employment contracts

How to choose employment status and contracts ?

Linkilaw Employee Regulations

There are so many different ways to employ someone these days. From independent contractors (freelancers) and subcontracted work (through agencies or industry specialists) to workers and employees – it’s a thin line that separates the similarities from the distinctions. Yet, the one thing they all have in common is a contract of employment; something which defines the work to be accomplished, as well as any terms and conditions between you and those you hire.

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As a precautionary measure, before you take on any type of worker, it’s always best to make sure you’re on solid legal footing by consulting with the appropriate lawyers for your business. Regardless of which kind of legal structure you are operating under – from Sole Trader or Partnerships to Limited Company – plenty of laws exist with which you must comply.

Meanwhile, you’ll want to consider which type of employment status is going to work best for your company. There are several boxes to tick before hiring your staff. If you’re a startup, take an honest look at whether the tasks in mind are really something you or your co-owners can absorb? Premature decisions might add unnecessary costs, and also impact the life of the one who was counting on that wage.

Employment Status

Because an employment contract will determine your tax liabilities and responsibilities as an employer, you will need to first define one’s employment status. This status can take the form of a worker, employee, self-employed person or contractor, director or office holder. Be sure to do your research and consult with contract law solicitors before you sign on the dotted line, or make a verbal promise.

[tweet_box design=”default”]All employees are workers, but not all workers are employees – nor do they have all the rights and responsibilities of an employee.[/tweet_box]

There are several classifications to explore, and in some cases they can overlap. For instance, an employee is entitled to all worker’s rights plus: statutory redundancy pay, sick pay, maternity, paternity, adoption and shared parental leave and pay; minimum notice for dismissal; protection against unfair dismissal, the right to request flexible working; time off for emergencies. Minimum continuous employment may be required to be eligible for certain of these rights.

If you would like more extensive descriptions, you can contact ACAS – the UK’s Advisory, Conciliation and Arbitration Service – or Northern Ireland’s Labour Relations Agency. You should be aware that in a dispute over employment status, the HMRC may consider someone as self-employed for the purpose of taxes, while an employment tribunal may decide that the worker has employee rights.

Employment Contracts

Every employee must have a contract, which sets out the conditions of employment, their rights, responsibilities and duties (terms). It must be adhered to until it ends or the terms have been changed. The contract is binding upon acceptance by the employee, and at times a verbal agreement may suffice.

Full and Part Time Contracts – There must be a written contract, statutory sick pay (SSP) and minimum of paid holiday, payslip showing deductions, maternity/paternity/adoption pay and leave. You must ensure they do not work past maximum hours, are paid at least minimum wage and work in a safe and secure environment. You must have employer’s liability insurance, register with the HMRC as an employer, avoid discrimination and make reasonable adjustments for any disabled employees.

Fixed Term Contract – These employees are hired to perform for a given length of time (with an end date or project completion specified), are established in advance, end once the task is completed or a specified event takes place. The person has the right to receive the same treatment as full-time permanent staff. This classification does not include agency workers, apprentices, students, trainees or members of the armed forces.

Agency Staff – You hire employees through an agency, and cover their National Insurance Contributions (NICs) and Statutory Sick Pay (SSP). After 12 continuous weeks in the same position, agency employees are eligible to receive the same terms as your permanent employees (such as wages, time worked – including nights, rest and break periods, and yearly leave). You are responsible for their health and safety at work, and must include them in any shared facilities (daycare, canteen), etc.

Freelancers/Contractors/Consultants – These workers are not employees, as they are either self-employed or employees of the company you contract to do the service. You are still responsible for health and safety, but they take care of their own NICs. If you cross the line by treating them like an employee, they may be able to establish an employer-employee relationship when it comes to their rights.

Zero Hour Contracts – Commonly known as ‘casual contracts’ the tasks these workers are generally hired to perform are termed on-call or piece work. Though they are still entitled to statutory annual leave, National Minimum Wages, and health and safety protection, you are under no obligation to continually give them work (nor are they obliged to perform). You cannot prevent them from seeking or accepting other work.

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Family/Voluntary/Young Workers – There are also special category rules for employing family members, volunteers, and young workers between 13 and eighteen years of age. You are still responsible for employer’s liability cover, health and safety, NIC payments, complying with working time regulations, and training for volunteers.

Written statements