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The risks of failing to adhere to legislation

Written by Sue Tumelty on Thursday, 03 December 2020. Posted in Legal

Employment for all business owners carries greater risks than ever before. Sue Tumelty examines the issues franchisors and franchisees should be aware of.

The risks of failing to adhere to legislation

Employment for all business owners carries greater risks than ever before. Sue Tumelty examines the issues franchisors and franchisees should be aware of.

The 26th July 2017 may not be a date which immediately springs to mind as having particular historic significance. But in HR terms it was a landmark.

On that day, a UK Supreme Court ruling stated that fees for employment tribunals were unlawful, undoing a regime which had been in place since 2013.

The ruling has had major implications for all business owners, significantly increasing the business risks of failing to adhere to employment legislation.

Within months of the ruling, tribunal claims soared. And now, with the Covid crisis causing widespread redundancies, we can only expect case numbers to rise further.

Indeed, the Government has recently announced measures to speed up tribunal processes, such as allowing remote hearings and providing means for easing up the burden on tribunal judges.

When combined with a society in which the rights of workers are improving, in which litigation is increasing, with antipathy towards the gig economy and the settling of historic claims over employment status, franchisors and franchisees alike should be aware that the risks of tribunal are greater than ever.

Prevention is of course better than cure. With the right approach to managing these risks, businesses can avoid the risks of crippling fines and historic, backdated settlements.

Employment statuses – relevant for all business owners

I have touched on the changing landscape regarding employment statuses already, but it is a factor certainly worth emphasising, as it relates to all business sectors.

It is no surprise that business advisers, accountants and bank managers do often not understand the complex legislative differences between worker and self-employed status and there is work being done at Government level to rectify the confusion.

For the time being, however, franchise businesses must be aware of at least one of the major intricacies. This is the issue of self-employment.

It has become standard practice for many business owners to use ‘self-employed’ personnel who are, legally, employed because they have no right to send a substitute. 

A recent case in Lancashire saw a self-employed hairdresser successfully claiming six years of backdated holiday pay, notice and a redundancy pay when her salon closed in 2019.

Any franchisors or franchisees who have personnel operating on a similar basis should certainly be aware of the risks involved here.

Covid-specific HR risks

Many businesses face the unpalatable prospects of making redundancies over the coming months. It’s a horrible situation and I would recommend looking at this crisis as an opportunity if at all possible, as with some creativity and input from employees this episode may be able to be navigated successfully. 

However, some businesses will find redundancy an inevitable consequence of this crisis. If so, then compliance will be vital to their chances of long-term survival.

Many franchises will be small businesses and if you’re looking to make fewer than 20 people redundant, there's no minimum time for a consultation. However, the consultation must be considered “meaningful”.

Larger businesses must consult for minimum periods depending on their size and proper information must be provided to staff or their representatives. Notice periods must be compliant with legislation, too.

There are also significant challenges around discrimination – employers must ensure they are making redundancies based on ability and the needs of the business, not on any one of the nine protected characteristics under the Equality Act 2010.

HR concerns for the franchise sector

My primary point here would be to reinforce the idea that, as a franchisor, business reputation is determined by business culture. This often extends from the top of the organisation right down to the shop floor of many franchisees and their contacts with customers.

The point is that, especially if amplified by social media, staff complaints from even one small franchise branch can affect brand reputation across the board. As such, franchisors should recognise that good employment makes good business sense.

The owners of businesses which have taken the decision to franchise should therefore make sure that a culture of valuing employees will bring great rewards – not only in terms of a positive view of the business by the end user but also for productivity and employee retention.

I’m sure I won’t need to reinforce the danger of getting on the wrong side of a social media barrage. Rightly or wrongly, these issues are ever more prevalent, and mitigation of the risks should be a serious consideration, especially for consumer-facing businesses.

About the Author

Sue Tumelty

Sue Tumelty

Sue Tumelty is Founder and Executive Director of The HR Dept, a UK-wide franchise business which provides outsourced HR advice and support to more than 6,500 SMEs through a network of licensees. She is a Fellow of the Chartered Institute of Personnel and Development.

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