During lockdown a number of readers got creative and almost overnight became entrepreneurs. Across the UK we have seen an increase in small companies producing home cooked food, jewelry made in bedrooms and individuals using their skills or natural charms to influence others online. This may have arisen out of necessity (having been made redundant) a new perspective as a result of home working, or perhaps simply ceasing the opportunity to turn a long honed hobby into a business. Whatever the inspiration, a large number of individuals have decided that they no longer want to work for someone else and have branched out on their own.
While the initial excitement of being your own boss may power this initial phase, at some point the realization dawns that this arrangement still brings with it a variety of duties and obligations. Whether that be managing your taxes, engaging with suppliers or perhaps hiring your first staff member, there is a variety of legal requirements that still regulate your working arrangements. As such it is important to ensure you are getting it right, lest this new creative project result in legal calamity.
From an employment law perspective there is a lot to think about. This is particularly relevant once you reach the point of hiring your first staff member. At the outset you need to consider what type of relationship you are going to have with this new entry to the team. Consideration need to be given to whether this individual is going to be an employee, with the full range of employment rights and responsibilities, or are they going to be self-employed, simply providing you with an end service and creative control on how this is provided. Or perhaps you want to retain some control over the manner in which the service is provided and as such you wish to engage them as a worker, which brings with it responsibilities such as sick pay and holiday pay.
Understanding the nuances between these three employment statuses (employee, worker, self-employed) is key to dictating the working relationship and the type of contract that is required. For example, since 6 April 2020 employers have been required to provide employees and workers with a written statement of particulars of employment by section 1 of the Employment Rights Act 1996 (ERA 1996). Certain particulars must be included in a single document (including for instance the rate of pay, normal working hours and terms related to holiday pay) while others may be contained within a ‘reasonably accessible document’ (including for example terms related to sick pay or training entitlement). Other terms may be provided within two months of beginning employment (including for example and terms related to pension or collective agreements). Failure to comply with this requirement, or providing an incomplete statement, could give rise to claims for compensation of 2-4 weeks’ pay, if the employee is successful in another substantive claim of a breach of employment rights before the Employment Tribunal.
Failure to comply with relevant statutory and contractual obligations can not only lead to disputes with your employees, it can also potential lead to serious reputational damage, lost sales and ultimately potentially legal action. While starting your own business can be a dream come true, you need to protect it by taking the necessary steps to comply with your legal obligations. Edwards Duthie Shamash has specialized employment lawyers that can assist and guide you to ensure this new venture does not turn into a legal nightmare.
If you would like further advice on contracts or any employment related matters, please do not hesitate to get in touch with Colin directly at: Colin.Davidson@edslaw.co.uk