Before taking on any employees, it’s important to grasp the basics of UK employment law. Otherwise, you could become unstuck. Here are some of the things you need to know.

Employment contracts

There is no legal requirement under UK employment law to provide a written employment contract but it is advisable to have one so the terms of employment are recorded.

Employees are legally entitled to a written statement of the main terms and conditions of employment if their employment contract lasts at least one month or more. The employer must provide the written statement within two calendar months of the employee starting work. The written statement must include a number of details including, among other things, the name of the employer, the employee’s name, job title and start date, the amount of pay and timing, hours of work, holiday entitlement, flexible working policy, notice periods and place of work.

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Protecting the interests of the business

Businesses need to think about protecting their interests such as confidentiality, client connections, staff, suppliers and intellectual property. Any relevant provisions should be included in the employment contract.

Depending on the circumstances it may, in certain cases, for example, be appropriate to include clauses preventing employees for a certain period on leaving from competing, soliciting or dealing with clients or poaching staff. Any post-termination restriction must, however, go no further than is reasonably necessary to protect the legitimate interests of the business and each case will be different.

As part of the Government’s Smarter regulation to grow the economy policy paper, the Government has proposed to limit the length of any non-compete clause to three months. The change would allow employees greater flexibility to join a competitor or set up a rival business after they have left their employer. Employers may have to consider other ways to protect their business.

A guide to HR outsourcing for small business – Outsourcing HR makes sense for businesses that are too small to have their own inhouse manager. However you need to be clear about what you need from the outset to avoid a one-size-fits-all approach

Unfair dismissal

Generally, an employee must have at least two years’ service to bring an unfair dismissal claim. Therefore employers do have more leeway to dismiss difficult employees prior to an employee reaching two years’ service. Usually, employers would only have to provide notice.

There are some claims that employees could bring without a continuous service requirement such as whistleblowing or discrimination. It’s therefore advisable to follow some form of process in all dismissal cases.

Also beware that an employee can take the minimum statutory notice into account in calculating two years’ service – which is one week for continuous employment less than two years but more than a month.

After two years’ service employees have general unfair dismissal rights and employers have to tread more carefully. Employers can only dismiss for a fair reason, such as for example, redundancy, performance or misconduct. The employer must also follow a fair procedure. The procedure to be followed will depend on the reason for the dismissal and the circumstances of the case.

Similarly after two years’ service, if an employer breaches a fundamental term of the employment contract, such as a pay term or the implied term of trust and confidence, providing the employee resigns swiftly as a result of the breach, the employee could claim constructive unfair dismissal.

Discrimination

It’s against the law to discriminate directly against a job applicant or employee because of the following protected characteristics: age, being or becoming a transsexual person, being pregnant or on maternity leave, being married or in a civil partnership, disability, race including colour, nationality, ethnic or national origin, sex, sexual orientation and religion, belief or lack of religion/belief. There is also protection from discrimination for being associated with someone who has a protected characteristic or for complaining about discrimination. There are other types of discrimination, too, such as harassment relating to a protected charaterstic.

Personal data

Employers need to be aware of their obligations under the General Data Protection Regulations (GDPR), which came into force on 25 May 2018. Personal data must, for instance, be processed lawfully, fairly and in a transparent manner. This includes employers being required to provide detailed information to their employees about processing of personal data.

Other aspects of UK employment law could be applicable to your business, too. Areas could include business transfers, whistleblowing and monitoring to name but a few.

This article is intended for guidance only and should not be relied upon for specific advice

Matt Gingell is managing partner of Lombards

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Employment law develops rapidly to reflect Government priorities and tribunal activity, but employers are currently experiencing an increasing number of employment law changes and challenges impacting their businesses.

Here are some of the more significant issues that you and your teams should be aware of, both current and future.

Holiday pay

Harpur Trust v Brazel clarified the position on how holiday pay for irregular workers on permanent contracts should be calculated. The change only impacts workers with no normal working hours and who are paid on an hourly or daily basis.

So, what does this mean? Basically, employers can no longer calculate holiday pay for workers with irregular working patterns using the 12.07 per cent method.

For permanent workers with irregular hours, you must calculate holiday pay by looking at the work they have undertaken across a 52-week reference period, discounting the weeks in which they did not receive any pay. You then need to calculate their average week’s pay across the 52-week period and multiply it by the 5.6 weeks’ annual leave entitlement.

It is worth reviewing your current holiday practices to ensure they comply with the judgment. You may also need to amend contracts of employment and payroll processes.

>See also: What are the new rules on calculating holiday pay for seasonal workers?

Employment status

The Government has currently decided not to legislate on employment status but has issued helpful non-statutory guidance on this fast-moving area. This provides advice on the differences between employees, limb (b) workers and those who are self-employed (including a table of rights that attach to each), as well as an explanation of the key factors in determining status.

It also looks at some of the more difficult issues or developments in this area, such as those associated with gig economy workers, zero hours workers, freelancers, interns and employee shareholders. So, if you need a bit of clarity in this area, the guidance is well worth exploring.

>See also: Zero hours contracts advantages and disadvantages

Fire and rehire

This has been in the news again. The Government will be publishing a new Statutory Code of Practice to clamp down on controversial tactics used by employers who fail to engage in meaningful consultations with employees and instead terminate contracts and offer to re-engage employees on new terms.

As a Statutory Code, tribunals and courts would be required to take it into account when considering relevant cases, including those for unfair dismissal. A tribunal would then be able to apply an uplift of up to 25 per cent to an employee’s compensation where their employer unreasonably fails to follow it.

Parents and carers rights

The long-awaited Neonatal Care (Leave and Pay) Act 2022 will give parents whose babies need hospital neonatal care 12 weeks of paid leave in addition to their statutory maternity or paternity leave. This has not yet come into force – realistically we’re looking at 2024. It will be available from day one of employment and apply to parents whose babies are admitted to hospital for seven or more days in the first month of their lives.

Similarly, The Carer’s Leave Bill will change the current right for parents to 18 weeks of unpaid parental leave for each child up to 18, by introducing a new entitlement available to any carer to take up to one week of unpaid leave each year to provide or arrange care for a dependant with a long-term care need. This is regardless of length of service. Carers won’t be required to show how or for whom it will be used.

Menopause rights

The Government has also now outlined its policy on menopause and employment. This includes the creation of a menopause taskforce to ensure the issue is prioritised in public policy on inclusion and diversity at work and the appointment of Government ‘menopause employment champions.’

Rooney v Leicester City Council saw the first binding decision related to menopause discrimination, with the Employment Appeal Tribunal holding that it was wrong to find that an employee suffering from significant menopausal symptoms was not disabled under the Equality Act 2010 (EQA).

As an employer, there are easy wins in this area. Train managers to signpost and support, make reasonable adjustments to working conditions and produce a relevant menopause policy for your employees.

Reporting thresholds

The business threshold for any future reporting regulations has doubled from 250 employees to 500 employees. This includes gender pay and executive pay ratio reporting regulations, but not ethnicity reporting, which the Government has decided will not be made compulsory.

More reporting requirements came in with the new Modern Slavery Bill, aimed at strengthening the protection and support for victims of human trafficking and modern slavery, particularly through increasing the accountability of organisations to their supply chains. The Bill strengthens the requirements on companies with an annual turnover of at least £36m to publish more rigorous annual reports and introduces a single reporting deadline and a mandated format. There will also be penalties for non-compliance, resulting in a key change to legislation which has previously been described as ‘toothless’.

Immigration

New digital ‘right to work’ checks, using ID validation technology became available for employees with valid British or Irish passports from April 6, 2022. The changes mean that employers will now need to either:

• Carry out a manual check by physically meeting with the employee to check and copy their original documentation.
• Appoint an Identity Service Provider to check the passport of the employee on their behalf or carry out the check themselves using ID document validation technology.

>See also: Businesses must pay for digital ID checking from April

Tipping

The Employment (Allocation of Tips) Bill, likely to benefit more than two million workers, has passed the Committee stage. The key points are that tips may not be withheld from staff and a new statutory Code of Practice on how tips should be distributed will be developed. Employers will be required to have a written policy on tipping and keep a written record of their tipping practice. They will also have to give their workers the right to ask questions and demand information about their tipping records.

The Employment Bill

The long-promised Employment Bill will potentially be very wide reaching but is still a work in progress. It will act as a single enforcement agency for employment rights and is likely to include extended redundancy protection and a right to request a ‘predictable and stable contract’ after 26 weeks.

