HR Compliances Small Business Owners Should Know to Avoid Huge Financial Loss in UK

Laws made easy for business owners. Let's educate you on working hours act, discrimination laws, immigration rules, wages & union right in simple words.
  • Author: Siva
  • Last updated: December 8, 2022
  • 9 Minutes
hr compliances and rules that small business owner in the UK should be aware of explained by Papershift

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If you run a business, you will know that you have to follow specific workplace and employment laws to ensure HR compliance. Failing to do so can expose the business to serious penalties and consequences. But managing staff while staying the right side of the law can be extremely challenging.

To make sure things run smoothly business owners and HR employees must understand what HR compliance is and how it needs to be administered. 

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In this guide we will discuss everything you need to do to ensure your company follows all the HR rules it needs to.

Let’s begin.

What exactly is HR compliance?

HR compliance involves implementing policies and procedures to establish employment and work practices that demonstrate a thorough understanding of applicable laws and regulations.

Given the rise in the number of employment laws and regulations in the UK, the risk of facing penalties for non-compliance has never been higher. Business managers of companies of all sizes should know a variety of things when developing HR policies and procedures to stay compliant. These include:

  1. Whether the company may be subject to an audit from an enforcing agency, especially if that agency is capable of levying fines and penalties for non-compliance.
  2. Knowing that not understanding compliance obligations isn’t an acceptable legal defence.
  3. Being aware that a lawsuit settlement or legal action against the company can lead to financial hardship and bankruptcy.
  4. Understand employment laws that must be followed, including government rules and those specific to their business area.

To put things into perspective, timely and proactive compliance with all applicable employment regulations is critical, no matter the size of the company.

What are the basics of HR compliance?

Employment laws have seven general categories, and to create effective HR compliance, a business will need an HR process for each type. Of course, as a company’s workforce grows, new laws will apply, which may require policies to adapt or change over time to stay compliant.

Here are a few areas that a business must be compliant with:

a. Discrimination

HR laws protect all employees from discrimination within the workplace. The whole point of discrimination law is to make it illegal for employers to discriminate based on their race, skin colour, religion, sex, nationality, genetic information, disabilities, or age. Anti-discrimination laws also protect employees who file discrimination complaints from being fired or punished for complaining.

These laws cover all areas of HR operations, such as recruiting, screening, hiring, promotions, benefits, pay, retirement, and leave. And since they affect several HR functions, everyone within a business must understand the rights and duties under the relevant anti-discrimination laws and ensure they are compliant.

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b. Wages and Working Hours

UK laws protect employees from working in unreasonable conditions and from being unfairly treated in terms of pay. There are certain minimum terms of employment that must be adhered to in any workplace. These rights are not dependent on length of service and will override any contractual terms which are less generous. Here is a list of some of the more important statutory rights: 

  1. The right to a national minimum wage. 
  2. The right to holiday entitlement. Full-time employees are entitled to at least 28 days’ paid holiday in each holiday year. This is pro-rated for part-time workers. This entitlement can include the eight public holidays.
  3. The right to statutory sick pay. Most employees who are absent from work due to sickness are entitled to be paid a statutory rate of sick pay for up to 28 weeks in any three-year period.
  4. Working time restrictions. These regulations are designed to ensure that employees’ health and safety is protected and that they do not work excessive hours and/or fail to take rest breaks. 
  5. The right to equal pay. Employees have the right to receive equal pay to that received by members of the opposite sex if they are doing equivalent work or work of equal value. 

There are also statutory rights which apply to employees with a family or family commitment. These include:

  1. The right to maternity leave
  2. The right to statutory maternity pay for 39 weeks
  3. The right to two weeks paid paternity leave
  4. The right to 52 weeks’ adoption leave

Wages, hourly rates, and working conditions affect HR activities, like scheduling, payroll, and the hiring of independent contractors and will require careful management to ensure HR compliance. 

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c. Immigration and the right to work in the UK

It is the responsibility of business owners to ensure that the workers they employ have a legal right to work in the UK. To stay HR compliant with this, they will need to perform all relevant ID and background checks. 

d. Safety and health regulations at work

Employees should be safe and healthy at work. The laws in the UK are specifically designed to keep everyone safe and free from injury.

