.
• Close the interview on a positive note. Leave the candidate feeling that he’s had a fair hearing and has no further questions to ask. Indicate approximately when the candidate is likely to hear from you and what the next stage in the selection process is.

You may want to let the applicants meet other people in the business. Doing so gives them a better feel for the company and you can get a second opinion on them. When Apple was developing the Macintosh, the entire Mac team was involved in every new appointment. Applicants spent a day with the team, and only when the team decided that people were suitable did they let them in on the project.

Ideally, you end up with at least three people whom you’d be happy to appoint. Offer the job to the best candidate, keeping the others in reserve. You must have a reserve in case your first choice lets you down, accepts but then changes his mind or quits or is fired after a week or two.

Always take up references, preferably on the phone. Don’t accept ‘testimonials’ at face value.

Welcoming new employees

Having got the right people to join you, make sure that they become productive quickly and stay for a long time. The best way to ensure that they do is to have a comprehensive induction process showing them where everything is and the way things are done in your business. Keep them posted about developments – put them on the email circulation list straight away. Set them short-term objectives and monitor performance weekly, perhaps even daily at first, giving praise or help as required. Invite them to social events as appropriate.

Testing to find the best

You can supplement the classic trio of selection methods – application letter or CV, interviews and references – with other tools that can improve your chances of getting the right candidate for most of the jobs you may want to fill. These tools are often clustered under the general heading of psychometric tests, although most of the tests themselves have less to do with psychology than with basic aptitude.

Although tests are popular and becoming more reliable, they’re neither certain to get selection decisions right nor risk-free.

Dozens of commercial test publishers exist, producing collectively over 3,000 different tests. You can locate a test and guidance on which is best for your business needs through the British Psychological Society (www.psychtesting.org.uk) or the Chartered Institute of Personnel and Development (www.cipd.co.uk/hrsuppliers/listing/guide/assessment-psychometric-testing).

Exploring Other Ways of Recruiting

You don’t have to do everything involved in recruiting employees yourself. You can find a recruitment consultant or use a government Job Centre to do much of the hard work for you. In fact, they may even be better at recruitment than you, because they recruit and select every day of the week. Research suggests that recruitment consultants, for example, are twice as successful at filling vacancies than are entrepreneurs on their own. You can also consider taking the job in question out of your business and paying someone else to do it. The following sections take you through your options.

Using agencies

Occasions may well occur when you feel that you’re unable or unwilling to do the job of recruiting yourself. In such circumstances, you may find it useful to use a recruitment agency. The costs involved may sound high, but when you reckon up your internal costs you may find that an agency isn’t that expensive. Doing the recruiting yourself can take several days of your time and that of others in your firm. If you’re working on your own or with just one or two others, this work may be too great a distraction from other key tasks.

The Recruitment and Employment Confederation (www.rec.uk.com) has a searchable database of recruitment consultants listed by postcode, region and business sector. Also check out the Online Recruitment Resource (www.onrec.com) for information and resources on many aspects of recruitment.

Using Job Centre Plus

Job Centre Plus is the government-run employment service that has professionally run offices with a growing number of staff specialising in small and medium enterprises (SMEs). Typically, the service operates out of 1,000 Job Centres based in towns where job seekers are likely to live. At any one time, it has around 400,000 job seekers on its database.

Job Centre Plus is particularly helpful to small firms with little experience of recruiting, because it offers a wide range of free help and advice on most matters concerned with employing people as well as signposting to other related services.

The Job Centre Plus range of services includes everything you expect of a recruitment consultant. But unlike other recruitment agencies, many of its services are free and in any event cost less than using any other external recruiter. You can find details of all services for employers at the Job Centre Plus website (www.gov.uk/jobcentre-plus-help-for-recruiters).

