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Becoming an Employer

Contents
RecruitmentWhen you take on a new employeePaperworkWork EligibilityFull-time and Part-time WorkInductionsEmploying Directors & ManagersPay & PensionsMaking a Job OfferManaging your StaffReferencesImproving Staff Performance
Recruitment
It is important that you recruit the right people into any business. You should learn how to advertise the job role well, how to interview candidates and how to shortlist them, as well as how to officially offer the job. The Business Link website provides information as how best to do this but ensure that you tailor all recruitment policies to your own specific business, for example, you may not need to have such a rigorous recruitment process for employing a Saturday girl as you would do somebody to manage the beautician side to your salon.

There is important legislation associated with recruiting members of staff. For example, as an employer you must ensure that your employees are eligible to work in the UK by making sure they have work permits, and that if foreign nationals, they are able to work in the UK and you must adhere to Acts which include Sexual Discrimination, Disability Discrimination, Age Discrimination, to name a few.

It is important to assess the likely benefits other types of workers can bring to your business such as employing people part time. You can also inform yourself on the advantages of employing a more diverse workforce in order to increase your competitiveness as this can enable you to reach new markets and can improve the content of your goods and service, for example, you could look to developing your basic salon into a unisex one and provide the service of nail and feet manicures or a whole beauty salon additionally. Family members and voluntary workers, like any other type of worker, can be a valuable asset to any business, but there are risks associated and different approaches to how they are employed must be considered. For example, to ensure that there is no bias shown to a member of the family over an externally recruited member of staff, and to make voluntary workers feel welcome through recognition since there will be an absence of pay appreciation.

Once recruited to a position, it is a good idea to get new workers started via the use of an induction programme, for example. This enables you to lay down where you stand as the employer and allows them to ask any questions. Written information should be given as a means of reference for the employee and if anything was to change, they should be notified with reference to this, in a written manner also. An induction period gives the chance for any ‘hurdles’ to be overcome and the ground set as it means to be carried on. It will also hopefully give the new employee some motivation as they begin to feel incorporated into the business and they gain some knowledge of what they will be doing as opposed to being thrown straight into it.

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Paperwork
It is crucial when you own your own business that you have all the relevant documentation that is required to make all operations run smoothly. These include the following:

• A written statement of employment

The written statement must be completed as one full document although the employee can receive parts separately, as long as they are all received within two months of the start date. There should be a ‘principal statement’ that will come in the form of a single document. This should include the following points.

• The company name, and the trading name if these are different.
• The company address (and where the employee works if this is - different)
• The employee’s name
• The date employment began
• If the employment has been continuous, what was the original starting date
• The salary, how it is calculated, and when it is paid
• The hours the employee works
• The holiday entitlement
• The job title and a brief description.

• The employment contract

A contract must be issued either in a written, oral or implied manner, or any mixture of the 3. Even if a written contract is not provided, a written statement of employment must be which can provide evidence of the terms and conditions laid out in a contract.

As an employer, you have a legal obligation to issue written statements of employment within two months of their employment commencing. This is not a contract but provides evidence if there are any disputes, as the contract is just as legally binding if it is oral or implied as well as being written, but obviously it is harder to prove unless it is in the form of the latter. For any changes that are made to the written statement, the employee must be informed in writing within one month of the changes being made and their consent must be gained. If you are to provide a written contract, ensure that it is clear this prevails all other previous correspondence that may have been orally agreed or implied, and ensure it is updated from then onwards if there are to be any changes. If there are to be any changes, then it is essential that you get the permission of the employee regardless of how the contract is stated. If you fail to gain their permission they can sue for breach of contract or claim constructive dismissal by resigning.

• Employment status

There are 5 different categories in which people can be employed under. These are self-employed, a worker, an employee, a director or a contractor. For each category there are different laws that have to be abided to, and different tax and National Insurance contributions that must be made.

• Make a job offer and pre-employment checks

This includes procedures such as checking health records where appropriate and references, and if necessary withdrawing job offers.

• Changes to an employees terms of employment

A contract may need to be changed for a number of reasons; changes in the economic environment or because of structural changes within a business. It may be possible that an employee wishes to change their contract to gain better pay or working conditions, for example. Consultation whatever the circumstances is imperative, and where possible in writing.