Having protocols and protections in place in HR policies can help keep minor incidents from becoming far worse. It also prepares you for more significant risks like fires, floods, and violent acts.

e. Union Rights

The final area of HR compliance to consider is that of the right for employees to join a trade union. UK laws grant employees the right to form, join or decline to join unions based on their own needs. It also guarantees employees the right to meet and discuss working conditions, including on public forums like Facebook or Twitter.

How can I improve HR Compliance in my small business?

Using the right tools is an important part of an effective HR compliance strategy. Below, is a list of some of the best tools available to improve compliance.

a. Onboarding software

Onboarding software tools simplify the onboarding process of new employees and can help cut down on unnecessary administrative work for managers and HR professionals. Furthermore, both the employee and hiring manager can keep better track of onboarding material and paperwork to ensure compliance.

b. Time and attendance software

HR departments use time and attendance software to make time tracking and payroll easier. These tools are designed to manage company time and attendance data while keeping tabs on holiday allocation, overtime, and sick days.

Got questions on staff time tracking? Register for a free consultation.

c. Rota scheduling software

A good rota scheduling software is one that gets your rota planning done in few hours than in days. The rota software must also be able to take in legal considerations with break regulations between shifts, day-offs between consecutive night shifts, added night shift allowances etc. Does your rota planning software do that? If not, feel free to signup for a free demo from our team on the simplicity of rota planning with peace for employers and happiness for employees.

d. Payroll automation software

Payroll is highly regulated and comes with a lot of statutory laws and clauses. HR teams must get it accurate and on time every time. The complexity arises when payroll has to be computed for different types of employees like full-time, part-time, interns, freelancers, shift/rota workers, night rota workers with added allowances, and more. Good payroll automation software will keep your statutory regulations in check. This being the most sensitive topic, it’s recommended to invest in fool-proof and proven payroll software that can calculate payroll. Payroll software that links employees’ time tracking and timesheets with it could be the best fit.

e. Benefits administration software

Benefits administration software tools allow organizations to plan and administer employee benefits packages while ensuring compliance with regulations. They help organizations of all sizes remain compliant with all applicable laws and regulations.

f. HR compliance software

HR compliance software works by assisting companies, managers, and HR leaders to deal with HR compliance issues and keep up to date with business regulations and relevant compliance laws.

HR compliance software tools make it easy for businesses to understand the latest compliance issues, legislations and rules. They can also assist in the communication and enforcement of company policies to employees.

What are some best practices for fool-proof statutory law compliance in UK?

In this section we are going to at some HR compliance best practices that allow businesses to keep errors to a minimum.

a. Have the right HR people

Every business is different, which is why it’s vital to have a tailored HR support team. There is no one-size-fits-all solution when it comes to building the right HR team.

For a business to be successful it will need an HR team that is efficient and knowledgeable. There are several options to build a good team depending on the business size, HR needs, and budget. For instance, a company can either hire an internal HR manager or outsource HR functions to a professional organization.

b. Document all policies and procedures properly

If there is anything a business needs to do that is essential to its success, make sure it’s documented in the employee handbook.

The employee handbook should thoroughly address policies and procedures that employees must follow, including those that ensure legal compliance. Documenting policies may sound overwhelming, but it can significantly enhance daily operations. 

Once established, procedures and policies can be continually tweaked over time to ensure the best results. 

Whatever procedures and policies are implemented, they should be regularly reviewed and updated as business circumstances change.

c. Train employees on HR compliance

Although effective, establishing a set of compliance policies and procedures isn’t enough. Open communication with employees is essential and staff need to be trained on policies to ensure team compliance.

The type of employee training offered will depend on the staff members involved and the topic. It can be done in-person or online and facilitated by the businesses internal HR team or an external party. 

d. Enforce disciplinary actions across the board

Whenever an employee makes a complaint or is found guilty of non-compliance, a business must investigate the matter thoroughly and with an even hand.

Once the investigation is complete and the company has determined that an employee has violated a policy, they must take appropriate remedial action as outlined in the employee handbook. The fair and equal treatment of all employees is an essential element of HR compliance. No employee should get special treatment or be “let off the hook,” because of their position or individual favouritism. Enforcing fair disciplinary action will also protect a company from potential legal litigation.

In conclusion

Organizations have to continuously anticipate and tackle HR compliance issues proactively while keeping an eye on the ever-evolving laws and regulations. 

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Written by Siva

I write & describe the value & benefits delivered by Paperhift's rota planning, staff time tracking, and employee payroll management software. Especially useful for Shift Planners, Rota Managers, Team Admins, and HR Teams :-)