Introduction
Management in a company plays a critical role in its success. Every successful firm must pay attention to the five management functions: planning, controlling, staffing, organizing, and staffing. The staffing function is concerned with recruiting employees who are a vital asset in a company. Managing employees in a company require paying attention to several issues that may affect a firm’s operations (Group Legal Group, 2022). In addition, countries have employment laws that all firms, whether small, medium, or large, must comply with. These laws govern the relationship between the employer and the employees by setting regulations that prevent discrimination and promote health and safety. Labor laws are created to ensure that employees work in safe and fair working conditions and are appropriately compensated.
Employment laws form the basis for helping the human resource manager craft guidelines for HR processes such as selection, Recruitment, and selection. Failure to establish formal HR processes and structures means that there is a likelihood for a firm not to comply with the employment laws. Formal HR processes are based on employment law, attracting potential employees to work at the company (UK Government, 2012). Ignoring employment laws could ruin a firm’s reputation and lead to company closure. Moor Hall Manufacturing is a growing company that requires formal HR process development from employment law to help effectively manage the company’s employees. The law provides guidelines for the Human Resource manager to develop employee compensation policies, Recruitment, and selection.
Part 1: The Role of Employment Law In Managing Employment Relationship And Work
Moor Hall Manufacturing is a small company with 15 employees. The CEO, Charlie, hopes to expand the workforce, which necessitates that the HR manager put in place policies and processes that govern the employer-employee relationship. As the number of employees increases, managing becomes complex necessitating a formal approach. Employment and labor laws are rules and regulations that govern employee and employer relationships (Denny, Venison & Marshall, 2022). These laws determine the conditions under which employers hire workers and when employees can work. Among other labor laws elements are work conditions, including hourly/wage pay and the right to join trade unions.
Adopting the flexible and informal approach to forming HR processes and structures has a few shortcomings that are likely to affect employees and how they relate to the employer. Charlie may seek to adopt a flexible approach to easily change the terms and conditions of employment (Denny, Venison & Marshall, 2022). While this approach seems desirable, it undermines the rights of employees. During the hiring process, there is lots of information that employers need to know. While a company has a right to hire the number of employees they desire, it is always against the law to hire people who have not attained the legal age. Child labor is prohibited both in the UK and worldwide. In the UK, anyone below 16 years is a child, and hiring them could lead to a lawsuit. Without employment laws, both the employer and employee will behave in any manner they wish. However, the rules force them to act appropriately. Employees also want employment laws to be enforced to protect them from unfair treatment.
The UK has a set of complicated labor laws that have developed over time. The main aim of these regulations is worker protection. While this is true, some inequality exists, especially in some sectors where the laws are poorly enforced. The development of employment law dates back to the 19th century (N-Apex, 2018). However, trade unions were legalized in 1871, giving employees the right to join trade unions. Other elements of the UK legislation include the Employment Rights Act of 1996, an update of a previous version with additions on dismissal, parental leave, and redundancy. The Equality Act, on the other hand, focuses on discrimination in the workplace.
The employment law in the UK is double-edged as it seeks to strike a balance between the needs of the employer and the employer, thus maintaining a healthy relationship. Companies are required to follow the law when setting working standards. They protect the employee from any form of discrimination at the workplace. Due to increased advancement in technology, good channels of communication, and transport methods, people can quickly move from country to country to do business and to work. Thus, the workforce in the UK is diverse, with employees from all races, ethnic backgrounds, and religions. The employment laws protect employees, especially those from minority races, from discrimination. The Equality Act 2010 protects employees from discrimination (Group Legal Group, 2022). Apart from race, employees are also discriminated against due to their gender, which workers face the most challenges. Other provisions of the Act are to protect the disabled against discrimination in the workplace. The Equality Act protects from direct and indirect discrimination, harassment, and victimization during public functions.
Labor laws benefit not only the employee but the employer as well, as they set guidelines of what is required of them. They stipulate the responsibilities of the employer to the employee. The laws accord the employer the right to hire and fire within the law’s confines (UK Government, 2012). Operational ambiguities reduce by establishing clear legal expectations together with materials that guide firms are informed them of their responsibilities. Some laws guide employees on the minimum wage an employee should receive and how to set hourly salaries. Laws also exist that allow employees to be members of a trade union. Trade unions fight for the rights of employees by negotiating for better pay, and better working conditions. In an industrial dispute, the trade union representative provides support and guides on campaigning for better pay.
