Finding the right people who share your vision and will work hard to help bring it to life is perhaps the most important challenge your startup will have to grapple with in its first year. The hiring process can be quite a pursuit, as it’s only natural for you to want to find the best employees that will work for a reasonable salary. The outcome of the recruitment will depend on a multitude of factors: Of course, there are legal requirements and procedures to follow, but soft skills, mutual “chemistry” and dynamics, as well as pure luck, play a great part.
Even when you’ve hired the right person for your company, the bulk of the work is still ahead of you: You need to properly train, educate and motivate your employees, and do so continuously and constantly in order to ensure great results and an overall positive company culture.
We know your entrepreneurial plate is full as it is, and that there’s a lot you need to take into consideration when it comes to employment law. Therefore, here is the gist of what you should be beware of:
- Lack of employment documentation
When you’re launching your startup, your main concern will lie in attracting as many clients and spiking sales as soon as possible. Understandably so. However, with your hands full with trying to maximise profits and gain return on your investments, it’s easy to let other important matters slip your mind. Drafting and maintaining adequate employment documentation is not something you should put off for “when you’ll have more time”.
Don’t be sloppy with your employment contracts, as their purpose is to establish the rights, expectations and obligations between you and the employee. According to UK law, you should offer a written terms and conditions of employment within the first two months of employment.
In addition, an employee handbook is always a good idea – even if you’re operating with a small staff. After all, this document outlines your startup’s key policies like vacation, maternity/paternity leave, whistleblowing, conflicts of interest, etc. Needless to say, these have to be thought out and implemented wisely and with due care. Have a competent and thorough lawyer by your side to see that all of your employment paperwork is in tip-top shape, as this is the best way to protect your interests and avoid potential malversations.
- Violation of employment law
Violation of employment law does happen on purpose, but more often than not, its main culprits are ignorance and negligence. This doesn’t mean it’s not one of the top employment law issues for many startups. Don’t let that happen to you: Here’s our post on employment status and contracts for the lowdown of the basics.
In brief, most employees in the UK are entitled to work no more than a 48-hour maximum average working week. According to the country’s employment law, employees aged over 25 must be paid at least £7.20 an hour, but that amount decreases with the age of the employee. Therefore, the National Minimum Wage stands at £6.70 an hour for staff aged 21 to 25, £5.30 for those aged 18 to 20, and £3.87 for employees aged 16 and 17.
To reel in the most competent candidates, many startups consider the option of offering company’s equity to employees. This can be only an addendum to the salary, not a substitute: If you’re paying your people in stock instead of giving them regular wages, you’re violating employment law. In addition, slicing the stock cake is no easy task. If you want to go down that road, we strongly recommend have an equity plan set in place and a good lawyer who will provide legal advice on the matter.
- Employee classification
Are you clear on whether you are going to hire employees or freelancers/independent contractors/consultants? Hiring either has its pros and cons. In case you want to test the waters first and rely on the help of freelancers, we have written a post on what you should know about legally working with them – regardless if it’s permanently or temporarily.
The bottom line is that the legal classification of all your hires needs to be accurate and truthful. Because hiring a freelancer is considerably cheaper, many employers resort to classifying their employees as freelancers. However, such mischaracterisation means a violation of employment law and possible legal sanctions for your startup. In fact, it’s one of the top employment law issues startups find themselves in.
End Note: Top Employment Law Issues
Feeling slightly overwhelmed by all these top employment law issues you have to keep in mind? What you need is an expert legal sidekick to guide you through the process – tell us exactly what it is you need, and we’ll give you tailor-made recommendations of our trusted, pre-vetted lawyers that will help you dot your I’s and cross your T’s.