Often at HR Revolution we are approached by a new client because they haven’t put the right HR measures in place for their employees, which has resulted in a situation they are not equipped to deal with.   Unfortunately HR always gets pushed down the priority list, but is a vitally important role and ignoring employment responsibilities may also have financial implications when it does go wrong.

If this has caught your attention read on, we have listed the most common HR risks that many small businesses take and the potential penalties for ignoring or getting them wrong.

Ignoring legal compliance or the law

By law you are required to have a number of written employment policies in place, such as a disciplinary and grievance procedure and equal opportunities to name but a few.  This is where an employee handbook is imperative as it lays out what you expect of the employee.

The risk of not having these policies in place is, if an employee makes an unfair dismissal or discrimination claim it would most certainly count against you if you didn’t have the appropriate policies in place, leading to a larger compensation award.

Not having a written employment contract

You are required by law to provide employees with a written statement of terms and conditions of their employment (i.e. employment contract), within 2 months of them starting to work with you.  If this is not in place, you could be taken to an employment tribunal and fined between 2-4 weeks pay.

More importantly, if you don’t have any terms of employment put in writing for an employee and there is a disagreement later down the line about what was agreed, you could be looking at a breach of contract claim.  Compensation payouts for breach of contract claims can be up to £25,000 if taken to an employment tribunal or £50,000 at the High Court.  Definitely not worth taking any risks.

Not checking an employee’s right to work

You need to check that all your employees have the right to work in the UK (by taking copies of evidence, such as a passport or work permit).  If this not carried out and and employee is found not to have the right to work in the UK, you can be fined up to £20,000 per person for employing illegal workers.

Discriminating against an employee

In employment law, employees are protected against being discriminated against on the grounds of age, disability, marriage or civil partnership, race, nationality, sex/sexual orientation, ethnic origin, gender reassignment, pregnancy or maternity, religion or belief and colour.

In cases of discrimination, tribunals can award unlimited compensation and there is NO length of service requirement for employees to make a claim.  Also there is a particular risk with discrimination cases that if an employee has shown that discrimination could have taken place, it is then up to the employer to prove to the tribunal that this is not the case, which can be extremely difficult to do.

Unfair dismissal of an employee

Dismissing an employee without having a legally fair reason or not following the correct legal process, can lead to an employment tribunal awarding the employee up to £74,000 compensation or a year’s pay if this is lower.

In addition, you would have to pay your employment lawyer’s fee even if you win, which could amount to several thousands of pounds!  However, employees need to have had 2 years service to claim unfair dismissal, although if they can show that they were discriminated against unfairly when dismissed they can make a tribunal claim regardless of their length of service (see above).

Underestimating the knowledge of employees

Employees can now find any information about their rights on the internet, so tend to be very knowledgeable about their rights at work and processes their employers should be following.

As an employer if you don’t do things properly this can lead to your employees being demotivated and lower productivity. So make sure you treat your employees fairly and lawfully and it will lead them to be happier and more productive at work.

If you are struggling with any of the issues we have outlined above and need some HR help, please do give HR Revolution a call, we know we can save you time with practical guidance on how to handle your daily HR tasks.