Recruiting is a big step for start-ups and small businesses, and it’s not only a legal minefield but also a huge financial commitment. You have to ensure you know what you are doing and that you are operating within the law, even if you are just taking on unpaid interns!
Peter Adediran, Principal at PAIL Solicitors, which specialises in small business law primarily within the digital, technology and media space, shares his employment tips for small businesses thinking about employing unpaid interns, freelancers, contractors or employees.
Peter, from a legal perspective what do we as start-ups and small businesses have to consider when taking on unpaid Interns or when hiring freelancers, contractors and employees?
The terms intern or freelancer have no legal meaning on their own. An intern’s right to a minimum wage depends on whether they are classed as a worker. More information can be found at https://www.gov.uk/employment-rights-for-interns.
With respect to dealing with a freelancer/contractor or a self employed consultant, again it really makes no difference the term you use to describe the person. What is important is what they are actually doing for you. Generally a contractor can be self-employed or an employee.
A self employed consultant runs their own business and is not considered an employee. As a result you don’t have to comply with English laws for employees. The relationship with the self employed consultant is primarily governed by a contract although you are still subject to some laws such as health and safety whilst they are on your premises or the consumer credit act if you should loan them money. The important things to cover in a contract with a self employed consultant include the exact scope and description of services provided including all rates. Set out how you will deal with payment at the end of each job or on a monthly basis. Deal with the issue of the self employed consultant being independent and paying their own tax. There are many other issues that you might want to deal with here and you should seek professional legal advice. You will find a good explanation of the various types of employment status on the UK Government website here https://www.gov.uk/employment-status/selfemployed-contractor.
Regarding actual employees, to be fully compliant with English employment law you will require an employment contract for all staff part time or full time. I would also recommend that you have an employee’s code of conduct for staff (including social media policy. This is crucial to minimise risk including employment tribunal cases. I would also suggest that you have a contract for the protection of trade secrets and intellectual property; confidentiality and the prohibition of competing with the employer.
Typically, you will also need advice about opting out of the 48 hour week Working Time Regulations where appropriate, as well as, ensuring compliance with minimum wage for different types of work including salaried work per hour or an annual salary in weekly or monthly amounts; currently £6.31 for 21 and over and £5.03 for 18 to 20. Additionally you require advice on the statutory minimum level of paid holiday; length of rest breaks; statutory sick pay, maternity, paternity and adoption pay and leave. All of these matters should be dealt with in the employee’s code of conduct.
You should register with HM Revenue and Customs to deal with payroll, tax and NICs (you will need payslips showing all deductions, e.g. National Insurance contributions (NICs)). Make sure you have employer’s liability insurance and are aware of discrimination and disability laws.
It is an ongoing challenge ensuring that you comply with all existing employment statutory codes. Checking the law might mean reference to case law as well as existing statutory laws. English law is based on case law as well as statute. The challenge is what legal problems need to be overcome in producing the contracts so that they protect the Company (for example the employment contract; protection of trade secrets and IP; contract for confidentiality and the prohibition of competing with the employer are all complex matters likely to require more time than the – Code of Conduct for Staff). There is little point in having unenforceable clauses in your contracts. Accordingly I would recommend getting professional legal advice.