• Set yourself up as an employer

Ensure that you register as an employer.

If this is your first business venture, you may need to register as an employer with HM Revenue and Customs as you look to employ people. You can do this online following the link or you can call them on 0845 6070143 and they will also provide you with information as to how to register.

• Keeping the right staff records

It is crucial that the correct documentation is kept on employees for business and legal purposes. Keeping the relevant records can help to run your business more efficiently.

• Complying with data protection legislation

It is essential that your business complies with the Data Protection Act of 1998 if you are processing personal information.


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Full-time and part-time work
You need to consider when taking on staff whether it will be on a full or part-time basis. It very much depends on the nature of how your salon will operate, and would probably be more beneficial if you had a number of hairdressers employed on a full-time basis in order for them to build up a good rapport with your client base. If you are hiring as well, this may mean that they bring their clients with them, increasing your customer base. Regardless of how they are employed, you have responsibilities to them.

• All employees should have a written contract of employment.
• They must receive an itemised pay statement.
• The environment in which they work in has to be safe and secure.
• Your insurance policy must insure you against any claim employees may make that has come about as a result of working for you, for example, an illness.
• You must register as an employer with the HMRC
• Your employees must be paid at least the National Minimum Wage and gain the minimum amount of paid holiday and breaks.
• In the event of absence from work for more than three days due to illness, they are entitled to receive Statutory Sick Pay.
• Your staff are entitled to maternity, paternity and adoption leave during the first five years of their child’s life. If any of your employees have children that are under six years of age, you should consider seriously any request to use flexi-time.
• At all costs, discrimination must be avoided and all your employees treated fairly.

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Employing Directors and Managers
If your company is a Limited one, then you must have at least one director. The director should be appointed by your shareholders as the person that they believe can run the company best. It is essential that the correct director is appointed as their responsibilities, for example, employment law and health and safety, are crucial to the success of the business.

A manager will usually be employed as someone to take a little bit of the responsibility away from you while you concentrate on building the business. Ensure that they are someone you trust, or has a lot of experience as their role will additionally contribute significantly to the success of the business.

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Making a job offer
Once you have recruited your employee/employees, and made them a job offer, it is important that you discuss the terms of employment. Make sure that you send the newly appointed employee(s) a letter which details all that you have discussed and get them to return to you a signed copy, just in case of any disputes. This should include the job title, the person’s name, the date the employment will start, any conditions that there are, the date the employment commences, whether there is a probationary period and if there are any terms of employment.

Ensure that you check every potential employee’s right to work in the UK and ensure you keep copies of this documentation. If you do not check this information, you can be fined or convicted if they are not eligible to work in the UK.

You must ensure that you are not racist when employing somebody. This means that your decision for employing someone cannot be based on their appearance, name, ethnicity, religion or accent. If you are discovered to be operating your recruitment process in this way, you can be prosecuted under the Race Relations Act 1976.

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References
References are the ideal way, if you do not know your potential employee, to gain an insight into their past work experience and the skills and knowledge they gained and from someone other than the potential employee. They can be requested at any point during the recruitment process, although usually are done so as one of the final stages.

Written References
You can write to the previous employer and include a form. Things to ask are how long was the candidate employed, what their main duties and responsibilities were, why they left the company, what their character was like, for example, honest, reliable etc., and if there are any reasons why they should not be employed.

Telephone References
It is usually best to write to the previous employer so that they can prepare to give you the information you require. This is just good manners as they should hopefully then be able to give the most accurate information without them having to think on the spot.

Obviously you should use references with caution, they are not always 100% genuine, you do not know what the relationship was like between the previous employer and employee, they could have been best friends or related, and so the referee is unlikely so say anything that may hinder their progression. Ensure that you are comfortable with the prospective employee as a person and the rapport you build and use references to confirm this.

Checking Qualifications
When a qualification is essential to a role, it is in your best interests to check that the candidate is as experienced as stated. This can be done at any stage in the recruitment process, but it may beneficial for you to say in job advertisement that offers will be made once qualifications (and you may want to mention references here) have been checked. This may just deter some people who apply and ‘exaggerate the truth’ on their CV’s in order to get positions, and therefore save you some time if indeed this was to happen. Use the following links to check for the relevant qualifications.

