Legislation and regulation

Employment legislation

Employers are responsible for deducting tax (under Pay As You Earn) and Class 1 National Insurance contributions from their employees’ wages. These deductions together with the employer’s own contributions must be paid to the Inland Revenue each month. Leaflet IR35 from the Tax Office explains the rules and the New employer’s starter pack contains the necessary forms and instructions. Advice about tax and NI contributions is available from tax offices or via the Employer’s Helpline on 0345 143 143. (There is also a special helpline for new employers: 0845 60 70 143.)

In addition, there is a large amount of legislation covering all aspects of employment. Some of the employment legislation most likely to be of relevance to a small business is listed below:

Asylum and Immigration Act 1996
It is a criminal offence to employ a person who is not entitled to live or work in the UK. The employer should make basic checks before taking on a new employee, such as seeing a document which states their National Insurance number

Disability Discrimination Act 1995
It is unlawful for an employer with 15 or more employees to treat a disabled person less favourably than someone else because of their disability, either when applying for employment or when employed, without a justifiable reason

Employers' Liability (Compulsory Insurance) Act 1969 as amended by the Employers’ Liability (Compulsory Insurance) Regulations 1998
Employers must take out employer’s liability insurance under an approved policy with an authorised insurer. Copies of the insurance certificate must be displayed for all employees to see

Employment Relations Act 1999
This Act covers many 'family-friendly' measures such as rights to extended parental and maternity leave, with provisions being brought into force on a piecemeal basis since late 1999

Employment Rights Act 1996
Covers many issues relating to the rights of employees, eg maternity leave and pay, minimum periods of notice, redundancy, unfair dismissal rights and the right of shop workers to opt out of Sunday work. Also included is the requirement that employers provide a written statement of the main terms of employment within two months of an employee starting work

Equal Pay Act 1970
Employers must give equal pay to men and women doing the same sort of work, or work of equal value

Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002
These regulations give new rights to fixed term employees, preventing discrimination against them when compared to equivalent permanent employees. They must not be treated less favourably than comparable permanent employees, in terms of pay, pensions, annual leave or the provision of employee benefits. The use of successive fixed terms contracts is restricted to a maximum combined period of four years unless varied by a workforce or collective agreement

National Minimum Wage Act 1998
Sets minimum wage rates which must be paid to all employees

Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000
Part-time workers must receive (pro rata where appropriate) the same treatment as comparable full-timers. This includes the same hourly rate of pay, the same access to pension schemes, training and career development and the same holiday and maternity/parental leave entitlement (on a pro rata basis)

Race Relations Act 1976
It is unlawful for an employer to discriminate against an employee, or during the recruitment process, on the grounds of colour, race, nationality, or ethnic or national origin

Rehabilitation of Offenders Act 1974
It is unlawful for an employer to ask a prospective employee whether they have a spent conviction, or to discriminate against or dismiss an employee because of a spent conviction. (This does not apply to certain occupations, for example, medical services, teaching or the provision of care to children, the sick or elderly)

Sex Discrimination Acts 1975 and 1986
It is an offence to discriminate against an employee on the grounds of their sex or their marital status. It is also unlawful to discriminate on these grounds when determining who should be offered employment (except in those cases where being a woman or being a man is a ‘genuine occupational requirement’)

Social Security Contributions and Benefits Act 1992
Employers are responsible for paying statutory sick pay to entitled employees who are sick for four consecutive days or more

Trade Union and Labour Relations (Consolidation) Act 1992
Together with various other Acts, this covers employee rights with regard to trade union membership. It is unlawful to discriminate against an existing employee, or when recruiting new employees, on the grounds of membership or non-membership of a trade union

Transfer of Undertakings Regulations 1981
If a business is transferred from one owner to another, the new employer must observe all the terms and conditions of employment which applied before the transfer

Welfare Reform and Pensions Act 1999 and the Stakeholder Pension Schemes Regulations 2000
Certain employers must offer their staff access to a stakeholder pension scheme. The obligation applies to employers with five or more staff who are not offered an occupational pension scheme or access to a personal pension scheme to which the employer also contributes

Working Time Regulations 1998
Set limits on working time and provide rights to minimum rest periods and paid annual leave

The above list is an overview of some of the main points of relevance to employers and is not exhaustive.

Employers also have responsibilities under health and safety legislation. Broadly speaking, the Health and Safety at Work Act 1974 requires employers to provide their employees with a safe place of work. The many regulations made under the Act provide a framework for accomplishing this by placing duties on employers covering all aspects of workplace health and safety.

Further details of employment legislation are available from various sources.