Retained EU Law (Revocation and Reform) Bill

The government is currently grappling with the December 31, 2023 deadline imposed by the Bill to amend, repeal and replace current EU law that is still in force in the UK. With some 2400 UK regulations across 21 Government departments, this deadline is not going to be possible to achieve and is likely to be pushed back.

EU law had far-reaching impact and effect on employment law in the UK, so employers would be well advised to keep an eye on the Government’s REUL dashboard which is updated quarterly and records where EU-derived legislation remains and where legislation has been amended, repealed or replaced.

Further reading

What owners should put in an employment contract

The post 10 employment law changes that you should know about appeared first on Small Business UK.

A non-disclosure agreement, also known as an NDA, is becoming an increasingly common in a small business when discussing confidential information.

NDAs, or confidentiality agreements, are used to help protect confidential information such as trade secrets, new ideas, business plans and other commercially sensitive information.

The aim of an NDA is to stop unauthorised use of certain confidential information.

>See also: What are the new rules on calculating holiday pay for seasonal workers?

NDAs are a useful tool for setting boundaries with new business relationships, allowing you to describe precisely what information you will share, how it can be used and who it can be shared with.

In what circumstances is an NDA appropriate?

You should use an NDA when you need to protect information that is valuable to your business.

When deciding if an NDA is appropriate, ask yourself:

Is the information ‘secret’ in the first place?

If the information is widely known or publicly available, the information is not confidential.  NDAs are not enforceable against publicly available information.

Is it appropriate to share the information?

For initial meetings, informal discussions or sales pitches, you often don’t need to reveal business-critical information.

Keep the initial discussions limited to need-to-know information that will not harm your business if discovered by third parties. You can consider using an NDA once discussions move beyond the introductory conversation.

>See also: How to avoid unfair dismissal claims

Could sharing this information widely cause harm to my business?

If the answer is yes (or even maybe), propose an NDA before continuing the discussions.

Deciding when to use an NDA will involve careful consideration of the potential business relationship, how much you trust the other party, the value of the information being shared and the impact of it being shared without your permission.

How important are NDAs for protecting my growing business?

The best way to ensure your information remains confidential is to not disclose it at all. But that is not practical if you want to share your ideas with prospective business partners, suppliers or investors to help grow your business.

If you don’t have an NDA, and your confidential information is shared without your permission, you may rely on the common law “breach of confidence” which applies to information which has a “necessary quality of confidence” disclosed “in circumstances importing an obligation of confidence”. However, it can be difficult to satisfy these requirements, and you will usually need to engage lawyers to enforce them.

It is safer to rely on a well-written NDA. This should remove any doubt as to whether the recipient was aware that the information was confidential and can provide you with a legal remedy if there is an unauthorised disclosure.

NDAs alone are rarely enough

However, NDAs alone are rarely enough, and they work best as part of a wider strategy to protect your business assets.

While NDAs can help hold a “rogue leaker” accountable, they are unlikely to fix the harm caused by the disclosure.  Once someone has shared your secret recipe, it cannot be made secret again.  It is important to manage your methods of disclosure as well as having a carefully drafted NDA in place.  You may wish to consider using data rooms, watermarks and encryption, and make sure you have the ability to restrict access to documents previously disclosed. If you are having a face-to-face meeting, you may even consider providing physical, hard copy documents only (as long as you collect them at the end of the meeting).

Could I harm negotiations by using an NDA?

NDAs are very common in the business world, and many businesses will be familiar with them. They show you are serious about protecting your business, and help reinforce the message that what you are disclosing is to be kept under wraps.

However, they can represent unwelcome “red tape” when pitched at the wrong time. A good example of this is when approaching investors.  Many investors consider multiple deals at a time and often refuse to sign NDAs so they are not restricted from engaging in other investments. This is usual market practice.

The key to protecting your business without harming negotiations is finding the right balance.

During initial discussions, investors or other partners are looking to get a feel for your concept and whether you can achieve your aims. The phrase “share the cookie, not the recipe” is commonly used when discussing NDAs and is worth remembering. You should aim to promote your business idea without revealing so much that someone else can replicate it.

Once you have found someone who is keen to commit to your business, then you can consider using an NDA before sharing more sensitive information. However, it is worth remembering that confidentiality obligations will usually be included in a term sheet or investment agreement, so your NDA may not be needed in these circumstances.

What terms should I include in an NDA?

A well-drafted NDA will include the following:

• Definition of confidential information: this is another careful balancing act.  You must ensure this is broad enough to cover everything you want to keep secret. However, this definition can only apply to truly confidential information, as once the material loses the quality of confidence (such as becoming publicly available), the NDA is unlikely to be enforceable
• Permitted purpose: clearly specify the purpose for which the recipient may use your confidential information.
• Disclosure: clearly define who the recipient can share the information with (usually employees,  consultants and advisers such as lawyers) or you may wish to provide a list of specific individuals who can receive the information (and these people should also be bound by confidentiality obligations)
• Duration: how long will the NDA apply? This must be realistic otherwise the NDA may be unenforceable (and the receiving party may not agree to it). A never-ending obligation to keep the information secret is rarely likely to be appropriate or enforceable in law. The duration should be tailored to the nature of the information, and how long it is likely to remain of a confidential nature from a commercial perspective . For example, information relating to a new product could be protected until the product goes to market and is therefore publicly available.

It is important to remember that NDAs are only one tool at your disposal for protecting your sensitive information and should form part of a wider strategy to keep your information confidential.

It is equally important to limit the information you share, keep it on a need-to-know basis, and do your due diligence on your prospective partners – do you trust them, and do they have a good track record?  These factors, together with a well-drafted NDA, will help set you up for positive discussions to help grow your business.

Brett Lambe is a senior associate at Ashfords LLP

Further reading

Sick leave – Making changes to company sickness policy

The post Using an NDA in your small business appeared first on Small Business UK.

A recent court judgement, the Harpur Trust vs Brazel case, brought holiday pay for seasonal and part-year workers into focus.

We’ll take you through the findings of the case and what that means for you as an employer.

What happened in the Harpur Trust vs Brazel case?

Ms Brazel is a music teacher who was on a permanent zero-hour contract and worked depending on how many individual music lessons were scheduled in any given week. She argued that she was worse off on her new holiday pay rate than she would have been under The Working Time Regulations. The school said that as she only worked part of the year, pay was in proportion to the number of weeks she actually worked, based on the 12.07 per cent rule.

What is the 12.07 per cent rule?

Known as the percentage method, the 12.07 per cent rule is calculated by taking a standard working year of 46.4 weeks, with 5.6 weeks being 12.07 per cent of 46.4 weeks. However, this can lead to workers getting paid less than they’re entitled to.

A key issue is that under the Regulations, holiday is accrued during periods of non-work as well whereas the 12.07 per cent rule only factors in periods of work.

In the Court of Appeal judgment, Lord Justice Underhill held that the Working Time Regulations did not provide for the kind of pro-rating which underlies the application of the 12.07 per cent formula in the case of a part-year worker.

What does it mean for small business owners?

There’s been no change in legislation, but the judgement has opened up the possibility of more cases like this, so it’ll be wise to review how you pay part-year workers.

Basically, this ruling affects any employer who has employees who work irregular hours during certain times of the year but who don’t have a regular contract throughout the year, such as workers in the education system and seasonal staff.

In line with the Working Time Regulations, all workers should get the full statutory minimum 5.6 weeks paid holiday per year while the pay for their holiday pay must be based on the calendar week method of averaging a week’s working hours (averaged over a 52-week period and using weeks where they worked).

That said, you can still determine when they take holiday and use the worker’s hourly rate when calculating the rate of pay when paying for holiday.

For part-year and zero-hours workers, you could offer contracts for less than a year and issuing a p45 at the end of that period. The downside of this is that there is case law which shows that in a school setting the terms can be joined together for continuous service.

In addition, employees who have a series of contracts back-to-back over a two-year period can be treated as a permanent employee and are entitled to a permanent contract of employment. So unless you take significant breaks between contracts, the employee will be entitled to permanent status and therefore 5.6 weeks of holiday, even on a series of fixed term contracts.

