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What type of contract is the ‘right’ one for my business?

The decision to employ or not to employ can be a tough one, especially for a small growing business where finances are tight and income is not guaranteed. Hopefully you want to do things the ‘right way’ – do the right thing by your business and not over commit to costs that are risky; do the right thing by the person you are bringing on board, giving them the right amount of job security and benefits; and do the right thing by HMRC and ensure you are not putting your business and your reputation  at risk by not following the rules correctly.

So, what are your options? The 3 main options are to take on a ‘worker’ and have slightly less obligation to provide all the benefits that an employee would have; to take on an ‘employee’ and have the full responsibility of being an employer; or to outsource the services that you need provided to an individual or a company operating as a ‘contractor’ or on a ‘self-employed’ basis.

But which one is right for you?

Worker

A worker has a contract – it can be written or verbal. A worker often works on a casual basis, sometimes a zero hours contract. A worker cannot substitute themselves with someone else as the contract is with the individual. The employer provides the equipment and tools needed to do the job and the employer states where and when the work should be done.

A worker is usually not entitled to minimum notice periods, protection against unfair dismissal, statutory redundancy pay or flexible working.

The employer is responsible for deducting any taxes and national insurance contributions from wages.

The advantage to the small growing business is that you have less obligation to the worker than you would to an employee. However, the effect of that is that you may get less commitment and the worker would perhaps feel that you are not investing in them as an individual in the same way that you are with an employee. This type of arrangement would be more suited to manual, casual or less skilled work, where the demand is sporadic rather than constant.

Employee

An employee has full employment rights, including statutory sick pay, maternity and paternity rights, minimum notice periods, statutory redundancy pay and protection against unfair dismissal. The employer is responsible for deducting taxes and national insurance contributions from wages. For the employer this is a bigger responsibility, bigger cost and potentially bigger risk however the advantages can outweigh the costs.

For the employee you are making it clear that you are investing in them as an individual, not just the service they can provide. You believe they are the right person for the business in the long term and the psychological contract created by this, if managed in the right way, can benefit your growing business significantly.

Contractor / Self Employed

For many small businesses this seems to be the most attractive option… no costs other than the cost of the work done, very few obligations to provide any benefits, no need for payroll. However, be careful. Outsourcing work to a self-employed person can be a risky decision if you are doing it for the financial benefits when actually what your business needs is an employee or a worker. If you treat the person as an employee, even if you have a contract in place stating they are ‘self-employed’, then you are opening yourself up to significant risk. If your business is subject to an audit and your working practises show that you are treating the person as an ‘employee’ even though the contract states’ self-employed’ you could be liable to pay the national insurance, holiday pay, sick pay and other related costs that you thought you had avoided.

There is no mutual obligation in a relationship with a self-employed person, and this is key. You as a business are not obliged to provide work and the self-employed contractor is not obliged to accept any work offered.

A self-employed person can substitute another worker in their place if needed as the agreement is for a service to be provided and not a specific person.

The business cannot dictate when and where the work is done as long as it is completed in line with the agreement.

This sort of relationship is the most flexible for the business and can be the most cost effective. However, it is meant for situations where a specific service is required for a short-term period. It is not designed to be a long-term solution.

And remember whilst having a written contract in place is essential, your actual working practice is what will take precedent if you are unfortunate enough to be audited.

Deciding on the right way forward for your business is a crucial point in your business growth, and if you a e at that point then ‘congratulations’ – your business is proving successful!

For advice on any of the above, please call Giraffe HR and we can help you to make the right decision for your business:  info@giraffehr.co.uk

Parental Leave

I have had the privilege of being asked to write a blog for Mums Work.. this has kick-started me into getting my own blog up and running. Below is my first ‘blog’ of thoughts on the topic of ‘Parental Leave’.. enjoy…

As working mums we want to be able to do it all… successfully do a job we are passionate about, earn enough money to make it worthwhile, be there for our children when we can and when they need us, and for some of us we also want to try to be a decent wife or partner too.. but we all know it is not easy. Not easy at all. And we often complain that there aren’t enough hours in the day or enough days in the week.

Fortunately for us, the Government has recognised the importance of sometimes needing to be able to take some extra time off work to be with our children when we feel they need it most. It is called Parental Leave.

If you have one year’s continuous service with your employer then you are eligible to apply. Most employers would expect you to put your application in writing (and it’s a good way for you to keep a record of it anyway), and you should give at least 21 days’ notice of wanting to take the leave.

Parental Leave allows you to take 18 weeks unpaid leave for each child between the date of birth or adoption of the child and the date that the child turns 18 years of age. The leave must be taken in one-week blocks unless your employer agrees otherwise, so you wouldn’t normally use it to attend a school show here and a sports day there, but you could take 2 weeks off while a child adapts to starting school or a move to a new school. Or if a child is going into hospital for an operation, you could request to take time off to be with them. You can also apply to add it straight on to your maternity or adoption leave. You will be limited to taking a maximum of 4 weeks per child per year.

But can your employer say no to your application? If your employer feels that your absence will affect the business dramatically, then your employer can postpone the date of your leave for up to 6 months. However, your employer should put the decision in writing within 7 days of your application, should explain to you why the leave has been postponed and should confirm the date that the leave has been postponed until. The leave cannot be postponed a second time.

A word of caution though – bear in mind those people in your workplace who aren’t mums – they may wish they had the option to take some unpaid time off work. Tread carefully and be understanding of why they may feel slightly put out.

So, in summary… 1 years’ service with your employer, a total of 18 weeks unpaid leave allowance up to child’s 18th birthday, maximum 4 weeks per year, 21 days’ notice of leave in writing to your employer.

Being a working mum is still going to be tough..but why not plan ahead and put some dates in your diary for some much needed and well-earned time off with your children when they need you by their side the most.

For more information on being a working mum, why not visit www.mumswork.co.uk