A legal guide to hiring employees

Two women sit side by side at a window, discussing work

As your business sets its 2022 targets and financial projections, it may become apparent that new talent must be recruited to ensure your organisation can reach its commercial ambitions. Once you find the right person, it is imperative that you comply with relevant UK employment law throughout the recruitment process to ensure the appointment is secure, saving you time and money by reducing the likelihood of having to restart the process from scratch or face the prospect of an Employment Tribunal claim.

Hiring new employees is an important and exciting moment for any business. In this article, we not only provide tips on how to find the best candidates in today’s tight labour market but also the rules and regulations employers need to understand and comply with when appointing new talent.

Table of contents

Defining the job role and its status to ensure compliance with IR35 rules

To ensure you comply with IR35 rules from the outset, you need to put the employment relationship into context. You have to decide whether the available position is that of an employee, worker, or self-employed contractor. 

  • Employees are typically employed under a contract of employment and have the highest level of protection concerning employment law rights.  
  • The status of “worker” comes with limited employment law rights as a result of the greater flexibility they receive under their employment contract. The worker status is deemed a halfway house between being an employee and self-employed. 
  • Self-employed contractors are independent of your organisation in that although you provide a brief in relation to the job that needs doing, they decide how, when, and where the work will take place and invoice you as per the agreement between you. 

The line between whether the position you are recruiting for is that of an employee or worker is often extremely narrow. To help decide which category is correct, the most important factors to consider are: 

  • Is there a clear need for the new employee and a defined role description? 
  • Are there guaranteed hours for which they will be paid? 
  • Do they have to report to work and are you obliged to give them work? We call this ‘mutuality of obligation’ which refers to the obligation to give work (and pay for it) and the subsequent obligation to do the work (and get paid for it). 
  • Are they supervised for the work they do; i.e. do they have a line manager? 
  • Will they have employment rights such as paid sick leave and paid annual leave?  
  • Are they paid through your payroll as PAYE or gross against their own invoices? 
  • If they are made redundant are they entitled to redundancy pay? 
  • Can they bring a claim for unfair dismissal? 

As you can see, much depends on the circumstances of the position and your workplace practices. As such, it can sometimes be difficult to decide whether a position is for a new employee or a worker, particularly in hybrid/nuanced cases where some of the factors are clear but not others. 

Differentiating between employees and self-employed contractors is particularly important in light of the IR35 Rules. In essence, a person is deemed to be working ‘off-payroll’ (i.e. IR35 rules apply) if they are working for a client through an intermediate but would otherwise be seen as an employee if working directly for the client; in this case, they are required to pay income tax and National Insurance contributions as an employee would. 

The assessment of whether off-payroll rules should apply is based on the extent to which the worker is actually more akin to an employee versus an external company. To make this judgement, the following questions, in addition to the above, should be considered: 

  1. To what extent does the client control what, how, when and where the worker undertakes their work? 
  2. Does the work have to be done by the specific individual or can the company providing the service send a replacement person with the same skills if needed (i.e. in the case of sickness)? 
  3. Is the employer obliged to offer work, and, in turn, is the worker is required to undertake it? 

Incorrectly assessing whether a person is self-employed, or an employee/worker can lead to HMRC clawing back income tax and National Insurance contributions for up to six years as well as adding interest to the recouped amount. 

To avoid any unnecessary errors when evaluating the status of the position you are hiring for it is well worthwhile to invest in legal advice from an employment lawyer. Our partner LawBite offers a free 15-minute legal consultation for small business owners.

Making your job advertisement stand out

Talented prospective employees will often have a choice of new employers. So how do you make your business stand out? 

  • Ensure the job description starts with a company intro 
  • Describe your culture, mission, values, and vision 
  • Clearly state the salary
  • List employee benefits and perks 
  • Explain what makes your organisation a great place to work. Why have other people joined the company and stayed?  
  • Use multimedia content such as video or audio about your company 

The recruitment process can seem daunting if it’s your first time, especially given the importance of hiring the right people for your organisation. You will be competing with many other companies for the attention of the same talented people, so make sure you use innovative ways to make your business stand out. 

Creating your employment contract

If this is your first time recruiting an employee you will need to draft an employment contract. If you have previously recruited talent, it is worthwhile checking your existing Employment Contracts to ensure they are up-to-date in terms of the information concerning the company and to meet current legal requirements. 

Employment contracts consist of both express and implied terms. Express terms are terms that have been explicitly laid down in the document. Implied terms are not set out either orally or in writing but form an important part of the employment relationship. For example, although the employment contract may not state that an employer has an obligation not to destroy the relationship of trust and confidence between themselves and their employees, the Employment Tribunal is likely to imply such a term. Implied terms can also stem from the customs and culture of the employer’s workplace and/or market sector. 

According to the Acas guide to employment contracts, the agreement should contain the following terms: 

  • The employer’s name 
  • The employee or worker’s name 
  • The start date (the day the employee or worker starts work) 
  • The date that ‘continuous employment’ (working for the same employer without a significant break) started for an employee 
  • Job title, or a brief description of the job 
  • The employer’s address 
  • The places or addresses where the employee or worker will work  
  • Pay, including how often and when (for example, £1,000 per month, paid on the last Friday of the calendar month) 
  • Working hours, including which days the employee or worker must work and if and how their hours or days can change 
  • Holiday and holiday pay, including an explanation of how its calculated if the employee or worker leaves 
  • The amount of sick leave and pay (if this information is not included in the document, the employer must state where to find it) 
  • Any other paid leave (if this information is not included in the document, the employer must state where to find it) 
  • Any other benefits, including non-contractual benefits such as childcare vouchers or company car schemes  
  • The notice period either side must give when employment ends 
  • How long the job is expected to last (if it’s temporary or fixed term) 
  • Any probation period, including its conditions and how long it will last 
  • If the employee will work abroad, and any terms that apply 
  • Training that must be completed by the employee or worker, including training the employer does not pay for 

Provisions for pensions, disciplinary and grievance procedures, and non-compulsory training can be provided two months after the new employee begins their employment.

