This article provides an overview of HR compliance in the UK for small and medium-sized businesses. It covers key legal requirements and practical steps to ensure your business meets all essential employment regulations, helping you to avoid costly mistakes and protect your company.
What is HR compliance?
HR compliance means complying with statutory and contractual requirements with respect to engaging employee, workers or other staff. The objective of HR compliance is to minimise regulatory and legal risks. Failure to do so could result in costly Employment Tribunal claims, or penalties and fines from other regulatory bodies, such as HMRC and the Home Office.
There are 4 types of HR compliance:
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Statutory compliance:
Implementing and adhering to government legislation with regards to employment and the workplace, e.g. minimum wage, holiday entitlement, unfair dismissal, family leave and entitlements.
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Regulatory compliance:
Following the established rules of a specific regulating body, e.g. the HSE.
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Contractual compliance:
Ensuring all parties fulfil their obligations under a contract, e.g. employee contracts or contracts with external partners.
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Union Law compliance:
Important for organisations dealing with unionised workers e.g. Trade Unions etc.
The responsibility for HR compliance predominantly lies with the HR function, if the organisation has one, but should in any event be shared collectively with managers and employees.
Achieving HR compliance
We have listed below some of the key areas to focus on when it comes to ensuring your organisation stays on top of its legal obligations.
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Right to Work (RTW) Checks
To ensure an individual is legally authorised to work in the UK, a RTW check must be completed before they start work. This will ensure that the employer has a ‘statutory excuse’ if it is later found that an employee is working illegally, preventing significant financial and other penalties.
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Contracts & Documentation
Contracts of employment/offer letters should contain a statement of the principal terms of employment as required under the Employment Rights Act 1996 and should be issued on or before the first day of work. Failure to provide this could result in an award of up to four weeks’ pay if the employee later brings an Employment Tribunal claim and includes the failure to provide such particulars as part of their claim. Perhaps even more importantly, providing a clear contract of employment can prevent costly disputes regarding what contractual terms are in place.
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Working Hours
Under the Working Time Regulations, there is a standard 48-hour limit on weekly working hours (calculated over a 17-week reference period) unless the employee has signed an opt out agreement.
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National Minimum Wage
Employers must ensure they are paying at least the relevant National Minimum Wage rate to all workers. Failure to do so can result in significant penalties/fines and reputational damage. Getting this right is not always as simple as it appears, as consideration must be given to any deductions for expenses such as uniform etc, which cannot operate to reduce the net pay to less than the relevant NMW rate. There may also be questions of what amount of time is actually ‘working time’ for the purposes of the regulations, such as where employees travel from site to site, or are on callout or standby rotas.
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Holiday Leave & Pay
Robust policies and procedures should be in place to ensure fairness and compliance with legal requirements. All workers have the statutory right to receive 5.6 weeks’ paid holiday each year, equating to 28 days for those working five days a week. This continues to be the case when they are on sick or family-related leave. For part-time workers, this will be pro-rata. Pay for the first 4 weeks of the 5.6 weeks of a worker’s statutory holiday entitlement must include commission payments which are intrinsically linked to the performance of tasks which the worker is obliged to carry out under the terms of the contract, and other payments, such as overtime, which have been regularly paid to the worker in the 52 weeks preceding the calculation date.
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Sickness Absence Procedures
Clear policies should set out how and when sickness absence should be reported, details of Statutory Sick Pay (SSP) and any company sick pay schemes etc. Employees are currently entitled to SSP from day 4 of absence. However, changes to SSP in the Employment Rights Bill include the removal of the 3-day waiting period so it will be payable from the first day of sickness absence, and the removal of the current exclusion of workers who earn less than the lower earnings limit for NI.
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Disciplinary & Grievance Procedures
Employers should follow the ACAS Code of Practice on Discipline and Grievance when dealing with such issues. Failure to do so can lead to successful claims in the Employment Tribunal and potential uplifts in financial penalties.
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Sexual Harassment
Under the Worker Protection (Amendment of Equality Act 2010) Act 2023, employers have a legal duty to take ‘reasonable steps‘ to prevent sexual harassment in the workplace. Compliance will provide the basis on which to establish a statutory defence against related tribunal claims, whilst failure to comply could result in employers facing a 25% uplift in related compensatory awards.
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GDPR Compliance & Data Protection
Data protection impacts many aspects of HR compliance. It is essential that employers are aware of their obligations and potential liabilities under data protection laws. Data privacy statements must be issued to all employees and prospective employees.
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Termination
Changes being brought in by the Employment Rights Bill mean that all employees will soon have the right to bring an unfair dismissal claim, regardless of length of service. To avoid claims of unfair dismissal, employers need to follow fair dismissal processes which will vary according to the reason. Where the dismissal is in relation to conduct or performance, the employer must adhere to the ACAS Code of Practice on Discipline and Dismissal, and failure to do so could lead to a 25% uplift in compensation in any related unfair dismissal claim. There are minimum periods of notice which apply to dismissals according to the employee’s length of service, albeit that the contract may provide for more. While exit interviews are not legally required, they can be a valuable tool when it comes to HR compliance, identifying potential issues within the organisation which need to be addressed.
Maintaining HR compliance
Maintaining compliance requires considerable commitment and can be challenging for SMEs who don’t have the luxury of large HR functions. Here are our top tips.
- Establish robust policies and procedures from the outset which are communicated to employees and reinforced during refresher training.
- Complete annual audits of policies, procedures and documentation to identify areas of non-compliance.
- To ensure employees understand their responsibilities, provide regular training covering topics such as harassment and discrimination, health and safety, data privacy.
- Stay abreast of changes to the ever-evolving landscape of employment law by engaging with a professional HR support provider.
If your organisation requires support in maintaining HR compliance, if you are looking for SME HR services, or if you have any other HR, Employment Law or Health, Safety & Wellbeing issue you would like to discuss, please get in touch on 01942 727200 for a no obligation chat or email enquiries@employeemanagement.co.uk.