Pre-Employment checks
Only carry out any pre-employment checks that are essential and need to be done for a specific reason, and ensure that the employee/potential employee knows what checks you are going to be carrying out on them and how they will be done. Make sure that you only use sources to carry out these checks that are reputable and reliable, and if they provide any adverse information, then make sure that you give the employee/potential employee a chance to explain this and make your decision from there.

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When you take on a new employee
HRMC has compiled two packs filled with information aimed at prospective employers. There is one for registration purposes and one for taking on new employees.
Below is a checklist for things you should make sure you have covered before taking on an employee, although do note this list is not exhaustive.

• Ensure you are registered to employ people with the HMRC (see above taking on staff). If you are not registered then make certain you do so, but if you are then make sure you inform them that you have taken on a member of staff.
• Get hold of the employee’s P45 and National Insurance number. If you cannot get a P45 then fill out a P46. Make sure this information is entered into the accounts and a payroll is set up.
• Plan their induction period well. They must be aware of your company policy and procedures and be given an induction on health and safety issues to ensure that they comply. Ensure that they have an adequate workstation (if appropriate) available for them when they begin. Include in your induction an introduction to your other employees and allow them time to get to become acquainted. Make sure that as part of the induction, ongoing support is provided, and training if applicable, and the new employee knows where to get this from.
• You are legally obliged to provide an employee with their contract of employment within two months of them starting work with you, although it is applicable from day one.
• Make sure you are covered for employer’s liability insurance if you need it.

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Ensure that your employees are eligible to work in the UK


You should check each employee’s eligibility to be employed in the UK, regardless of their racial background. Failure to check this out could lead to you being prosecuted or paying a fine of up to £5000 per employee, if it is discovered that a member of your staff is working in the UK illegally. Ensure that at all stages you are not discriminating against anyone in any way.

Make sure you check and keep a copy of all the relevant documentation that confirms a person’s right to work in the UK. If you have obtained the correct documents for your records then you will have a defence if any legal case is brought about. There are two lists which contain different types of documentation. These lists can be found on the Home Office website. You should ask to see (and keep a copy of) either, one original document from list one, or, two original documents from list two. It is your responsibility to take the appropriate steps to ensure as far as possible that the person you are employing is the holder of the documents they provide you with.

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Carry out an Induction


Although there is no legal obligation to do so, carrying out an induction will help your employee understand more about your company and enable them to establish themselves more quickly within their job role. If a good induction is conducted then the chances are there will be less mistakes made in the long run as the employee will gain a good foundation, as opposed to possibly learning on the job where they can pick up other people’s bad habits!

You should use this time to persuade them as well that they want to work for your business. Good induction programmes lead to less confusion on the part of the employee. Failure to provide them with a good one can lead to decreased morale as if in a few weeks or months in they don’t understand something and believe it to be a basic point, they may fear asking for help when really they had never been told about it in the first place.

Invest time into developing induction programmes, as if you get them right first time for the employee, you can rest assured that you have done a good job. Make a checklist of things to be included and prepare a pack for them to take away if you feel this is necessary. Make sure there is someone to look after them on their first day, ideally their line manager so they feel there is someone always on hand for them to ask questions to and that they won’t be disturbing any of the other colleagues. Ensure that they feel they can ask whatever questions they want; it is nerve wracking enough on your first day at work so make sure they don’t feel like a burden as well.

The induction period is a good time to present the new employee with their written statement (if the first part is completed) and to discuss it. Make sure you arrange a follow-up meeting from this so the new employee can discuss anything with you they may have come across on their own.

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Pay and Pensions
Paying your staff

If you are employing people in your business you have to decide what your rates of pay will be to ensure that you keep your staff happy and motivated. Use pay rate systems and ensure you review them, as well as benchmarking your wage rates with other businesses to ensure that you stay competitive.

As an employer it is essential that you understand how legislation affects the National Minimum Wage and Statutory Sick Pay as there are procedures that need to be followed as well as paperwork that should be documented. When paying wages you as an employer have obligations to fulfil for example, when paying maternity and paternity pay and holiday pay.