If you are hiring seasonal staff for the summer or Christmas, you will need to offer fixed term contracts and issue P45s after the contract expires, rather than holding your seasonal workers as bank staff until such time as they resign or you terminate them. This means that you will have additional recruitment, onboarding and training costs each ‘season’.

There is also a large administration cost associated with calculating annual leave for these employees. Every part-year employee will need to have their holiday pay calculated based on the number of hours worked in the previous 52 weeks before they take leave. If you only have a couple of part-year employees, this may not be such a major task. However, if you employ a lot of part-year employees, this could become a significant monthly job for your finance department or payroll provider.

Another element of the financial risk is the actual cost of paying the increased holiday pay entitlements. An employee who is on a permanent contract and works full-time for 12 weeks every summer would have been entitled to 6.5 days of paid annual leave. Now they are entitled to 28 days of paid annual leave.

The final financial risk is the cost of an employment tribunal. If an employee chooses to take you to an employment tribunal for unpaid holiday pay, unless you elect to settle out of court, you are going to need to pay legal costs and probably their costs as well, as well as the unpaid holiday pay and perhaps any fines applied.

It also makes sense to pay attention to admin tasks such as updating employment contracts and employee handbooks as well as reprogramming HR and time attendance software

You may also get requests for backpay. James Poyser, CEO of inniAccounts and founder of offpayroll.org.uk, has used the judgement to create an example calculation. A part-time sports coach who worked just one week, earning £1000, could be entitled to £5,600 of holiday pay. “Whilst this example is contrived, and extreme, it underlies the particularities now facing employers, and further underlines the risks of zero-hours contracts,” he said.

>See also: Zero hours contracts advantages and disadvantages

What about umbrella companies?

“This has particular and challenging ramifications for umbrella companies,” said Poyser. “The umbrella industry will now be facing multi-million-pound claims from workers for underpaid holiday pay. Umbrella companies have no recourse to reclaim this compensation from end hirers (the companies the workers performed the work for), meaning they will need to pay compensation from their own profits.

“Given this unexpected compensation claim and the wafer-thin margins umbrella companies operate on (no thanks to the aggressive kickbacks that exist in this market), I believe this year we will see more umbrella companies enter administration. The situation may well be exacerbated by no-win-no-fee practitioners with aggressive marketing campaigns.”

He added that, going forward, umbrella companies must manage the complexities of holiday pay along with the commercial risk surrounding this. Increased risk in the umbrella industry predicates unethical practices as umbrella companies turns to skims and scams (at the workers expense) to maintain their profitability, he added.

Employment tax specialist, Rebecca Seeley Harris, also said: “Off-payroll rules have exacerbated this situation – employers are employing people as permanent workers but putting them on zero contract/casual hours to compensate for the tax risks. Too many people who want to make a fair wage, on flexible terms, are exposed because of out of touch tax law, and too many employers are getting it wrong. This outcome is a massive deal for employment rights in this country. We need to take heed and overhaul regulation, and it must be done quickly.”

Read more

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The post What are the new rules on calculating holiday pay for seasonal workers? appeared first on Small Business UK.

UPDATED: The government has made it simpler for businesses to comply with the new UKCA testing and labelling rules that will come into effect on January 1, 2023.

The UK Conformity Assessed (UKCA) mark is due to replace the European Union’s CE markings on products sold in England, Wales and Scotland.

The changes include allowing products assessed this year under EU standards to be sold on the market in Great Britain in 2023 without the need for retesting. Instead manufacturers will simply be able to add the UKCA mark.

The UKCA certificate, whose introduction has already been delayed by a year, is a British equivalent of the EU’s widely-used and internationally recognised CE safety mark.

However, industry groups, while welcoming the concession, warned that the government’s decision to press ahead with the certification scheme would still pile costs on to business for no obvious benefit.

What is the UKCA mark?

The UK Conformity Assessed (UKCA) mark, pictured left, is a marking for products on the market in Great Britain (England, Scotland and Wales). Businesses have until 1 January 2023 to start using UKCA marking which replaces the CE and reverse epsilon markings now that we have left the European Union.

What’s changed with the UKCA mark?

To make it simpler for businesses to adopt UKCA marking, the government has brought forward the following measures:

Reducing re-testing costs

Any conformity assessment activities undertaken by EU bodies before the end of 2022 will be considered as the basis for UKCA marking next year. Legislation on this will be brought forward before the end of the year and will enable manufacturers to apply the UKCA mark on these products without the need for re-testing.

Removing the need to re-test existing imported stock

This will allow CE marked products that are manufactured and imported into the UK by the end of 2022 to be sold, without the need to meet UKCA requirements. This will remove the current need for retesting and recertification for products that are imported whilst the UK recognised CE requirements.

Continuing to accept spare parts onto the GB market

The UK will continue to accept spares onto the GB market that comply with the same requirements that were in place at the time the original products or systems they were being used to repair, replace or maintain were placed on the market. This will help to address concerns about the availability of spare parts and ensure businesses and organisations avoid disruption to their operations.

Extending labelling measures

To make it cheaper and logistically easier for businesses to continue to supply goods to Great Britain, legislation will be brought forward to extend current labelling easements to allow important information and other UKCA markings to be added to products using a sticky label or an accompanying document.

Recognising historic testing on some construction products

Manufacturers of construction products under AVCP system 3 – such as radiators, sealants and tile adhesives – whose products are tested by an EU notified body before 1 January 2023 – will be able to obtain a UKCA mark without having to retest through a UK-approved body.

Affected business sectors

The business sectors that these easement measures apply to include:

• aerosols
• electrical and electronics
• equipment for explosive atmospheres
• pyrotechnics
• gas appliances
• lifts
• machinery
• outdoor equipment
• personal protective equipment
• toys
• pressure equipment
• civil explosives
• recreational craft

William Bain, head of trade policy at the British Chambers of Commerce, welcomed the reforms. “It’s good news that the UK government has listened to business in providing these new easements to support cashflow and costs in these difficult economic times, he told The Times. “There will be relief on the pragmatic solution reached on spare parts and repairs.”

However, he added that from 2023 companies face “significant new cost pressures” from the new quality assurance system. “Uncertainties also still exist in terms of what will happen to markings in Northern Ireland,” he said.

Do I need to use the UKCA marking?

If you’re selling goods within Great Britain – and they previously needed the CE mark – then yes. As well as goods that have previously needed the CE mark, it’s needed on aerosols which previously needed a “reverse epsilon’ marking, as shown below.

The UKCA came into effect on January 1 2021 once the Brexit transition period ended. However, an adjustment grace period has been allowed so you can still use the CE mark until 1 January 1 2023 while you make adjustments. You should be looking to change to the UKCA mark as soon as possible though.

You only need to use the UKCA before January 1 2022 if all of the following apply:

• Your product is for the market in Great Britain
• It’s covered by legislation which requires the UKCA marking
• It needs third-party conformity assessment
• The conformity assessment has been carried out by a UK conformity assessment body

The product areas listed below are covered by the UKCA marking:

• Toy safety
• Recreational craft and personal watercraft
• Simple pressure vessels
• Electromagnetic compatibility
• Non-automatic weighing instruments
• Measuring instruments
• Lifts
• ATEX
• Radio equipment
• Pressure equipment
• Personal protective equipment
• Gas appliances
• Machinery
• Equipment for use outdoors
• Ecodesign
• Aerosols
• Low voltage electrical equipment
• Restriction of hazardous substances

These products are covered by the UKCA marking but have some special rules:

• Medical devices
• Rail interoperability
• Construction products
• Civil explosives

What rules do I need to follow?

The CE marking is only valid in Great Britain for areas where UKCA and CE rules stay as they are now. If the EU changes its rules on CE for member states and you CE mark your product, you might not be able to sell it in Great Britain, even if it was before December 31 2021.

The technical requirements and the conformity processes and standards you must meet for UKCA are mostly similar to CE standards. This includes the self-declaration of conformity.

Legislative areas where self-declaration of conformity for UKCA marking is permitted are in the table below.