Recruiting over the Internet

The fastest-growing route to finding new job applicants is via the Internet. The number of websites offering employment opportunities has exploded in recent years. The advantages of Internet recruitment to both candidates and clients are obvious. Internet recruitment offers a fast, immediate and cheap service compared to more traditional methods of recruitment. A number of recruitment sites have established formidable reputations in Europe and the US. These sites include

• Futurestep (www.futurestep.com), which covers all job functions and industry sectors.
• Monster (www.monster.co.uk), which attracts approximately 100,000 visits per month and contains over a million CVs. Its vacancies cover every industry sector and regional area.
• Web Recruit (www.webrecruit.co.uk), which offers to fill your vacancy through its online service for £695, or give you your money back.

Another option is to have a job-listing section on your own website. This solution is absolutely free, although you’re certain to be trawling in a really small pool. However, it may not matter if the right sort of people are already visiting your site. At least they know something about your products and services before they apply.

Outsourcing jobs

If you want to, you can probably buy in almost every part of the work you do from external sources. Other companies can design and host your website and you can rent other technology. External warehouses can hold stock of your product. Transport companies can deliver on your behalf. Third-party call centres can handle your customer services. Online banks compete with traditional banks to offer online payment processing. You can outsource almost every other aspect of business – from accounting and recruitment, to payroll and human resource services.

Motivating and Rewarding Employees

After you’ve recruited the staff you want, you need to manage them in the most suitable way for your business. Management is the art and science of getting people to do what you want them to do because they want to do it; something, of course, that is easier said than done.

Most entrepreneurs believe that their employees work for money and their key staff work for more money. Pay them enough and they’ll jump through any hoop. In contrast, most research ranks pay as third or even fourth in the reasons for people coming to work.

If they don’t necessarily work for money, why do people work in a particular organisation? I provide some of the answers in the following sections.

Getting the best out of employees

My best advice for getting the best out of your employees is: get to know everyone. This statement may sound insane in a small firm – after all, you almost certainly recruited them all in the first place. However, by observing and listening to your employees you can motivate them because you make them feel special.

The starting point in getting people to give of their best is to assess them as individuals and to recognise their specific needs and motivations. A person’s age, gender or job influences these differences, as does the individual’s personality. You need to tailor your actions to each person to get the best results.

Some practical tools and techniques can help you get the most out of your employees. For example:

• Show an interest in people’s work. This interest has nothing to do with monitoring performance and more to do with managing by walking about, seeing everyone and talking with them as often as possible.

  If you employ fewer than five people, you need to spend time with each of them every day; up to ten people, spend time with them every week. After that, you should have managers doing much the same thing, but you still need to get around as often as possible.

• Give praise as often as you can. The rule is simple: minimise your reaction to bad results and maximise your appreciation of good results. Autocratic employers continually criticise and complain, finding only poor performance wherever they look. Criticism reinforces poor behaviour. Everyone wants to be recognised, and strangely enough people often prefer to be shouted at than ignored. So, if doing things wrong is the only way to get noticed in your company, that’s what may well happen.

  If you do need to criticise, keep it constructive and lighten it with a favourable comment. For example, if an employee is making some progress but is short of being satisfactory, saying something like ‘This is certainly an improvement, but we still have a way to go. Let’s spend a little time together and I’ll see whether we can’t get to the bottom of what’s holding you back’ may produce a better level of motivation than just shouting out your criticism.

• Create a no-blame culture. Everything in business is a risk. To a greater or lesser extent, you delegate some of the responsibility for taking risks to your employees. But how should you react when the inevitable happens and things go wrong? If you jump up and down with rage, no one will ever take a risk again. They’ll leave all the decisions to you and you’ll become even more overworked. Good people will get highly demotivated and leave. If you take a sympathetic and constructive attitude to failure, you motivate and encourage employees to try again.

  You need to make clear that tolerance of mistakes has its limits and that repetition of the same mistake won’t receive an equally tolerant reaction.

• Reduce demotivation. Often the problem isn’t so much motivating people, but avoiding demotivating them! If you can keep off employees’ backs, they’re more likely to motivate themselves. After all, most people want the same things – a sense of achievement or challenge, recognition of their efforts, an interesting and varied job, opportunities for responsibility, advancement and job growth.

