· 5 min read · Features

The employment law life cycle


Employment law can baffle many SMEs. Here's what you need to consider at each stage

  • Start-up


Consider the type of employment contract you want to offer. When work is for a finite period or sporadic, consideration should be given to atypical working arrangements such as self-employed contractors, fixed-term contracts or casual or zero-hours agreements. It would be a mistake to recruit beyond the short to medium term needs of the business since this could lead to costly overstaffing or redundancies, so ensure hiring is on suitable terms and provides flexibility. Consider pay levels (always complying with the national minimum wage) and costs of any benefits. Consider also whether to apply a probationary period to the employment.

The recruitment process must be conducted fairly, from advertising for the vacancy right through to interviews and selections. This means avoiding any discrimination on the grounds of age, race, sex, marital status, disability, sexual orientation or religious belief. For example, words such as “youthful”, “fit” and “energetic” should be avoided in recruitment materials.

You will need to check any applicant has the right to work in the UK, but this must be done consistently, avoiding issues with discrimination on the ground of race.

Contractual documentation

Once an employee has started work an employment contract will be in place. A verbal agreement is sufficient, but it is strongly recommended that employment contracts are put into writing. This avoids uncertainty and later disagreements, and allows the employer to comply with its legal obligation to provide a written statement of the main terms. This statement must contain details such as remuneration, hours and holiday entitlement, and must be provided to the employee within two calendar months of starting work. Failure to provide this entitles the employee to bring a tribunal claim for compensation of up to four weeks’ pay.

  • Growth


As the business becomes more established and managers are clearer on what is expected of employees, performance issues may arise. This is particularly the case where there are increasing demands on employees due to new procedures or practices or simply because the employee has failed to keep up with the demands of the role.

An employer will be expected to have warned the employee of any performance concerns and given them an adequate chance to improve and access to training and development. It is likely that a performance management procedure for a long-serving employee will involve more detail than one for a short-serving employee where it soon becomes obvious that they are unsuitable for the role, particularly those on probation.

  • Expansion

When times are good or an opportunity presents itself businesses, look to rapid growth and expansion above normal organic growth.

TUPE on acquisitions

If expansion involves taking over a business a set of regulations known as TUPE – Transfer of Undertakings (Protection of Employment) – applies for the new employees. Continuity of employment is maintained and employees who transfer to your business will have a right to continue working on their existing employment terms and the right not to be unfairly dismissed. Before the date of the transfer the employer must carry out a consultation with the transferring employees and you will be required to provide information to the existing employer to enable it to do this.

  • Downturn


Before considering more drastic measures such as redundancies, explore the options. Not only could this avoid the need for a costly and unsettling redundancy programme, it is also essential as part of a fair redundancy to show that options were considered.

Common examples of cost-cutting measures include redeploying staff into other areas; reducing or stopping overtime; offering career breaks; pay cuts or freezes or reducing hours. Any methods of cost-cutting that involve changing terms and conditions (such as a pay cut or reducing hours) will need to be properly consulted upon and legal advice should always be sought.

Lay-off or short-time working

Lay-off and short-time working are useful methods of coping with a downturn. These allow the employer to provide no work to an employee for a week or part of a week. The employee is entitled to a statutory guarantee payment during the period and may in some cases claim a redundancy has taken place if the situation continues for a certain length of time.

It is not possible to use lay-off or short-time working without an express contractual right. If you want to create this as a new right it will involve changing terms and conditions and consultation will be necessary.


Redundancy is a potentially fair reason to dismiss an employee provided a genuine redundancy situation exists and a fair consultation and selection process is followed. Failure to do this can lead to claims for unfair dismissal.

Dismissed employees will be entitled to a statutory redundancy payment and may be entitled to a contractual enhanced redundancy payment depending on the terms of their contract and, in some instances, custom and practice of their employer. The statutory redundancy payment is calculated by reference to a formula that takes into account the length of service, employee age and weekly pay as at the date of dismissal.

  • Exit

You may want to cash in on the business or call it quits. A closedown will usually result in redundancies. Special rules may apply if the closure is due to insolvency.

TUPE on sale

If you are selling all or part of your business you need to be aware that TUPE regulations may apply and obligations will be placed on you. These include providing specific information and consulting your employees in advance of the transfer and also providing details known as employee liability information to the person acquiring the business to whom the employment contracts of your employees will transfer.

  • Any stage of the life cycle

Certain events can occur at any stage of the business life cycle and are unpredictable and often costly.

Disciplinary issues

A written disciplinary policy should notify employees of the rules they are expected to adhere to (such as following management instructions, complying with health and safety rules) and the obligations placed on them (reporting accidents, sickness absence reporting). This has a deterrent effect and enables a business to take disciplinary action fairly. Procedures should include an adequate investigation, appropriate decision-makers, the right for an employee to be accompanied to hearings and the right to appeal.

Grievance issues

Employees have a legal right to raise grievances. When these are raised in writing these must be considered under a fair process. Grievances can range from employment terms to allegations of sexual harassment, racism or bullying. Procedures should include an adequate investigation procedure, appropriate decision-makers, the right to be accompanied to hearings and the right to appeal.

Sickness absence and ill-health

Persistent short-term absence may be a ground for disciplinary action as long as caution is always exercised when there is a possibility of an underlying disability. Long-term absence may be a ground for dismissal on the basis of capability/ill-health if medical information is obtained before any decision is made and a fair procedure is followed.

An employee with ill-health may not necessarily be absent from work and this presents its own challenges if there are health and safety implications of them working or if you feel they should not be working because of the risk it poses to the employee or others. If an employee has a disability you are obliged to consider any reasonable adjustments to allow them to continue working, such as altering their hours or duties.

Family-related leave

All employers need to be aware of employment rights of employees regarding maternity, adoption and paternity leave (and pay), the right to request flexible working, parental leave and time off in emergencies.

Tribunal claims

The number of tribunal claims submitted is expected to decrease because claimants are now required to pay fees when they lodge one. However, the receipt of a claim is still something smaller employers dread in relation to costs, time and employee morale. Once a claim is submitted you must comply with the tribunal’s deadlines and directions. In some cases it might be best to try to settle a claim for a financial payment before the hearing.

Peter Byrne is managing director of ESP, which provides HR Legal Service