Legislation	Scope of products which can be self-declared
Electromagnetic Compatibility Regulations 2016	All products
Toy (Safety) Regulations 2011	Products where all essential requirements are covered by designated standards and the manufacturer has applied these standards
The Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Regulations 2012	All products
Medical Devices Regulations 2002	Some Class I devices
Radio Equipment Regulations 2017	Products where all essential requirements are covered by designated standards and the manufacturer has applied these standards
The Pressure Equipment (Safety) Regulations 2016	Category I pressure equipment
Construction Products Regulations (Regulation (EU) 305/2011 as brought into UK law and amended)	Products within scope of System 4
Recreational Craft Regulations 2017	Certain categories of recreational craft as specified in the legislation
The Electrical Equipment (Safety) Regulations 2016	All products
The Supply of Machinery (Safety) Regulations 2008	Products where all essential requirements are covered by designated standards and the manufacturer has applied these standards
The Equipment and Protective Systems Intended for Use in Potentially Explosive Atmospheres Regulations 2016	Equipment-group II, equipment category 3
Personal Protective Equipment Regulations (Regulation (EU) 2016/425 as brought into UK law and amended)	Category I personal protective equipment

For many of the product types listed above, some transitional measures apply. Until January 1 2023, for most goods (except those subject to special rules), you can affix the UKCA marking on a label which is affixed to the product or on an accompanying document. It’s up to economic operators (manufacturers, importers or distributors) to ensure that the UKCA marking remains in place.

Construction products, medical devices, interoperability of the rail system and transportable pressure equipment are under UKCA but these transitional measures don’t apply.

If you want to change the size of the letters in the UKCA image to fit your product or packaging, then they must remain in proportion to the image displayed on the government website. They must be at least 5mm in height, unless stated otherwise by relevant legislation. It must also be permanently visible. From January 1 2023, it must be permanently attached.

Where do I put the UKCA marking?

In most cases, you’ll need to apply the marking to the product itself or to the packaging. In other cases, it can be placed in the manual or on other supporting literature. This will vary depending on the product.

Here is a mock-up of what an IKEA toy would look like with the new marking:

UKCA markings need to be placed on a product by either you as the manufacturer or by a licensed authority (the latter is only allowed in line with relevant legislation).

When attaching a UKCA marking, you take full responsibility for your product’s conformity in line with the relevant legislation. You must not place any marking or sign that would misconstrue the meaning or form of the UKCA to third parties, nor should you attach anything which obscures the UKCA marking.

What technical documentation do I need?

Record keeping

You (or the relevant authority) must keep a record to demonstrate that your product complies with regulations. It must be kept for up to ten years after the product goes to market. This information can be requested at any time by market surveillance or enforcement authorities to check your product conforms with the compliance.

Again, the documentation you need to keep depends on the legislation relevant to your product. But you must keep general records of how the products are designed and manufactured; how the product has been shown to conform to relevant requirements; and the address of the manufacturer and any storage facilities. Keep this information in the form of a technical file which can be presented if requested by the market surveillance authority.

UK Declaration of Conformity

The information required on the Declaration of Conformity is largely the same as what was required on an EU Declaration of Conformity. This can vary depending on the application legislation but generally should include:

• Your name and full business address or that of your authorised representative
• The product’s serial number, model or type identification
• A statement, stating you take full responsibility for the product’s compliance
• The details of the approved body which carried out the conformity assessment procedure (if applicable)
• The relevant legislation with which the product complies
• Your name and signature
• The date the declaration was issued
• Supplementary information (if applicable)

You will need to list:

• Relevant UK legislation (rather than EU legislation)
• UK designated standards rather than standards cited in the Official Journal of the European Union

Can I have a UKCA and a CE marking on the same product?

If your product is sold in Great Britain and the EU, you can have both markings.

UKNI is being used alongside CE for products on the market in Northern Ireland. Read more about the use of UKNI marking on the government website.

Where can I get additional advice?

Further questions can be sent to goodsregulation@beis.gov.uk.

Read more

What the Brexit deal means for small business

The post What is the UKCA mark and how does it affect my small business? appeared first on Small Business UK.

Among other costs that are coming into effect next month, such as the National Insurance price rise and climbing energy costs, a Plastic Packaging Tax has been creeping up in the background.

We’re here to tell you a bit about what it is and whether you need to worry about it.

What is Plastic Packaging Tax?

Plastic Packaging Tax (PPT) is as it sounds – a levy on plastic packaging. You need to register if you’ve manufactured or imported ten or more tonnes of finished plastic packaging components within the last 12 months or you’ll do so in the next 30 days. From April 1, 2022 to March 30, 2023 the 12-month threshold will be worked out differently.

PPT only applies to manufacturers and importers of plastic packaging components which contains 30 per cent or less recycled plastic. However, packaging should only contain recycled plastic where it is permitted under other regulations and food safety standards.

For PPT, all plastic is assumed to be virgin (not recycled) unless there’s evidence that recycled plastic has been used.

>See also: How much national insurance hike will cost your business

Which packaging is subject to Plastic Packaging Tax?

Let’s talk a bit about what plastic is. Plastic is a polymer material to which additives (e.g. calcium or dyes) or substances may have been added. This doesn’t include cellulose-based polymers which have not been chemically modified. 

When you assess the amount of plastic in your packaging, these additives count. If a plastic packaging component is made up of multiple materials but contains more plastic by weight – including the aforementioned additives – it will be classed as plastic packaging for tax purposes. You need to keep a record to show what substances are in your plastic packaging.

Two types of packaging subject to tax: packaging designed to be used in the supply chain or for single use by the consumer. If packaging is made up of several components, you must account for PPT on each component. Examples of different components include bottles, caps and labels or trays, boxes and plastic windows.

Packaging is chargeable when the plastic packaging component is finished if this takes place in the UK, or when finished plastic packaging is imported.

You must weigh the packaging you manufacture and export. You must know the:

• Weight of the packaging component recorded in metric values — this must be shown in kilograms on your return
• Percentage of recycled plastic content

You may also have to demonstrate that a packaging component isn’t plastic.

When do I need to register for the tax?

You must register for Plastic Packaging Tax within 30 days of becoming liable for it. Be aware that you must pay the tax on all of the chargeable components from the day you’re liable to register.

If you’re not required to register, you should keep records demonstrating that you manufacture or import less than ten tonnes per year of finished plastic packaging, including filled packaging.

How do I register for Plastic Packaging Tax?

If you’re liable, you’ll be able to register from April 1, 2022.

To register, you may need to provide the following information:

• The type of business you run
• Your businesses address and contact details
• The date your business became liable for Plastic Packaging Tax
• An estimate of how much finished plastic packaging you expect to manufacture or import in the next 12 months
• A customer reference number, which could be your:
  • Corporation Tax Unique Tax Reference
  • Self-Assessment Unique Tax Reference
  • Company Reference number
  • Charity Registration number
  • National Insurance number
  • Temporary National Insurance number

If you’re a non-UK business with no UK establishment and do not have any of the reference numbers listed, you can still register for the tax. After registering you’ll be given a registration number.

The requirement to include a statement with your invoice to show that Plastic Packaging Tax has been paid, which was due to commence in April 2022, will be delayed. The government says that more information about including a Plastic Packaging Tax statement with invoices will be published in due course. Register for updates on the government website.

Which records and accounts do I need to keep and for how long?

You must keep accounts and records to support the information you submit in your quarterly tax returns. You’ve got to show your workings and explain how you came to the figures that you did. You must have records to show when your packaging contains at least 30 per cent recycled plastic or when you’re exempt from the tax.

 Your accounts and records must:

• Be kept for at least six years from the end of the accounting period in writing (this can be done electronically)
• Record weight in tonnes, kilograms and grams

Where relevant, your accounts must include:

• A breakdown of the weight of plastic packaging components finished or imported in each period
• The weight of plastic packaging exported in the period on which the tax was deferred
  
  If you want to defer paying Plastic Packaging Tax for components you intend to export, you must keep records that show you intend to export them.

The records must be either a document:

• Used for any other tax or duty
• Which clearly identifies the components to be exported, such as a sales contract or order

The records must:

• Be dated at or before the time of production or import
• Include details which allow the plastic packaging components you intend to export to be identified
• Include the weight of the plastic packaging components which you intend to export

You should keep a record of all documents you intend to use to complete your Plastic Packaging Tax return or claim any credits or exemptions.

Will this affect my tax return?

You’ll have your quarterly tax return as normal, but some extra information will need to be included on it.

List any packaging components you’ve reported on a previous tax return as being intended for direct export but they:

• Will now be supplied within the UK
• Have not been exported within 12 months from the date of manufacture

Do not include:

• Packaging manufactured to be rail, aircraft and ship goods stores (unless customs formalities are cleared and they are formally imported as no longer for use as goods stores)
• Plastic packaging components permanently set aside for a non-packaging use

Will I have to raise my prices?