It is vital as well as an employer to understand what PAYE is (Pay As You Earn) and to be aware of the common errors that are made associated with filling in the relevant forms. Also detailed here are what the key principles of National Insurance are, for example, the contribution types you can pay and how these differ for employees and employers and for the self employed.

Pension schemes

As a business it is optional as to whether you run a pension scheme, although you may be obliged to offer one through a third party depending on your size. As an employer you should know your legal obligations and what type of pension scheme you should use, if any.

Running a pension scheme enables you effectively to offer employees tax-efficient benefits at a relatively little cost to you, allowing you to recruit or retain the best employees. Topics covered on the Business Link website include regulating the schemes, the responsibility of the employer and trustees, and the tax advantages that come with operating pension schemes. If you are self employed, you cannot join an employer’s pension scheme and do not qualify for the additional State Pension. You can find out here information about how personal pensions work, state pensions, stakeholder pensions and other tax-efficient savings, as well as lots more. Choosing the right pension scheme can be challenging, and it is hard to know which one is right for you or your employees. This section provides information about choosing the right schemes, for example, an occupational pension scheme, a stakeholder pension scheme or a group pension scheme. Information is provided about schemes that are approved and unapproved and you have the ability to compare schemes that are out there, as well as guidance on things that should be considered.

Information can be accessed from the Pension Service website. This details all information an employer will need to know relating to pensions and how the employee is or is not covered.

Sickness, sick pay and injury

Terms and conditions with reference to these, how much sick pay is and how it is calculated.

Period of Employment

Whether it is temporary or permanent, and how long the period of employment is for or if it is fixed, and how often, if at all, the contract will come up for review.

Notice period

How much notice needs to be given from both parties. There is a legal requirement, although this can depend on what is incorporated into the employment contract as employers may wish to receive more notice. Legally, employers must give one week’s notice if the employee has been employed continuously for more than one month but less than two years. If the employee has been employed continuously for over two years, two weeks notice must be given and one extra week for each year over that, up to 12 weeks. An employee, legally, must give one week’s notice if they have been continuously employed for over one month.

Dismissals, redundancies and other exits

Two things should be included in the written statement that should have already been provided to your employee. They are the names of the people who deal with grievances and with disciplinary procedures and dismissals, and how applications for these should be made. You must ensure that any disciplinary rules and procedures you have, and what an employee needs to do if they are not satisfied with an outcome, is easily accessible information to the employee, for example, if it is not incorporated into the written statement then it must appear in the company handbook which all employees have easy access to. If they win a dispute and it is discovered that an employee has not been issued with a written statement then you can be forced to pay out.

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Managing your staff
Setting the rules

You should ensure that you have procedures in place so that all the employees are aware of the employment policies for your business. These include working hours, disciplinary procedures, training and performance management, benefits and rewards, equality and health and safety policies. Operating clear policies will make certain that you comply with the law and they prevent potential risks that may arise. The policies that are mentioned provide a minimum legal standard which should be enforced to comply with best practice. Having such policies in place will also set a precedent for dealing with all issues fairly and consistently.

It is important also that there are procedures in place for any employees who are found to be under the influence of drugs and alcohol whilst at work. As well as this having a harmful effect on any individual involved, it can also impede strongly on the image of your business, not to mention the dangers posed to fellow employees and customers. Policies should be drawn up by any employer to coincide with the Health and Safety at Work Act 1974. This should also include information about your company policy on smoking.

You should try to use monitoring systems wherever possible to make sure that your staff are being productive and that their quality of work is to the set standard. This can be quite easy in a salon as you can often see the results and depend on your customers to tell you if they are dissatisfied with a service they have received. But it is worth bearing in mind that as opposed to speaking up, some customers may visit you once, have a bad experience and never return. It is therefore in your best interests to ensure you have staff that listen well to their customers and give them what they want or advise in the best possible way.

Working time and time off

A good business will have measures in place to deal effectively with staff absences and sickness. There should be ways in place that enable you to measure the levels and try to identify reasons that contribute towards absence. Absences that are not planned for can affect motivation and productivity, and most importantly, profitability. Look into how you can implement procedures to hopefully control absence levels within your business, as well as how it can be managed as a disciplinary issue.