Dealing with difficult or demotivated employees

Difficult or demotivated people need prompt and effective managing. Dissatisfaction can spread quickly and lower other people’s motivation levels. The first step is to identify the causes of the problem – is it to do with the employee or with the job itself? The problem may be brought about by illness, stress or a personality clash between people working together.

Whatever the cause, the initiative for re-motivating an employee has to come from you. However, the only reason for going through this effort is that the employee has delivered satisfactory results in the past or you believe he has the potential to do so, if you can only find the key.

Keeping motivation in the family

Over 80 per cent of small businesses are family businesses in which one or more relatives work in the organisation. Family businesses have both strengths and weaknesses when it comes to motivation. By being aware of these factors, you can exploit the former and do your best to overcome the latter to give your business a better chance of prospering.

The factors that motivate or demotivate family members can be different to those affecting non-family members.

The overwhelming strength of a family business is its different atmosphere and feel. A sense of belonging and common purpose usually leads to good motivation and performance. Another advantage is that a family firm has greater flexibility, because the unity of management and shareholders provides the opportunity to make quick decisions and to implement rapid change if necessary.

On the downside, several weaknesses exist. Although these weaknesses aren’t unique to family businesses, family firms are particularly prone to them.

• Unwillingness to change is the single most common cause of low motivation in family firms. Family firms often do things the way they’ve always done them just because that’s the way they’ve always done them. This attitude can lead to stagnation in the market place and failing confidence in investors. Resistance to change is exacerbated by diminishing vitality, as the founders grow old.
• Family goals and commercial goals can come into conflict. Unlike other businesses, family firms have additional objectives to their financial performance targets, such as building family reputation and status in the community; providing employment for the family; protecting family wealth; ensuring independence; and a dynastic wish to pass on a position, in addition to wealth, to the next generation. However, superimposing these family values on the business can lead to difficulties. For example, nepotism may lead to employment of family members at a level beyond their competence, or a salary above their worth. This unfairness can lead to discontent and be demotivational for non-family members.
• Conflict may exist between growth and ownership. Families prefer majority ownership of a small company to minority holdings in a big company where they’re answerable to outside shareholders. A dilemma that all family managers face is growing the company, keeping purely commercial goals in mind at whatever risk to family control, or subordinating the firm’s welfare to family constraints. This dilemma affects all areas of the business, from recruitment through to management.
• The impact and career prospects of non-family employees may be limited. At management level, family pride sometimes doesn’t allow a situation where its members are subordinate to an outsider – even if the outsider is a better person for the job. Also, reliance on family management to the exclusion of input from outsiders may starve a growing firm of new ideas. A family firm may become inward looking, insensitive to the messages of the marketplace, unreceptive to outside ideas and unwilling to recruit competent outside managers. None of these factors is likely to be motivational to others in the business.

A family firm must address these problems to avoid all the effort it puts into motivating employees being seen as a cynical deception. Having a clear statement of family policy on the employment of family members, succession and ownership can be helpful. If these things are in place, non-family members can buy into this policy or not join the company in the first place.

Rewarding achievements

Different types of work have different measurable outcomes. You need to identify the outcomes you want and arrive at a scale showing the base rate of pay and payment above that base for achieving particular objectives. Different types of ‘payment by results’ schemes are in common use, and you need to make sure that you pick the right mix of goals and rewards.

Setting pay scales

People don’t come to work just for money, but they certainly won’t come if you don’t pay them, and they won’t stay and be motivated to give of their best if you don’t give them the right pay. But how much is the right amount? Get it too low and you impair your ability to attract and retain productive and reliable people capable of growing as your business grows. But pay too much and your overheads rise so high that you become uncompetitive. Small firms face the real danger of a wage bill that represents their largest single business expense.