If you pay Plastic Packaging Tax on plastic packaging components that you have manufactured or imported, you can choose to increase the price you charge for that packaging to help cover the cost of the tax. That’s entirely up to you, but it could frustrate your customers and make them look elsewhere. Weigh up the pros and cons before you go ahead.

Plastic Packaging Tax is only paid once when the packaging component is finished or imported. It is not passed down the supply chain as a separately identifiable charge like VAT. VAT will continue to be payable on the whole price charged for the goods you sell according to VAT rules.

>See also: How to use MTD to get VAT right

If you increase your price of your plastic packaging because of Plastic Packaging Tax, VAT will be payable on the whole of the new price.

The government website has more detailed information on Plastic Packaging Tax, how to measure your plastic packaging and how to keep your records.

Read more

How does your business boost sales with sustainable packaging?

The post Plastic Packaging Tax – what does it mean for my small business? appeared first on Small Business UK.

For any innovator or entrepreneur, there is always an inherent tension between wanting to get a product out to market quickly, before it loses its unique selling point, and going through what can be a time-consuming process of filing an application to obtain a patent. 

However, the long-term significance of protecting your innovations cannot be underestimated.

For a small company, the cost of applying for and maintaining even a small number of patents is significant, thus it is crucial that businesses are well informed on the steps that should be taken to effectively approach the process.

>See also: What to do when faced with a law suit for patent infringement

#1 – Get professional advice

A granted patent may be a very valuable asset. However, relatively minor flaws in your application can result in the patent not being granted or having much lower commercial value. These flaws can be very difficult, if not impossible, to rectify.

A patent attorney can give you confidential advice covering the legal requirements for a patent and can highlight commercial considerations that you should think about. They can give you advice on whether or not you are likely to get a patent for your invention, and if you decide to proceed, they can draft your application in a way that maximises the chance of obtaining a granted patent which is commercially useful. They are used to working with the patent office to address their objections, and they can also help you find professional representatives outside the UK who can help you apply for patents in other jurisdictions.

If you do decide to proceed on your own, the following tips may help you navigate the path to obtaining a UK patent.

Please note, the information in this article is for guidance only and should not be taken as legal advice.

#2 – Keep your idea secret

Make it explicit to employees that they are prohibited from divulging details of your invention, and use a non-disclosure agreement (NDA) if you must share details with another company (e.g. a supplier or potential investor).

If your invention is already publicly available – e.g. because you have been selling goods which incorporate the invention – then you are unlikely to be able to obtain a UK patent.

#3 – Determine that applying for a patent is the right thing to do

Obtaining a patent can be time-consuming and expensive, even if you do most or all of the work yourself. Once you have a patent, it is only useful if it supports your business in some way: for example, if you are using it to prevent others from copying your invention, you need to be prepared to enforce your patent, which can also be time-consuming and costly.

On the other hand, a patent can be a powerful and valuable asset. Benefits of patents can include preventing others from using your invention, generating licensing income, encouraging investment and even lowering your tax bill.

You should consider the potential costs and benefits as part of your business plan.

>See also: The Trunki patent case and small business IP

#4 – Check no-one has beaten you to it

Search for anything that could already disclose your invention: this might be in technical journals, product literature or earlier patents (or published patent applications). Inventions must be novel to be patentable, so anything which has already been made public cannot be patented. An invention must also have an “inventive step” so, for example, an obvious modification of an existing solution is unlikely to result in a patent.

#5 – Prepare your application: describe your invention

Patent applications are written in a very particular style in order to meet various requirements of patent law. In particular, they must describe the invention in sufficient detail so that someone else could put it into practice. Figures are particularly helpful in explaining aspects of the invention. Reading existing granted patents in your technical area can be useful to see how they are written.

Make sure you include any alternatives (for example, different materials that could be used), and if particular variants work better than others, make this clear.

Claims are numbered sentences which define exactly the scope of protection sought. Generally, these should be written broadly, omitting unnecessary or optional aspects. Subsequent (“dependent”) claims can provide narrower fallback positions.

#6 – File your application

You can file your own application online at the UK Patent Office.

The UK Patent Office also has a helpful guide which includes guidance on the requirements for an invention to be patentable, and explains the details of applying for a UK patent, including the fees.

#7 – Get it granted

The process to obtain a granted patent involves the patent office performing a search (to identify any relevant prior art) and an examination (to assess your invention in light of the prior art). During examination, you may exchange letters with the patent office in which you amend your application or provide arguments in support of your application.

If you are in a hurry to obtain a patent, you can request and pay for both of these when you file the application.

If you are not in a hurry and/or want to defer any expenditure, you can pay for these stages later. An application which has been abandoned (e.g. because fees haven’t been paid) can still be used as a “priority” application for later filings, which are filed within one year of the original filing (see the next step).

#8 – Strategic filing

If you are thinking of launching products or services in other countries, or you want to stop competitors from doing so, you might want to apply for patents in those countries as well. You may need a qualified representative to represent you before each national patent office.

During the one-year period after you file your first application, you can apply for further patents for your invention either in the same country, or in other countries. To the extent that they cover the same subject matter, these applications will be treated as if they were filed on the day that you filed your first application provided you indicate that you wish to “claim priority” to your earlier application.

The one-year deadline is very strict, so do not leave this until the last minute.

#9 – Check you can launch your product/service

A patent gives you a right to stop others from using your invention, but it does not guarantee that you can launch a product or service which includes your invention without consequences. This is because there may be other patents in force which cover your product (or even your invention).  For example, you might manufacture a product, and your patent covers the product when it is coated in a new and inventive way with a special compound. However, if the compound itself is still under patent protection, you would be infringing that patent by selling your product.

A “freedom to operate” assessment checks whether any patents are in force which relate to your product. You may have to obtain a licence to these patents or modify your product to avoid infringement.

#10 – Keep innovating

All patent applications that have not been already abandoned are published 18 months after filing (or after the priority date). This means that your competitors will be able to see your invention. They may use this as a springboard to come up with their own improvements or alternative solutions. In order to ensure you can stay competitive, you may decide to file further applications to protect additional inventions.

David Hole is a UK and European patent attorney with EIP

Further reading on how to obtain a patent

Patent risk: understanding the best way to deal with it

The post How to obtain a UK patent – a 10-point checklist appeared first on Small Business UK.

Image credit: careeremployer.com

Leaving your job and setting a competing business in direct competition to your previous employer is one of the most high-risk areas for any entrepreneur.

Those who get it wrong can find themselves hit by legal action which can be a disastrous prospect for any new business.

I want to cut ties with my employer and set up a rival business. Can my employer stop me doing this?

Before you do anything, check your employment contract. These could have explicit and implied obligations that apply both during and after your relationship with your previous employer. In most cases, provided that you are not a director, LLP member or partner with fiduciary duties you can generally take “preparatory steps” towards setting up a competitor business without being in breach of your obligations.

However, this will be dependent on what your obligations are stated to be. Be mindful too that they may not be found solely in your employment contract. They may be in a variety of places, including service agreements, shareholders’ agreements, membership or partnership agreements and long-term incentive plans, bonus, or other remuneration schemes.

>See also: How can a restrictive covenant be enforced?

I worked on a great idea for my employer but never saw it through – can I roll it out when I open my own business?

This is an area you need to be very careful in. Generally, any inventions, works, designs, databases or names you have come up with during the course of working for a business and which is relevant to it cannot be used to set up a competing business, without prior authorisation, otherwise you are infringing your employer’s IP rights.

Remember too that if you have worked for a competing business, you are likely to have access to some of its confidential information until you return business property, hard and soft copies of documents, memory sticks and devices, and permanently delete documents on personal devices or email at the end of your employment. This is an important area to be mindful of because if you use this information in breach of your contract and this causes damage or might cause damage to the business you are exiting, it is likely that enforcement action will be commenced against you or your new business.

Okay I am happy my contract allows me to do this and I have taken steps on IP. How quickly can I get going?

You may be eager to get started. But when you can actually set up a new business is dependent on any notice period and/or gardening leave. These are usually set out in your contract of employment, and if your employer gives you notice it must be at least the minimum statutory notice period of one week per full year of service up to a maximum of 12 weeks.

