How to avoid costly legal action against your business

When you’re an HR consultant, you often find yourself having in-depth conversations about how business owners can avoid legal action. Of course, we offer services that go way beyond this. We can help you to boost your profits, create a happier and more productive workforce, and achieve your big strategic goals.

Steering clear of expensive and potentially reputation-damaging legal action is something that many leaders are very keen to do, for obvious reasons. If you’re worried about ending up on the wrong side of the law, then it’s important that you take some positive steps towards minimising the risk.Let’s take a look at what you can do to keep your business practices compliant, up to date, and above board.

Know the law

As a business owner, it’s your responsibility to keep up to date with the law. New pieces of legislation are passed on a regular basis, so it’s vital that you stay on the ball. The last thing that you want is to find out is that new provisions came into force, rendering your existing policies and procedures unlawful.

If I work with any of you on a regular basis then I have been telling you for some time that there were likely to be important changes ahead in terms of how holiday pay is calculated for employees earning commission.

Currently, many employers pay their staff earning commission an hourly rate and this is often minimum wage, as with their commission they earn a pretty healthy annual salary, and most employers will pay their staff their holiday pay based on their hourly rate of pay.

However, at the recent Employment Appeal Tribunal (EAT) Employers will have to pay commission as part of holiday pay, the EAT has confirmed. The decision was handed down in the long-running case of Lock v British Gas Trading Ltd, which was first brought to tribunal in April 2012.

Helen Cookson, senior associate in the employment team at Trowers & Hamlins, said: “It seems there’s now little room for doubt that commission and overtime, both guaranteed and non-guaranteed (where the worker is obliged to work overtime if required), will have to be included in holiday pay. This will lead to additional expense for employers who need to be aware that a failure to include such payments will open the floodgates to a whole succession of unlawful deductions from wages claims. Rather unhelpfully for employers the issue of the practicalities of how such payments should be calculated still remains to be determined. It is likely that, in the meantime, tribunals will approach the issue on a case-by-case basis.”

The reference period employers must use to calculate holiday pay is yet to be clarified – the ECJ said this was a matter for national courts to decide by taking an average over a period they considered to be representative. So, there is still no clear answer about what to do! So if you are confused, and want some advice on how to approach this matter, then please give me a call and we can discuss what the best approach for your business is.

Consistently implement people policies

People policies are there for a very good reason. They outline acceptable standards of behaviour, make your expectations clear, and map out what will happen if a problem occurs. If you decide though that they should only be applied to some staff, some of the time, then you could be accused of discrimination.

The bottom line here is that your whole workforce should be held to the same standards. You’ve no doubt spent a great deal of time creating and implementing your policies. They’re there to help you, so use them and if people aren’t following them, then deal with it!

Always keep records

If any problems arise, having a comprehensive paper or electronic trail can be extremely useful. Your documentation should clearly outline the details of each stage of everyday employment situations, such as absences, performance discussions, grievances, and so on.

These days, you can find solutions that will allow you to safely store information of this nature online, or on encrypted systems. This isn’t always necessary, but it could save you time. Whichever route you decide to go down, make sure your records are up to date, accurate, and confidential.

Give your line managers the capability they need

As your business grows, it’s unlikely that you’ll be personally handling all people management practices. However, if you or any of your team are dealing with employment matters, you need to have relevant HR training so that you could avoid finding yourself in a situation whereby your operations aren’t compliant with the law.

We hold FREE workshops every two months for our clients to come along to and cover topics such as employment law essentials, performance management, managing a disciplinary matter effectively and managing sickness absence.  It’s down to you to make sure that your managers are trained and consistently compliant so get them to come along!  When you invest in your leadership team, you’ll find that many potentially volatile incidents can be quickly defused before they spiral out of control.

Not many business owners would intentionally break the law when it comes to how they treat their greatest asset – their people. But if you aren’t vigilant, you could find yourself in a tricky situation.

If you’ve decided that it’s time to put your niggling worries to bed once and for all when it comes to complying with employment legislation, then get in touch. We can arrange an initial review of your existing practices.