The ground rules for pay aren’t complicated but they’re important:

• Pay only what you can afford. Don’t sink the company with a wage bill that it can’t meet.
• Make sure that pay is fair and equitable and that everyone sees it as such.
• Let people know how you arrive at your pay scales.
• See that pay scales for different jobs reflect the relative importance of the job and the skills required.
• Ensure that your pay scales are in line with the law on minimum wage requirements. The UK has a statutory minimum wage whose amount is governed by the age of the employee and whether an employee is undergoing training. The hourly rate changes over time, so you need to keep abreast of the latest rates (www.gov.uk/national-minimum-wage-rates has information on current rules in this area).
• Ensure that your pay scales are competitive with those of other employers in your region or industry. PayScale (www.payscale.com/hr/index) is a useful website for getting accurate, real-time information on pay scales.

Here are a few ways to find out the going rate for a job:

• Read articles on pay, as well as job advertisements on the Internet, in local papers and in the relevant trade journals. You may have to correct some pay rates to allow for variations. For example, pay rates for similar jobs are often much higher in or near major cities than they are in rural areas.
• Talk to your chamber of commerce or trade association, some of which publish salary surveys, and to other local employers and business owners in your network.
• Contact employment agencies, including those run by the government. They’re usually a bit ahead of the rest of the market in terms of pay information. Other employers know only what they’re paying their present staff. Recruitment agencies know what you have to pay to get your next employee.

Deciding the pay rates of people who work for you arbitrarily may appear to be one of the perks of working for yourself. But inconsistent pay rates quickly upset people and staff members tend to jump ship at the first opportunity.

Matching pay to performance

You may want to add to people’s salaries by rewarding them with money or benefits for the level of performance they achieve. I discuss various reward approaches in this section, which all follow the same ground rules for matching pay to performance:

• Make the rules clear so that everyone knows how the reward system works.
• Make the goals to be achieved specific and if possible quantifiable.
• Make the reward visible so that everyone knows what each person or team receives.
• Make the reward matter. It has to be worthwhile and commensurate with the effort involved.
• Make the reward fair, so that people believe you’ve calculated it correctly.
• Make the goals realistic, because if you set the target too high no one will try to achieve it.
• Make the reward happen quickly.

Paying a commission

Paying commission is perhaps the easiest reward system, but it really only works for those directly involved in selling. A commission is a payment based in some way on the value of sales that the individual or team concerned has secured.

You have to make sure that the order is actually delivered or executed before you pay any commission and you may even want to make sure that the customer has paid up. However, as with all rewards, you must keep the timescale between doing the work and getting the reward as short as practicably possible, otherwise people forget what the money is for.

Base the commission on your gross profit (the value of sales less the cost of generating those sales) rather than your sales turnover – otherwise you can end up rewarding salespeople for generating unprofitable business.

Awarding bonuses

A bonus is a reward for successful performance, usually paid in a lump sum related as closely as possible to the results that an individual, team or the business as a whole has obtained. In general, bonuses are tied to results, so that how an individual contributed directly to the result achieved is less obvious. For example, a company bonus may be paid to everyone if the firm as a whole achieves a certain level of output. Keeping everyone informed about how the firm is performing towards achieving that goal may well be motivational, but the exact role that, say, a cleaner or office worker has in helping to attain that goal isn’t easy to assess – not as easy as it is to calculate a salesperson’s commission.

You can pay bonuses periodically or as a one-off payment for a specific achievement.

Sharing profits

Profit sharing involves giving a specific share of the company’s profit to its employees. The share of the profits can be different for different jobs, length of service or seniority. This type of reward has the great merit of focusing everyone’s attention on the firm’s primary economic goal – to make money. One or more employees can be performing well while others drag down the overall performance. In theory, in such circumstances, the high-performing staff put pressure on the others to come up to the mark.

If profits go up, people get more; but profits can also go down, which can be less attractive. Also, the business can miss profit targets for reasons outside of employees’ direct control. If your company depends on customers or supplies from overseas, for example, and the exchange rate moves against you, profits, and hence profit-related pay, can dip sharply. However unfair this situation may seem to a receptionist who’s been hoping for extra cash to pay for a holiday, it shows the hard reality of business. If you think that your employees are adult enough to take that fact on board, then profit sharing can be a useful way to reward staff.