Employers often have discretion within your employment contract to place you on garden leave, so that you remain away from the office and do not contact colleagues or customers, aside from when instructed to do so, but your other contractual obligations will continue to apply in full.

Garden leave is generally easier for employers to enforce than restrictive covenants and so is a useful tool for your employer to use to protect against the competitive threat you might pose.

>See also: How you can prevent employees stealing confidential data

While you may think garden leave is a useful time to develop your new competing business, you are still restricted by the terms of your contract and your employer will be monitoring your activities carefully to ensure you do not breach those obligations. If there is no contractual right to place you on garden leave, you may be able to argue that there has been a breach of contract and so the terms of your contract no longer bind you, but it is recommended you seek legal advice from an experienced employment solicitor first if you are hoping to run that argument.

Whilst you are still employed and bound by the terms of your contract of employment, you are only able to make acceptable preparatory steps so as not to depart from your obligations. As long as there are no express obligations preventing you from doing so, you can purchase an off-the-shelf company, arrange business premises, meet investors and other potential business contacts, take professional advice and prepare a business plan, as long as these things are done outside of your working hours whilst you are still employed and not using your current employer’s resources or contacts.

What if I am ‘taking’ others with me?

If two or more people leave a business at the same time to join another competing business, this is a team move. A team move might breach an explicit post-termination restriction in your employment contract prohibiting moving and working with another individual you worked with at your former employer. If this destabilises the workforce, particularly if you and/or the other individuals are influential within the business, this might be an enforceable restriction.

It may also constitute a breach of an implied obligation in your contract of employment if you have been discussing moving elsewhere with a current colleague, whilst you both still work for an employer, so that you can both move on to compete with that employer. Considering your own position and future prospects is likely to be seen as more reasonable than recruiting one or more colleagues to organise a competitive business whilst working for the same employer or shortly after having worked together.

>See also: Stealing clients: How to stop employees poaching your customers

Calum Covell is senior marketing manager for Harper James Solicitors, the law firm for entrepreneurs

The post Can my employer stop me from setting up a competing business? appeared first on Small Business UK.

The UK General Data Protection Regulations (UK GDPR) came into force on January 1 2021 and sets out the key principles, rights and obligations for processing data in the UK. It is almost entirely based on the EU GDPR (which applied in the UK before January 2021) and sits alongside the Data Protection Act 2018 (DPA).

With the plethora of initialisms, some small businesses are understandably overwhelmed. Some actively ignore what they deem to be an administrative burden, while others unknowingly stray into breach of data protection regulations. Regardless of your view of the UK GDPR, one thing is clear; overlooking it could have costly repercussions by way of hefty fines and reputational damage to your business.

The body in charge of enforcing data protection breaches in the UK is the Information Commissioner’s Office (ICO). Much of the enforcement action pursued by the ICO relates to aggressive direct marketing techniques, such as nuisance calls and emails. For example, ColourCoat Ltd, a home improvements business based in Hastings, was fined £130,000 by the ICO in June 2021 following a substantial amount of direct marketing calls.

Businesses should also be mindful of the Privacy and Electronic Communications Regulations (PECR). Whilst UK GDPR covers processing of personal data, PECR is designed to protect privacy and security of personal data when using electronic communications. PECR covers aspects of your business such as electronic marketing and the use of cookies on your website. It is therefore important that businesses are aware of your responsibilities in this regard also, although it is important to note that these regulations are currently under review.

However, the ICO’s enforcement action is not limited to the deliberate flouting of regulations. Mermaids, a charity supporting transgender youth, was fined on July 8 2021 for failing to keep the personal data of its users secure. In its report, the ICO found there to be a “negligent approach” towards data protection, with inadequate data protection policies and a lack of face-to-face data protection training. Despite Mermaids being a charity with just 18 employees, and the ICO acknowledging it took immediate action to mitigate the damage to data subjects as soon as they were made aware of the breach, Mermaids were handed a fine of £25,000.

This fine demonstrates the severe consequences that could await small businesses in breach of the UK GDPR, and SMEs should be aware the degree of culpability will be assessed when calculating monetary penalties. The good news is that because the UK GDPR largely replicates the EU GDPR, if your business was compliant with EU GDPR you should find you will already be largely compliant with UK GDPR. However, in light of the changes, a data audit or review is advisable to ensure continued compliance. With that in mind, let’s consider what can be done to ensure your business fulfils its data obligations.

>See also: 9 steps to GDPR compliance for your first business website

6 steps to ensure you’re UK GDPR compliant

Update policies and procedures

The individuals’ data your business uses must be informed through a privacy notice of the personal data types you hold relating to them; how their personal data is to be used; and for what purpose(s).

An internal-facing data protection policy (a privacy standard) should be implemented. It should set out principles and legal conditions you must satisfy when obtaining, handling, processing, transporting or storing personal data and provide for customers, client, suppliers and employee data. An updated policy will demonstrate how your organisation processes personal data and make employees aware of their obligations.

Businesses are required to review contracts with third parties where the processing of personal data is involved and ensure they’re updated with each parties’ obligations, whether as a data controller or data processor.

Educate your organisation

All employees need to be aware of their data regulation obligations. Keeping them trained on your new policies, notices and procedures will ensure they’re followed consistently and promptly. As demonstrated in Mermaid’s case, face-to-face training for employees is also good practice to ensure that your staff understand their obligations. In some organisations, a mandatory data protection officer (DPO) must be appointed for formulating and implementing strategies on data processing and keeping the organisation educated.  It is sensible to appoint someone to be responsible for data protection in your organisation (such as a data manager), even if a mandatory DPO appointment is not required. However, SMEs may not have capacity to make this appointment, due to lack of resources. If so, it’s worth outsourcing a legal data protection expert to ensure everyone knows their responsibilities.

Re-evaluate consents

The UK GDPR sets a high standard for consent. It must be explicit, freely given and unambiguous. Review your organisation’s consent mechanisms. In particular, make sure approval requires an affirmative “opt-in” action. This bans pre-ticked boxes as a legitimate form of giving consent, since no positive indication can be provided. It’s advisable to keep consent separate from other T&Cs and it shouldn’t be a precondition of signing up to a service. You must notify individuals about their right to withdraw consent, offering them easy ways to do so at any time.

If your existing consent mechanisms comply with the UK GDPR, you don’t necessarily need fresh consent but do review and consider whether fresh consent is appropriate, in particular if there has been a significant time lapse or there is a possibility that the purpose or scope of the processing for which consent was obtained has changed in any way.

>See also: GDPR: company campaigns that are ‘on brand’

The right to be forgotten

One rule under the UK GDPR is the right to have personal data erased (“the right to be forgotten”). Although the right only applies in certain circumstances, your organisation must have the capability and procedures to comply with such requests. You’ll have one month to respond substantively.

Subject access requests

Every individual has right of access to their data and you’ll need suitable procedures to deal with subject access requests. In the employment setting, access requests are often made in the context of ongoing disputes or tribunal claims. Requests are increasingly made by individual customers who are dissatisfied with customer service. An individual may genuinely wish to see what personal data is being processed and if it’s accurate. Others make requests because of the time, effort and expense they can cause, and to achieve a settlement. Regardless of motivations, be helpful, respond substantively within a month (as opposed to 30 days under the old legislation) and provide the data in a machine-readable format. Under the UK GDPR you aren’t allowed to charge a fee, save in limited circumstances.

Responding to data breaches

It is essential employees are fully trained, equipped to understand and recognise what constitutes a data breach. Your data manager or data protection officer will need specialist training around responding to a data breach.

Employee error is highly likely to cause security threats in SMEs and you will need to adopt internal procedures and require the same from third-party processors to deal with data breaches. Include how to identify a data breach, how it will be investigated and how to perform an assessment of the implications. Remember certain breaches must be notified to the information commissioner within 72 hours of when it was discovered, and the affected data subjects must be informed where there is a substantial risk of harm.

Small businesses should take actions to ensure their data is securely managed and those that comply with the UK GDPR will not only avoid potential fines and reputational damage, but will find their data handling, compliance processes and contractual relationships are robust, reliable and will keep their business secure for years to come.

Every care is taken in the preparation of our articles. However, no responsibility can be accepted to any person who acts on the basis of information contained in them alone. You are recommended to obtain specific advice in respect of individual cases.

Every care is taken in the preparation of our articles. However, no responsibility can be accepted to any person who acts on the basis of information contained in them alone. You are recommended to obtain specific advice in respect of individual cases.