The employment laws provide a point of reference for employers when developing HR policies such as recruitment policies, employee data protection, training and development policies, and disciplinary and termination policies. Human resource policies guide HR managers and supervisors in dealing with various employment issues. An inflexible and informal approach that Moor Hall adopts poses legal challenges. The approach needs specific guidelines for handling employment and human resource issues. Thus, there is a likelihood for conflicts and dissatisfaction among employees, especially when they feel that the rules are changed to their disadvantage. Take, for instance, a situation where an employee is unfairly dismissed. If Moor Hall holds on to the flexible approach to handling HR issues, they come up with rules and regulations on employment that could change at any time.
While that seems inexpensive and straightforward, it could cost the company’s reputation and land it in a lawsuit. The Employment Law in the UK defines unfair dismissal as when an employer dismisses an employee without a valid reason. This is when the company HR policies need to be clearer about when an employee can be dismissed. There must be a clear guideline on the formal disciplinary or dismissal process. For some companies, employees are given one verbal warning, then one or two written warnings before serving them with a dismissal letter. When an employee is dismissed, it implies that their employment contract ends immediately. This can happen, especially if the employee is guilty of gross misconduct, including disclosing the operational secrets of the company. There are several situations when dismissal would be unfair, such as when an employee joins a trade union, asks for flexible work hours, or takes part in an industrial action.
If an employee feels dismissed unfairly, they have a right to bring a claim against the company. They can appeal through the employer’s appeal process through the help of their employer. Appealing a dismissal is part of the Acas Code of Practice. Sometimes, the employees might want to speak to their trade union if they want representation or a lawyer. If the employee has appealed but wants to take further action, they claim the employment tribunal. However, for an employee to appeal through the employment tribunal, they must have worked for their employer for two years and above and have an employment status.
Part 2: Self-Employed approach to Recruitment
Many small and medium-sized companies prefer hiring self-employed workers instead of permanent ones. Companies such as Moore Hall prefer these workers because they save a lot in taxes and employment rights since only self-employed employees run their businesses and are solely responsible for their failure. When Moore Hall hires employees on a self-employed basis, they will not be considered employees or workers. Such workers are not paid through PAYE and do not have an employee’s rights and responsibilities. Self-employed workers are responsible for their health. The terms of a contract outline their rights and responsibilities.
Self-employed workers charge a relatively higher amount than everyday employees. However, hiring self-employed workers can be pretty expensive for Moore Hall. The company should not take this approach. Several risks are associated with hiring them. Besides charging more, the HMRC is constantly looking for firms that hire self-employed workers to save on taxes. However, companies can still hire self-employed workers. They can take the as long as they do it within the confines of the law and present the HMRC with information about their employment status beforehand. The HMRC has a guideline that directs firms on whether an employee should be treated as self-employed. Depending on how Moore Hall will work with its employees, HMRC will look for factors that classify them as employees.
When hiring self-employed workers, it is essential to note that they are not direct employees of the company. They may carry on with their business of providing services, but through third parties and not as employees. Thus they should not be treated as employees. A sole trader who hires self-employed individuals engages in their services but does not employ them (Peninsula Group Ltd, 2022). This must be clearly indicated in the contract for self-employment. The self-employed workers sign commercial contracts for the services they provide. Self-employed staff s are responsible for paying their own taxes and insurance. The employer provides them with the necessary equipment required for work. These workers can source for replacement if they cannot work. They do not have the same rights as employees, such as holidays, minimum wage, and paid sick leave.
The law places a strict distinction between employed and self-employed workers. Using a wrong contract when hiring can go very wrong for a company resulting in claims for wages, holiday pay, and compensation for unfair dismissal if they have worked for quite a long time. The approach to hiring that Charlie wants to take seems like a mixture of self-employed and employed workers. The approach is likely to result in severe consequences. First, self-employed individuals are distinct from employees and are not also subject to the terms of employment of formal employment (Peninsula Group Ltd, 2021). They sign the self-employed staff contract where their terms of employment are stipulated. In the case of Moor Hall, the contracts explicitly state that there is no contract of employment created; hence they are responsible for paying their taxes and national insurance. However, the proclaimed self-employed workers must comply with policies, procedures, and work hours set by Moor Hall.