Sharing ownership

Share option schemes give employees the chance to share in the increase in value of a company’s shares as it grows and prospers. The attraction of turning employees into shareholders is that doing so gives them a long-term stake in the business, hopefully makes them look beyond short-term issues and ensures their long-term loyalty. Of course, unwelcome side effects can occur if the value of the business goes down rather than up. Share schemes also have important tax implications that you need to take into account. You can find out all about these implications on the HM Revenue and Customs website (www.hmrc.gov.uk/shareschemes).

Giving skill and competence awards

You can give a skill or competence award when an employee reaches a certain level of ability. These awards aren’t directly tied to an output such as improved performance, but you must believe that raising the skill or competence in question ultimately leads to better business results.

The award itself can be cash, gift certificates, extra days of holiday, a trip to a show or sports event or whatever else your employees may appreciate. Bottles of wine always seem to be well received!

Creating a menu of benefits

A benefit is defined as any form of compensation that’s not part of an employee’s basic pay and isn’t tied directly to his performance in his job. Non-salary benefits such as a pension or changes in working conditions can also play a part in keeping people on your side. A wide range of other perks is on offer to employees, ranging from being allowed to wear casual dress to on-site childcare. Other benefits available in some organisations include personal development training, company product discounts, flexible hours, telecommuting and fitness facilities.

You’re now obliged to consider flexible working if an employee requests it and has sufficient reason, and setting up some form of pension scheme looks set to become compulsory for most businesses soon.

Staying on the Right Side of Employment Law

All businesses operate within a legal framework whose elements the owner-manager must be aware of. The areas I cover in the following sections summarise only a few of the key legal issues. Different types of business may have to consider different legal issues, and employment law itself is dynamic and subject to revision and change.

The government website www.gov.uk/browse/employing-people provides the definitive, up-to-date guidance on current employment legislation, covering every aspect from recruiting to dismissing staff and everything in between. The Advisory, Conciliation and Arbitration Service (ACAS; www.acas.org.uk) and the British Safety Council (www.britsafe.org) are useful organisations that can help with aspects of employment issues. Emplaw (www.emplaw.co.uk) is a website covering basic British employment law information and can direct you to a lawyer in your area who specialises in the aspect of employment law you’re concerned with.

Keeping employment records

You need to keep records about your employees, both individually and collectively. Keeping records makes the process of employing people run smoothly. Some of the data you need to keep is a legal requirement, such as information on accidents. Some of the information is also invaluable in any dispute with an employee; for example, in a case of unfair dismissal.

The individual employee information you retain should include

• Application form
• Interview record and results of any selection tests used
• Job history, including details of promotions and assignments
• Current and past job descriptions
• Current pay and bonus details and a record of the amount and date of any changes
• Details of skills and competences
• Education and training records, with details of courses attended
• Details of performance assessments and appraisals
• Absence, lateness, accident, medical and disciplinary records, together with details of any formal warnings and suspensions
• Holiday entitlement
• Pension contribution data
• Termination record giving date, details of exit interview and suitability for re-engagement
• Copies of any correspondence between you and the employee

Collective information should include

• Numbers of staff, grades and job titles
• Absenteeism, staff turnover and lateness statistics
• Accident rates
• Records on age and length of service
• Wage and salary structures
• Employee costs
• Overtime statistics showing hours worked and costs
• Records of grievances and disputes
• Training records showing how many person days have been devoted to training and how much that’s cost
• Gender, ethnic and disability profiles

Employees have three basic rights over the information an employer keeps in their employment records:

• To be able to obtain access to their personal data
• To be able to claim damages for losses caused by the use of inaccurate data or the unauthorised use of data, or by loss or destruction of data
• To apply to the courts if necessary for rectification or erasure of inaccurate data

These rights mean that an employee is entitled to gain access to his personal data at reasonable intervals without undue delay or expense. This request must legally be put in writing, although you may choose not to insist on this, and you must provide the information within 40 days of the request.