Chris Cook is a partner and head of employment and data protection at SA Law

Further reading

GDPR and Brexit – 5 steps your small business can take

The post GDPR three years on: make sure your small business is compliant appeared first on Small Business UK.

Dismissing an employee is never an easy process, and many employers will avoid taking action against a problem or under-performing member of staff out of fear of a claim in the employment tribunal.

However, while the dismissal process may seem complicated and risky, for many businesses, failing to tackle problem employees can have huge repercussions for the future; and a failure to act risks damaging the business in both the short and longer term.

Wrongful and unfair dismissal

Wrongful dismissal is a dismissal in breach of the employee’s contract and applies where the employer has terminated employment without full notice. The value of a wrongful dismissal claim is usually limited to the pay and benefits the employee would have received during the notice period provided by the employment contract.

Unfair dismissal is where employment is terminated, and the employer did not have a fair reason for the dismissal. Alternatively, a dismissal may have been fair in theory, but the employer’s failure to follow the correct procedure renders it unfair as a result.

It is worthwhile noting that an individual will require two years of service before they are eligible to bring a claim in the employment tribunal for unfair dismissal. This period of service, know as the ‘qualifying period’ does not apply however to discrimination claims.

Employers will therefore need to be very clear about the reasons behind any dismissal process. They must ensure they are not directly or indirectly discriminating against the employee in question, or that the reasons behind any under-performance or misconduct relate to any of the protected characteristics within The Equality Act 2010, such as disability causing sickness absence.

There is no qualifying period for a wrongful dismissal claim.

What is fair?

A fair dismissal is one that is based upon one of five potentially fair reasons. These are: the individual’s conduct, their capability or qualifications for the job, redundancy, a statutory duty or restriction prohibiting the employment being continued or because of a substantial reason which justifies the dismissal.

See also: The Small Business guide to HR

In addition to the requirement of a potentially fair reason as a baseline, employers must also ensure that the dismissal process they follow is procedurally fair. This means that they must follow their disciplinary policy and the ACAS Code of Practice (which in practice is likely to be similar to the policy). Failure to follow the ACAS code can result in a 25 per cent uplift to any damages awarded to an unfairly dismissed individual.

“Employers must also ensure that the dismissal process they follow is procedurally fair”

Further, an employee should know the allegations against them, as well as that dismissal is a possible outcome; they should be allowed to make representations, be accompanied at the disciplinary and appeal hearings and be given a right of appeal.

The following are all examples of potentially fair reasons for dismissing an employee:

Conduct – Where the employee’s behaviour is seriously unacceptable, for example, repeated lateness or drunkenness at work.

Capability – Where the employee doesn’t have the right skills or aptitude to do the job or is frequently absent through ill-health.

You should always consider training to improve capabilities or moving an employee to a suitable alternative position, with their consent, before dismissal. Remember that is it unlawful for an employer to discriminate against a person because of a disability. You have a duty to make ‘reasonable adjustments’ to workplaces and working practices to make sure that employees with a disability are not at a substantial disadvantage compared to other people.

Legality – To avoid breaking the law, for example, where the loss of their driving licence means the taxi driver cannot drive legally.

Redundancy – For example, where there is insufficient work or an employer is closing down entirely.

Some other substantial reason – This is called the catch-all reason but it should be used carefully, as you have to show that the reason was ‘substantial’. A major company restructuring could be an example.

Remember of course that all of the above examples are not ‘fair’ reasons until the procedure has been followed and the allegations investigated and proven. Failure to follow the procedure, as noted above, is likely to render a potentially fair dismissal, procedurally unfair.

The maximum award for compensation for unfair dismissal is £89,493, or 52 weeks’ gross salary – whichever is the lower of the two. These limits apply for a dismissal on or after April 6 2021.

How to stay within the law

Employers must have detailed and up-to-date employment contracts in place, and need to show that they have followed the correct procedures laid out in these contracts fairly and competently.

In situations in which a dismissal is a potential outcome, they must be scrupulously careful in ensuring they follow all procedural steps. They may also want to consider taking external advice from either an employment solicitor or HR practitioner to guide them through the process, and act as a third party observer.

Employers who dismiss unilaterally, or without reference to the five potentially fair reasons outlined earlier put themselves at significant risk of tribunal claims. In any event, it is always sensible to take detailed legal advice on all matters that could result in the dismissal of an employee.

You are advised to take legal advice in respect of the particular case before dismissing any employee.

Simon Robinson is managing partner of RobinsonRalph.

The post How to avoid unfair dismissal claims appeared first on Small Business UK.

Changing the terms and conditions under which your employees work, which is essentially what you would be doing making changes to a company sickness policy, should be done with careful consideration.

Firstly, your approach is dependent upon whether your sickness policy is contractual or not.

If the policy is clearly non-contractual and reserves the right to be amended from time to time, then you are generally able to simply make the changes you want to make and make your staff aware of this.

>See also: Can I dismiss an employee for sending threatening text?

If the policy is contractual and therefore constitutes part of your employees’ terms and conditions, then you need to tread more carefully. Introducing changes to an employee’s terms and conditions requires agreement by both parties because unilateral changes are not permitted – this means that you cannot simply impose a change unless it is required by law, as was the case when the indoor smoking ban was introduced.

A consultation process is required during which all affected employees should be informed of the intended changes, with an explanation of the reason why the changes are required. This needn’t be done by way of individual meeting – a memo/email to all staff, or a collective gathering, should usually suffice. If your employees are represented, for example by a trade union, then these representatives should be consulted. You should then give the employees the opportunity to raise concerns with you about the changes, and you should listen to any alternative ideas they may have.

Of course, it may be that the changes you wish to make will prove beneficial to your employees, in which case you are very likely to be able to make the change, after consultation, with no problem.

It may be that after consultation, your employees will understand the need for the changes and, even if some initial resistance occurs, will agree in the end. If strong resistance remains, employers have the option to terminate the current contract and simultaneously offer employees a new contract containing the new terms. This is a last resort and should not be taken without specific legal advice because it carries the risk of an unfair dismissal claim at Employment Tribunal. 

Peter Done is managing director and founder of HR consultancy Peninsula

Further reading

What is the legal number of hours employees can have between shifts?

The post Sick leave – Making changes to company sickness policy appeared first on Small Business UK.

This employee has made a threat of physical violence and her conduct in sending a threatening text should be treated as an allegation of gross misconduct. Whilst the sanction for allegations of gross misconduct is summary dismissal it is important not to make any hasty decisions and ensure that you follow your disciplinary procedure. If you simply dismissed without following your disciplinary procedure then the dismissal may be deemed unfair because the employee has not been given the opportunity to respond to the allegations made against her.

>See also: Do I have to pay staff who are self-isolating?

You should consider suspending the employee in these circumstances due to the nature of the alleged conduct. It’s important not to jump to suspension as the only way to remove the employee from the situation – you could achieve the same effect by other means – but a threat of violence in such a threatening text may make actual suspension necessary. In order to support the notion that the behaviour could be gross misconduct, it would be appropriate for some type of measure in this regard to be taken.

>See also: Holiday entitlement for new employees

It is important that the text message is kept because it is evidence. You should also make sure that your approach is consistent with how the organisation has dealt with any similar incidents in the past.

It’s important that you follow up with the employee subsequent to your initial instruction. Telling an employee to leave and not to return could be seen as an instant dismissal, so make sure that you implement a disciplinary procedure so show that you had not, in that instance, dismissed the employee.

Peter Done is managing director and founder of HR consultancy Peninsula

Further reading

How to deal with sexual harassment in your small business

The post Can I dismiss an employee for sending threatening text? appeared first on Small Business UK.

Understanding the legal implications of purchase orders is important. After all, if faced with a client refusing to pay an invoice, or you receive an invoice for twice the amount stated on a purchase order (PO), you need to understand your position.

So, is a PO legally binding? And above and beyond the legal ramifications, are there other advantages to raising POs? Here, Paul Barnes, MD of MAP, an outsourced finance function for digital creative agencies, provides his purchase order insights.

Purchase orders are a legal contract

If you issue or receive a PO, it’s a legally binding document once accepted. In essence, it’s a contract between the buyer and the seller. As a supplier, if you raise a PO and send it to your customer, this is notifying them of their legal obligations to pay you the agreed amount. As a customer, you need to be aware that when you receive a PO, this is obliging you to pay the amount on the purchase order. If the amount is incorrect, this must be disputed immediately and a new PO issued. Failure to dispute a PO at the time of issuing will place you in a weak legal position.