Since the self-employed staff strictly adhere to the policies and rules of Moore Hall, they cease to be self-employed but rather employed individuals. While hiring this group of employees, the employer has to ascertain that they meet the requirements that characterize a self-employed person (Kanagasunaram, 2022). Before that the employer is required to check their employment status. HMRC requires that employers consider several factors when evaluating whether a worker is self-employed. Among the factors they consider whether or not one is working with a self-employed person and has signed a contract. The other consideration is whether they are paid hourly, weekly, or daily rates (Nixon, 2022). Another factor to consider is whether self-employed persons have all the rights and duties of an employee. If they meet all the mentioned requirements, they are classified as employees, not self-employed. The approach that Charlie wants to take to hiring workers points out that they are employees and not self-employees because they have all the rights and duties of employees.
The Human resource implication that comes with issuing the wrong contract is that the workers will demand to enjoy the rights that other employees enjoy, such as paid maternity and sick leave. They can sue the company for not giving them the rights given to other employees, including retirement benefits(Andersen, 2022). HMRC picks particular organizations for investigation by looking at their yearly revenue. Apart from looking at the monthly returns of a year, the HRMC mines data submissions in real time to help identify any hallmark of employment. HRMC investigations often lead to unexpected substantial tax bills, followed by insolvency. Such colossal tax bills could also force a firm to file for bankruptcy. After the investigation, there are other financial penalties, like interests owed from the initial date the initial payment was due. According to Andersen (2022), penalties can be as huge as 200% of the actual liability. While the costs incurred during the HMRC investigation are implausible to affect the balance sheets of large firms, they could damage the financial position of small and growing firms like Moore Hall.
Conclusion
Employment laws are an essential part of any organization. Regardless of the film’s size, the firms’ owners must ascertain that human resource policies and procedures are developed using employment laws as the benchmark. The flexible approach to developing human resources can be costly to firms as they attract HR and legal implications. Developing policies that are just general and unclear can ignite conflict in an organization and fuel fights between employers and employees. Similarly, employment laws outline the guidelines to be followed when hiring employees, including the terms and conditions of employment. Under UK employment laws, self-employed individuals are clearly defined using characteristics that distinguish them from employees. Self-employed workers help to cut several costs. However, not understanding employees and self-employed workers can have severe long-term implications for Moore Hall and other small and upcoming businesses. It is vital that businesses conduct extensive investigations about the workers they seek to employ to ensure that they follow the law to avoid legal and IH implications.
References
Andersen, C. (2022, November 29). HMRC tax investigations – Advice, process, costs. Company Debt. https://www.companydebt.com/hmrc-tax-investigations/
Denny, A., Venison., E. & Marshall, C. (2022) The employment law review: United Kingdom. The Law Review.
Global Legal Group. (2022, 3). Employment & labour laws and regulations report 2022 United Kingdom. International Comparative Legal Guides International Business Reports. https://iclg.com/practice-areas/employment-and-labour-laws-and-regulations/united-kingdom
Kanagasundaram W. (2022). When does HMRC investigate self-employed individuals? WIS Accountancy. https://wisaccountancy.co.uk/when-does-hmrc-investigate-self-employed/
N-Apex. (2018). https://n-accounting.co.uk/hmrcs-take-hiring-self-employed-workers/
Nixon, R. (2022, November 28). Under what circumstances would HMRC investigate a self-employed person? Real Business. https://realbusiness.co.uk/circumstances-hmrc-investigate-self-employed-person
Peninsula Group Ltd. (2021). Employing self-employed staff. Peninsula UK. https://www.peninsulagrouplimited.com/topic/employment-contract/self-employment/
UK Government. (2012, January 26). Employment status. GOV.UK. https://www.gov.uk/employment-status/selfemployed-contractor#:~:text=Checking%20their%20employment%20rights&text=they%27re%20not%20under%20direct,when%20they%27re%20not%20working
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