Employing staff: what are the legal implications?

Employing staff: what are the legal implications?

Recruiting a new employee for your firm can be a stressful time; finding the right candidate is only a small part of the process. From the interviewing stage through to them leaving your employment, there are legalities that need to be followed to ensure your firm isn't subject to a fine or court case.

Such laws are in place for a range of reasons; to ensure that the process of recruitment is fair and equal, people are not discriminated against and the employee can seek compensation if they are injured at work. However, it can be a minefield to navigate.

Interview process

Although you may wish to find out as much as you possibly can about the applicant, you must remember to treat candidates equally and avoid being biased; don't make inappropriate comments or ask personal questions that have no bearing on the job role, such as whether the candidate plans to have children.

Avoid overselling the role too; not only will this stop any allegations from the employee that they were misled, but it also ensures you employ the right candidate to further your business. Provide a full breakdown of the job title and expected responsibilities so that everyone understands what is expected of the new employee.

When interviewing a candidate, always make sure they are legally allowed to work in the UK. Your firm can be fined up to £10,000 per worker for employing illegal workers and if you knowingly employ an illegal worker, you could be jailed for up to two years.

Employment rights

If the job position involves working with children, young people or in a position of trust, it is crucial to carry out a Disclosure and Barring Service check (formerly Criminal Records Bureau or CRB check) on the candidate. Insurance policies often have this as a condition of cover, so it is absolutely essential that it is undertaken, otherwise your firm could be left uninsured.

Tax duties

When employing someone new, you must check whether you need to operate PAYE (pay as you earn) on their earnings. If it's your first employee you should register as an employer with HMRC. If it's an additional employee, make sure they are added to your payroll system promptly - if you fail to submit payroll information on time HMRC may impose a late filing penalty.

Employer's liability insurance

If you have employees, it is a legal requirement to have a minimum of £5m employer's liability insurance. Without it, the Heath and Safety Executive can fine your firm up to £2,500 for every day which you are uninsured.

Once you have arranged cover, your insurer will provide you with a certificate of employer's liability insurance which states the level of cover and companies covered under the policy. This document should be displayed where your employees can read it, such as a staff room or kitchen. You can also display it electronically, however many firms choose to simply display a hard copy. If you can't prove the the certificate is displayed to staff, or can't show it to HSE inspectors should they request it, you could be fined up to £1,000.

It's important not to confuse employer's liability insurance with public liability insurance - public liability insurance covers third parties, such as members of the public, but does not cover employees. As such, employers' liability insurance is essential cover.

Legal expenses insurance

Legal expenses insurance is a type of insurance that covers your legal liability following an employment dispute. These can be wide ranging but include potentially sizeable claims, such as those relating to employment discrimination, health and safety or TUPE. It covers the legal costs of defending your firm, as well as damages, judgments, legal costs or expenses awarded to the claimant. It is not a legal requirement to have employment law protection, however you may want to consider it; according to the Ministry of Justice, there were over 117,000 employment tribunals between April 2020 and March 2021, and the costs in defending your firm can be eye wateringly high.

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