As a business you should be aware of how much time off work an employee is legally entitled to. There are lots of different arrangements that need to be made for full-time staff and part-time staff, whether the leave is statutory or discretionary and whether it is paid or unpaid. Different legislation applies to young people still at school and to those who are undergoing training for their jobs or being made redundant. There are parental commitments that people have and also emergencies that arise, as well as public duties that must be served. You should make sure that you are in line with the law regarding these issues. There are regulations in place about working hours in a week and break entitlements. This includes how many hours can be worked legally without a break and how many hours are legal to be worked in any working week. It is explained here how these rules may differ for younger workers and it gives advice on how to manage your employee’s hours also. Under the Working Time Regulations 1998, most workers are entitled to annual leave or paid holidays. You should be aware therefore of how much holiday you can give your staff.

When your employees are required to work overtime, it usually demonstrates that your business is dealing with changes in demand or with labour shortages. Employees must agree to work overtime, and there are quite a few legal and management issues that should be addressed. These include the existence of contracts, health and safety issues and the alternatives to it.

Inevitably as a business you will at some point be faced with an employee either having to take maternity or paternity leave. There are numerous legal matters associated with this. It is important to realise that as an employer who is supportive towards this, you can reap many benefits which include retaining experienced staff, increasing morale and reducing absenteeism and increasing productivity as your employees will value you as a good employer. The subject of adoption should also be looked into and what your employee’s rights are if they decide to adopt a child. You should seek advice of how to manage expectant mothers at work

Flexible working can bring many benefits to a business, for example, it can improve staff efficiency as they have more free time to fit in other activities, therefore improving their work-life balance. It may enable you to retain these members of staff for longer, resulting in you being able to offer a better service to your customers for more of the time.

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Improving staff performance
Skills and training

As an employer, it is important to understand that your staff may want to develop themselves and it would be good for your business if you favoured personal development and offered training to those employees who want it and /or require it. Read about how you can come up with good ideas and advice of how to offer training, for example, are you equipped to offer it in house? And how can you tailor the needs of your employees to fit in line with your business to make it even more successful. You may decide to enter a niche in the market, for example, offer hair extensions or become specialised in afro-Caribbean hair, and to do this you will need to ensure all your staff are trained and have some expertise and knowledge in the area. Try to develop your management as well, so hopefully as you expand as a business, you will want to be able to create a team that consists of different skills that enable the business to run effectively and efficiently.

Motivation

It is important and very favourable for your business if you as an employer can retain your staff by keeping them well motivated and enthusiastic in the workplace. There are several ways in which you can do this and some are mentioned below. Motivation can have a high impact on staff turnover and it is important that this is controlled as it poses a major threat to your business if it becomes unmanageable. There are many other factors contributing towards turnover and these are discussed, as well as a way of how you can measure the levels in your business.

• In order to get the best out of your employees, you could implement a staff incentives scheme in order to reward the performance and productivity of your staff and get the best out of them. Different types of schemes can be used and they do not have to be costly. Research shows that employees are just as well motivated by fun schemes that are not a financial burden on the business as they see the use of the schemes as recognition in itself.

• Use Appraisals to manage performance. This enables clear objectives to be set and so there are no illusions as to what the targets are for each employee to reach. This also enables each employee to have their own appraisal criteria dependent on what level they are at in the business. Having an appraisal system in place also gives employees the chance to have their say and it allows them to identify their strengths and development areas and put in place action plans to resolve these.

• A good way to improve motivation is give your employees a stake in the business by setting up an employee share scheme. Look into how to choose the best one for your business after considering the views of HM Revenue and Customs schemes and taxed employee share schemes.

• Meeting the need for a strong work-life balance can really benefit your business. It allows employees to feel they have time to respond to other responsibilities in their lives and not just have hours after work. By recognising this, employers give themselves an advantage over any competition as this is increasingly what employees are looking for as opposed to a more traditional clocking on and off system. Enabling your employees to feel more in control of their working lives can lead to increased productivity and lower absenteeism.

• A good communication channel is critical to the success of your business. As you employee people it is vital that you listen to them; their ideas and their views. This makes you an understanding and involving employer and provides tangible benefits to the business as employee involvement and empowerment can have a direct affect on productivity

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