Preparing contracts of employment

You have to give an employee a written statement of certain terms and conditions of his employment within two months of starting work for you.

The list of terms that form part of this statement include the following:

• The employee’s full name
• When the employee started working for you
• How and how much you pay your employee
• Whether pay is weekly or monthly
• The hours you expect the employee to work
• The number of days’ holiday the employee is allowed, including public holidays, and how that holiday is accumulated
• The employee’s job title or a brief description of his work
• Where you expect the employee to work and what conditions apply if you expect him to work elsewhere
• Whether you intend the employment to be permanent or, if it’s for a fixed term, when it starts and finishes
• Details of who manages the employee and who he can talk to if he has any dispute with that person
• Any terms and conditions relating to sickness or injury, including any provision for sick pay
• Any terms and conditions relating to pensions and pension schemes
• Any disciplinary rules applicable to the employee
• The period of notice required, which increases with length of service; a legal minimum of one week’s notice per year of service is required up to a maximum of twelve weeks (express terms in the contract may override this)

The job description forms the cornerstone of the contract of employment that exists between employer and employee. However, the contract is rarely a single document and may not even be completely documented. A contract comes into existence as soon as someone accepts an offer of paid employment, even if both offer and acceptance are only verbal. In practice, the most important contractual document may be the letter offering the person the job, and detailing the salary and other basic employment conditions. Many employers don’t document the contractual relationship with employees properly and end up with disputes. A contract of employment consists of four sets of terms:

• Express terms: Terms specifically agreed to between employer and employee, whether in writing or not.
• Implied terms: Terms considered to be so obvious that they don’t need spelling out. These terms include such matters as the employee complying with reasonable instructions and taking care of business property and equipment. For the employer, these terms can include taking reasonable care of the employee and paying him for work done.
• Incorporated terms: Terms from outside sources, most commonly from trade union agreements, which are included in the contract.
• Statutory terms: These include any work requirements laid down by law – safety regulations, for example.

The government provides an online toolkit to help first-time employers with a step-by-step guide to hiring staff: www.gov.uk/government/news/help-in-hiring-your-first-employee.

Working legal hours

Although the owner of a business may be content to work all hours, the law strictly governs the amount of time employees can be asked to put in. The Working Time Regulations apply to any staff over the minimum school-leaving age. This group includes temporary workers, home workers and people working for you overseas.

As an employer, you must keep records that show you comply with the working-time limits and that you’ve given night workers the opportunity for a health assessment.

This website has information on everything you need regarding working hours: www.gov.uk/maximum-weekly-working-hours/overview.

Granting leave

Occasions are bound to arise when you’re obliged to give your staff time off work other than their usual holidays or when they’re unwell. You have to meet statutory obligations of course. Otherwise you may not have to pay them when these occasions occur, but you do have to respect their right to be absent for compassionate or sickness reasons. And if they’re off sick, always meet up with them when they return, just to make sure that all’s well and that no underlying problems exist.

Protecting parents

Employees who become parents naturally or by adopting a child are entitled to paid time off and other benefits, including Statutory Maternity, Paternity and Adoption Pay. The employee may also be entitled to have his job back at some later date.

Work Smart, a Trade Union Council-run website, has a full description of the latest rules and regulations on these ever-changing topics. (Go to www.worksmart.org.uk, click on Your Rights and then Working Life and Family-friendly Policies.)

Recognising emergency leave

Employees have the right to reasonable unpaid leave where their dependants – spouses, children, parents, other people living in an employee’s house (except lodgers) and others who rely on an employee in emergencies, such as elderly neighbours – are affected by

• Illness, injury, assault or childbirth
• Breakdown in childcare/other care arrangements
• The consequences of a death
• A serious incident at school or during school hours

To take this leave, your employee should give notice as soon as reasonably practical, giving the reason for, and likely duration of, his absence. The legislation doesn’t define reasonable time off, but usually one or two days should suffice.