POs are therefore extremely helpful in the payment collection process as it ensures a smooth transaction. After all, the customer will be unable to claim that they did not approve the service or goods if the supplier has evidence that a purchase order was received.

What needs to be on a purchase order?

Drafting a PO is straightforward. You just need to ensure that all the key information is included. This must include the date you’ve issued the PO; goods/services the customer wants to buy from you; the type and quantity of items ordered; the agreed price; payment terms; delivery costs and details; and any other terms and conditions. It’s also advisable to include a PO number which can be quoted on the invoice and in any correspondence with the supplier.

>See also: Purchase orders explained for a small business

Benefits of POs

POs are a very important from a legal perspective, however they also have a number of other benefits which shouldn’t be underestimated. These include:

Spend control – From the buyer’s perspective, POs provide an important spend control so that any purchases aren’t made outside of budget.

Easier reconciliation – The buying party can be assured that purchase invoices received reconcile with the ‘agreements’ stipulated in the purchase orders. Without this level of control, errors and disputes are more likely. And when the supplier can ‘match’ a purchase order and invoice together, this may well speed up payment processing.

Outgoings can be forecast early on – POs enable the buyer to forecast their outgoings at the earliest possible stage – when the purchase order is first created and approved – rather than waiting for the purchase invoice to be received into the accounting system.

Improved financial reporting – As you will be less reliant on the supplier to provide an invoice in order for the cost to ‘make it into month end’, you can improve your financial reporting. By accruing for outgoings based on purchase orders, you have a far more accurate picture of your financial position.

The purchase order process

So what happens when a purchase order is raised and leaves your outbox? Here are the main steps of purchase order processing:

1. A PO is raised after agreeing a price and sent to the purchasing company
2. The purchaser receives the PO and approves it (it then becomes legally binding)
3. The goods/services are provided by the supplier
4. The supplier raises an invoice with reference to the PO number
5. The invoice and PO are matched
6. The invoice is approved and processed
7. The invoice gets paid
8. The PO is closed

Improve your chances of getting paid

Although purchase orders are key to getting paid, they are just one side of the payment collection process. Getting paid on time also depends on the invoice and your cash collection process. To improve your chances of getting paid without issue, it’s wise to do the following:

• Ensure everything the customer requires is on the invoice. Include the PO number as standard as well as a description of your product/service and if necessary, who authorised the purchase. Ask your customer whether anything in particular needs to be on the invoice so that the processing isn’t stalled.
• Email the customer a week or two before the invoice is due saying “Any issues with this invoice getting paid on time?” This then provides the ideal opportunity for them to dispute it before it’s due.
• Have a consistent invoice chasing process in place so that you prevent any invoices from getting severely overdue. An automated invoice chasing solution is a great investment as some customers will repeatedly pay late (and only pay after repeated badgering!)
• State you will add a fixed fee and interest on the invoice (The Late Payment of Commercial Debts (Interest) Act 1998)if it is not paid within a certain time frame. This statutory legislation will take precedence and can be enforced so long as you don’t have any late payment terms in your contract.

>See also: How to deal with late payment

Be purchase order savvy

Purchase orders are vital documents for enabling smooth transactions. As they’re legally binding once agreed, both the supplier and buyer must stand by this contract. POs are also really useful documents in other ways, ensuring spend stays within budget and helping with early forecasting and reporting. As a small business it’s important to get into the habit of raising and requesting POs as without them, payment disputes and cash flow issues are far more likely.

Paul Barnes is the managing director of MAP.

Read more

Purchase Order Best Practices and Processes

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UPDATED: When purchasing an investment property one of the first considerations is whether it should be held personally or within a company wrapper.

A company is a separate legal identity to its owners; therefore, the asset belongs to the company rather than the shareholders or directors. Rental receipts and proceeds from subsequent disposals belong to the company and are subject to corporation tax at the current rate is 19 per cent. Profits can be extracted via salary or dividends both of which are subject to income tax and national insurance at varying rates depending on the level of income received by an individual within a tax year.

The key question to ask is “What is your intention for the profits?”

See also: Landlord tax relief changes: Why property owners should consider a limited company

If the intention is to reinvest proceeds or to build up cash reserves, a corporate wrapper may be preferential because if the profits are not required to be extracted then they are not subject to income tax. If the property is held in personal names those profits are taxed on receipt.

Individuals used to be able to claim interest paid on buy-to-let mortgages as a business expense to directly reduce their taxable profits. This relief has been phased out over the past three years, and from April 6 2020 individuals will only receive relief in the form of a tax credit up to their basic rate band.

However, if significant rental profits are received by an individual, they should consider a corporate structure. Significant profits are those above £100,000 per annum as an individual’s personal allowance is restricted at this level and profits are charge to income tax at 40 per cent or 50 per cent above £150,000.

If significant rental profits of over £100,000 are received by an individual they should consider a corporate structure. Above this profit level, the income tax rate is 40 per cent or 45 per cent above £150,000, and individual’s personal allowance is restricted.

Can a director occupy company property?

As mentioned above, if profits are reinvested rather than extracted, they are not subject to income tax and national insurance. If a company purchases a property for a director or shareholder to occupy, they are receiving a benefit.

To disincentivise shareholders and directors from using company reserves to buy personal property and thereby avoid paying income tax to HMRC, the law seeks to penalise a company in various ways.

If a director, or a member of an employee’s or director’s family or household, is provided with living accommodation, a benefit in kind can arise both in respect of the accommodation itself and the associated benefits including utilities, furniture, and other services met by the company.

If the property’s value exceeds £500,000 it falls within a special regime for Stamp Duty Land Tax (“SDLT”) and Annual Tax on Enveloped Dwellings (“ATED”).

Stamp Duty Land Tax

If the property is to be occupied within the first three years following completion by a non-qualifying individual it will be subject to a 15 per cent flat rate charge of SDLT at purchase.

A non-qualifying individual is anyone who is connected to the company. This includes directors, shareholders and those connected to them. For example, their family, spouses or civil partners, their spouses or civil partners family and others. The charge is applied even if a market value rent is to be paid.

Annual Tax on Enveloped Dwellings

Closely related to the above is ATED which is an annual charge based on the value of the property. ATED does not expire after three years like SDLT, it is chargeable until a property is sold and it can be extremely costly.

For example, if the property is valued at £1m the ATED charge for 2021/22 is £7,500. To complicate things further ATED is chargeable a year in advance unlike the other taxes and the regime imposes significant penalties for non-compliance.

Does it matter if property is rented or developed for sale?

A property rental business is an investment activity whereas redeveloping a property for sale is a trade. This distinction is key whether a property is held personally or by a company as the activities are subject to different tax regimes.

Residential property rental profits received by individuals are subject to Income Tax, with CGT payable at 18 per cent or 28 per cent when the property is sold.

Investment activities by individuals are subject to income tax and NIC and CGT at 18 per cent or 28 per cent on disposal.

Trading activities can benefit from a full deduction of mortgage interest when calculating trading profits and proceeds are subject to income tax and NIC.

If a company’s intention is investment, the property will be included at market value as investment property within the financial statements. Profits are chargeable to corporation tax and on sale a chargeable gain is calculated. Unlike above, the gain is also chargeable to corporation tax, but certain costs will be allocated against annual profits and certain capital costs will be allocated to the cost of the property until sale. This means that some expenditure will not receive tax relief until sale.

If a property is developed for sale it will be shown at cost as stock within the financial statements. Profits and sale proceeds are subject to corporation tax. A property developer may need to consider other regimes as a result of its activities.

If sub-contractors are engaged to develop the property, the works will be within the scope of Construction Industry Scheme (“CIS”). CIS requires monthly returns and additional compliance, please ensure you talk to your accountant or tax adviser before undertaking any works.

With tax intention is key, if it is subsequently decided that a property will be kept as an investment rather than sold a company could be subject to a “dry” tax charge when moving it from cost in stock to market value in investment property. It is known as a dry tax charge as tax is due although no proceeds are received.

Natasha Heron is a tax manager specialising in property taxes at accountants Hillier Hopkins. She can be reached by email: natasha.heron@hhllp.co.uk.

Further reading

A guide to small business property tax

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