Ensuring you undertake a fair hiring process

Now more than ever, businesses are being held to account for failing to be inclusive. It is essential, therefore, to comply with all employment laws, including the Equality Act 2010 when both advertising and interviewing for the available position.

It is critical that any advertisement and interview is carefully drafted and takes into account the nine characteristics protected under the Equality Act 2010. These are: 

  • Age 
  • Disability 
  • Gender reassignment 
  • Marriage and civil partnership 
  • Pregnancy and maternity 
  • Race 
  • Religion or belief 
  • Sex 
  • Sexual orientation 

Under the Equality Act 2010 an employer (A) must not discriminate against or victimise a person (B): 

  • In the arrangements A makes for deciding to whom to offer employment 
  • As to the terms on which A offers B employment 
  • By not offering B employment 

Take care with the language you use and the questions you ask. For example, ask neutral, non-discriminatory questions throughout, and always ensure that each candidate is asked the same questions. To protect yourself, it is sensible to document your interview questions in order to avoid any claims that your recruitment process has been discriminatory. 

The Equality and Human Rights Commission (EHRC) provides an extensive guide on workplace discrimination and this includes an entire section on recruitment. 

With effect from April 2021, the Employment Tribunal’s ‘Vento guidelines’, which are used to assess compensation for injury to feelings arising from discrimination, set the current awards as follows:

  • Lower band case (for less serious cases) – between £900 and £9,100
  • Middle band case (for cases which do not merit an award in the upper band) – between £9,100 and £27,400
  • Upper band case (for the most serious cases) – between £27,400 and £45,600

As a business owner, it is important to understand how much of a detriment a claim such as this can have in your business, therefore it is vital to protect your business and staff. 

Being inclusive will not only help you avoid these claims and payments, but it will also benefit your company and culture.

Top Tip: A strong business culture is essential if you want to attract the best candidates in your industry and ensure your business is successful. Learn how to get it right from day one in our guide to building a happy business culture 🙌

Managing the offer-to-acceptance process correctly

Once you have selected the successful candidate the first document you should issue is the ‘offer letter’, which details the fundamental terms of the job offer. Include any applicable pre-conditions in your offer letter, such as: 

  • Required references 
  • Evidence of ID/Right to Work documents (i.e. any VISA required, etc.) 

You should ideally ask the proposed employee to sign and return their offer letter to formally accept the terms of the job offer. It is usually at this point that the employee will resign from their current position. 

You must issue the employee with a ‘written statement of employment particulars’ which has two parts: 

  • The main document which must contain certain key terms by law (known as a ‘principal statement’); and 
  • A wider written statement containing the rest of the terms 

The principal statement must be issued on or before the day the employee starts work and the wider written statement can follow within the next two months. However, it is usually best to include all of the terms in an Employment Contract as well as issue a privacy notice and a staff handbook, which can include your company’s workplace policies and procedures. 

If the employee has any queries regarding the contract, deal with these sensitively and promptly, ironing them out together. Reach a position where you have a mutually acceptable employment contract and then ensure it is signed by you and your new employee. 

You should ensure that you are complying with all employment laws, including the National Minimum Wage and National Living Wage requirements, and that you are providing a safe working environment at all times – this is particularly important in this post-Covid world. 

Where to go for additional help

If you are new to hiring staff, need help drafting the required documents, or are unsure about any step in the recruitment process, it is sensible to take legal advice so that you can ensure you get it right the first time.  

Tide has teamed up with LawBite, the leading online legal platform, to provide easier access to expert help that is fast and affordable.

Tide members get a free 15-minute consultation from one of the friendly lawyers at LawBite, and also receive extra discounts (10% for Tide Members and 20% for Tide Plus members) on any commercial or corporate legal advice your business needs from LawBite. You can also watch their video around employment and contracts which contains expert insight and guidance to help you get started.

Wrapping up

Recruiting new talent to your team is exciting, but the process must be handled carefully. There are many pitfalls to be aware of such as implied discrimination and not issuing a ‘statement of particulars’ within the required time period. 

To ensure you are following the right process: 

  • Safeguard the selection process to make it fair, non-discriminatory, and well-documented 
  • Issue a clear and unambiguous written job offer letter  

  • Set out any pre-conditions of employment in the offer letter  
  • Make sure you have a copy of the employee’s ID or right to work documents 
  • Issue an Employment Contract and get it signed 
  • Always comply with relevant employment laws  

If you get the process right, you will ensure your business and employees’ interests are protected and future employment law disputes are avoided. The best way to protect your interests is to partner with an experienced Employment Law Solicitor who can provide you with the expert legal advice and representation required to be fully compliant with employment rules and regulations.

Photo by Christina Morillo, published on Pexels

A headshot of Clive Rich, CEO of LawBite

Clive Rich

Tide Partner

Image of Tide card

A business bank account that's free, easy to open, and helps you start doing what you love.

Tide is about doing what you love. That’s why we’re trusted by 400,000+ UK businesses.

Open an account
Image of App Store 4.7, 27k
Image of Google Play 4.6, 3.7k