Avoiding discrimination

By and large business owners can employ whoever they want. However, when setting the criteria for a particular job or promotion, discriminating on the grounds of sex, race, age, marital status, religious beliefs, sexual orientation or union membership is usually illegal. Regulations also prevent you from treating part-time employees less favourably than comparable full-time employees – that is, someone doing broadly similar work and with a similar level of skills and qualifications.

Discrimination starts right from when vacancies are advertised – you can’t include such phrases as ‘women required’ or ‘young person sought’, or ‘no blacks’ or ‘no whites’. The rules extend to the pay, training and promotion of those who work for you.

Victimising someone who’s complained about being discriminated against is illegal. Sexual harassment is also a form of discrimination, defined as the ‘unwanted conduct of a sexual nature or other conduct based on sex affecting the dignity of men and women at work’. This description can include unwelcome physical, verbal or non-verbal conduct. Finally, you mustn’t include in your reason for dismissing an employee that he’s a member of a particular minority group protected by law.

To avoid discriminating in your employment, you need to ensure that all your policies and procedures meet the following criteria:

• They’re applied equally to all who work for you irrespective of sex, race and so forth.
• They don’t limit the proportion of one group who comply compared with another.
• They don’t disadvantage any individual.
• They can be objectively justified. For example, no argument exists when being a man or a woman is a genuine occupational qualification – for example, for the purpose of a particular photographic modelling assignment or an acting role. The same is true when you’ve a part-time vacancy so have no need of a full-time employee.

To make sure that you’re not discriminating, follow this six-point checklist:

• Ensure that your business has an equal opportunities policy. You can find a sample policy on the Equality and Human Rights website (www.equalityhumanrights.com).
• Train staff in equal opportunities policies.
• Keep records of interviews showing why you rejected candidates.
• Ensure that you take complaints about discrimination seriously, fully investigate them and address any problems that emerge.
• Conduct staff surveys to help determine where discrimination may exist within your business.
• Examine the payroll – pay should reflect employees’ job titles, not their gender.

The Equality Act 2010 is the law that protects people from discrimination in the workplace and in wider society. Under the law, organisations that do business with any public body – government, local government, hospital trust, school, university and so forth – as well as the public themselves have to have an equality policy and equality objectives. You can find out more about who’s protected from discrimination, the types of discrimination under the law and what action people can take if they feel they’ve been unfairly discriminated against at www.gov.uk/equality-act-2010-guidance. Visit www.bl.uk/aboutus/stratpolprog/diversity/equdivpol to see an example of a public sector policy. Also check out VentureNavigator, a free equality monitoring form (available online, at www.venturenavigator.co.uk/content/539).

Keeping healthy and safe

By law you have to provide a reasonably safe and healthy environment for your employees, visitors and members of the public who may be affected by what you do. This obligation applies to the premises you work from and to the work itself. An inspector has the right to enter your premises to examine it and enforce legal requirements if your standards fall short in any way.

When you have employees you must take some or all of the following measures, depending on the number of employees. A prudent employer should take all these measures whether or not the law requires them. Doing so sets a standard of behaviour that’s common in the very best firms.

• Inform the organisation responsible for health and safety at work for your business of where you are and what you do. For most small businesses, this organisation is the Environmental Health Department of your local authority (you can find contact details in your local telephone directory). The Health and Safety Executive website (www.hse.gov.uk) has a section devoted to small firms, covering both regulations and advice on making your work environment safer.
• Get employer’s liability insurance to cover you for any physical injury or disease your employees may suffer as a result of their work. The amount of coverage must be at least £2 million and the insurance certificate must be displayed at all your places of work.

You, as an employer, can in turn expect your employees

• To take reasonable care of their own health, safety at work and of other people who may be affected by their acts or omissions
• To co-operate with the employer in ensuring that they comply with the requirements imposed by the relevant statutory provisions