Do small companies need employment protection insurance?
Over the past 10 years there has been a huge growth in the number of services offering owners of small companies the opportunity to buy insurance to protect themselves against being taken to a tribunal. 
But do small companies really need this, or is it just insurers taking advantage in the growth in Tribunal Claims.
According to figures from the Employment Tribunal and EAT Statistics there has been a huge increase in the number of employees taking employers to tribunals, increasing by 56% between 2009 and 2010, with the top 3 claims being for Unfair Dismissal, Unauthorised Deduction from Wages and breaking the Working Time Directive.
However, a lot of small firms don’t set about breaking the law on purpose, problems often arise as they did not know what the law was or what they needed to do. Here are simple tips you can follow to avoid getting into trouble and reduce the need to purchase additional insurance.
Get the basics right
Make sure all your staff have up to date contracts of employment for all of your team and you use a comprehensive employee handbook. In a 2010 study carried out by simplybusiness.co.uk they found that
Two fifths (40%) of firms have no written HR policies, and despite it being a legal requirement, over a fifth (21%) of SME employers have no formal contracts in place for permanent employees, rising to 28% for those employers using freelance, contract or temporary workers.
By having clear policies and procedures on day-to-day employment law matters it tells the employer what they need to do and when they need to do it?
Understand the Law
If you don’t know much about employment law, there are a small number of areas that you should become familiar with, they include the law relating to:
- Disciplining and Dismissing Staff (what is the process you have to follow)
- Handling Grievances
- Equality and Discrimination
- Contracts of Employment
- Sickness / Holidays / Absence from work
- Working Time Directive
If you read around these topics you will be able to handle the majority of issues that arise and ensure that when handling an employee problem you won’t make simple mistakes.
Solve Problems Early
Too often problems that lead to disciplinary action are a result of previous instances of poor performance or unacceptable behaviour. When an issue first arises take the time to have a one-2-one informal chat with the employee to see if the problem can be solved informally without the need to take formal action. A common theme in tribunal claims is where the employees behaviour was the last straw in a long line of incidents, and if the employer cannot show that they have tried to resolve the matter previously, before dismissing the employee they could face a claim of unfair dismissal. Using informal meetings and keeping notes in your diary of what was said and agreed can mean that you are able to maintain a productive working relationship with the employee and improve the situation. A disciplinary hearing may improve the situation but may lead to a breakdown in the employment relationship.
Trust your Gut Feel
If your planned course of action doesn’t feel morally correct, then there is a good chance that the action you plan to take could get you into trouble. Employment law is founded on principles of Equality and Fairness to both employers and employees. The laws ensures that both parties behave in morally acceptable ways. If it doesn’t feel fair, it probably isn’t and you may find yourself in trouble.