The Employees of Wild Turkey Plc.
Adhil and his fellow directors met at the registered office for another board meeting. Although they had conducted informal discussions previously, they now felt that the time had come to agree formally that there should be some ‘division of labour’ among the directors with particular directors undertaking responsibility for the management of specific aspects of the company’s business. After some discussion, it was agreed that Breena should focus his attention on management accounting and financial management because of his considerable ability in this area. Both Breena and Adhil thought it would be very sensible if Chuma focused his energies on sales and marketing effort of the company because he had recently gained a postgraduate degree in marketing from Kingston University having had previous experience in the marketing department of a large music publishing business. Both Breena and Chuma thought that Adhil should concentrate his time and talents on the artistic and creative aspects of the company’s business where it was agreed his principal talents were seen to reside. Adhil agreed, although he stressed the necessity for them all to work as ‘a team’ and avoid a situation where any director might become completely absorbed with his particular area of responsibility. After further discussion it gradually became clear that the directors would not be able to do all the work themselves that was needed to be done in order to get the business operational and that it would be essential to recruit salaried employees to work for the company as soon as possible. It was agreed that initially that five posts should be advertised on appropriate websites immediately with employment to commence, if possible, as soon as the company’s premises were ready for occupation.
The new posts
The posts to be created were as follows:
1. recording engineer
2. sound technician 1
3. sound technician 2
4. clerical administrator
There was a good response to the job advertisements and the directors were soon able to appoint suitable persons to fill all of the above posts as follows:
1. recording engineer Peter Green
2. sound technician 1 Karen Baloo
3. sound technician 2 Wesley Jackson
4. clerical administrator Kim James
5. receptionist Zadie Petersen
Of course, there was going to be a time interval between these persons giving up their existing jobs and their being able to commence work for Wild Turkey Plc. This was not a great inconvenience because it enabled the directors to focus on completing the formalities associated with the acquisition of the company’s new premises. When Peter Green and Karen Baloo reported for work they were a great help to Adhil in deciding the layout of the sound studios and with the equipment specification that had to be compiled before orders would be placed with equipment suppliers. As the other employees commenced their employment with the company Adhil realised that all these employees should have the necessary documentation required by law even though the terms of their employment has been settled at the interview stage. At this stage, Breena had passed on the salary details of each employee to Enzo (the company secretary) who was busy with the creation of the company computerised accounting system and its computerised payroll application. Adhil and Breena both came to the realisation that it was time for another visit to Shah & Co. Adhil arranged to see Rita at her firm’s offices the very next day, after lunch.
Meeting at the offices of Shah & Co.
Adhil introduced his fellow director, Breena, to Rita. Adhil then indicated that a number of salaried staff has been recruited recently by the company and that he and Breena were uncertain about the documentation that the company might be legally required to provide to its new employees. He gave Rita a list of the names of the new employees together with particulars of their job title, hours of work, and salary. Rita responded by saying that Employment Law had become quite a complex area in recent years and that they were wise to have sought legal advice on how to comply with what is now a huge volume of legislation. She said that the employment relationship itself was conceptualised as being a contractual one. In consequence, she indicated that the directors might wish to have issued on behalf of the company detailed contracts of employment covering every aspect of the employment relationship. Alternatively, she indicated that the directors could opt to issue what has become known as a statutory statement of particulars of employment. She stated that if the directors decided to take that route and wanted her to compile the statements, she would need more information about the employees and their jobs than had been so far provided by Adhil and Breena. Adhil and Breena looked at each other quickly and then turned to Rita. They stated that they would prefer to have this alternative type of document issued to the new employees but Adhil asked why it was referred to as the ‘statutory statement’ if the employment relationship was contractual.
Rita explained that it was so called because it is issued to comply with the legislation enacted by the Westminster Parliament known as the Employment Rights Act 1996. She indicated that s. 1 (section 1) of the Act requires employers to issue a statement containing the important terms of the contract of employment so that it is clear to every employee what his/her rights and entitlements are quite soon after the commencement of their employment. She stated that the content of the statement is specified by the Act although it might be that some of the item headings would indicate that there was no contractual entitlement. Rita quickly referred to the computer screen on her desk and clicked the mouse a few times and a few pages of A4 rolled off the desktop printer. “There you are” she said; “this is a proforma and you can fill in the information under the various headings as they are applicable”. She said “if a particular heading is not applicable, you can simply state that to be the case”.
Content of the Statutory Statement
The headings were as follows:
a) the names of the employer and the employee;
b) the date when the employment (and the period of continuous employment) began;
c) the remuneration and the intervals at which it is to be paid;
d) the hours of work;
e) the holiday entitlement;
f) the entitlement to sick leave, including any entitlement to sick pay;
g) pensions and pension schemes;
h) the entitlement of employer and employee to notice of termination;
i) job title or a brief job description;
j) if the post is not permanent, the period for which the employment is expected to continue, or if it is for a fixed term, the date when employment is to end.
k) either the place of work or, if the employee is required or allowed to work in more than one location, an indication of this and of the employer’s address; and
l) the details of the existence of any relevant collective agreements (between the employer and a trade union) which directly affect the terms and conditions of the employee's employment - including, where the employer is not a party to an agreement, the persons by whom they were made.
The above statement must also include a note giving certain details of the employer’s disciplinary and grievance procedures, and stating whether or not a pensions contracting-out certificate is in force for the employment in question. If an employee is normally employed in the UK but will be required to work abroad for the same employer for a period of more than one month, the statement must also cover:
i. the period for which the employment abroad is to last;
ii. the currency in which the employee is to be paid;
iii. any additional pay or benefits; and
iv. the terms relating to the employee’s return to the UK.
Rita stated that all employees are entitled to receive such a written statement meeting the requirements described above, provided that their employment lasts for a month or longer. If one of the above is not applicable (for example l), it will be sufficient to state that this is inapplicable.
Itemised pay statement
Rita went on to point out that the majority employees have a right under the Employment Rights Act 1996 to receive individually from their employers a detailed pay statement at or before the time of payment. Every pay statement must give the following particulars:
• the gross amount of the wages or salary;
• the amounts of any fixed deductions and the purposes for which they are made (for example, trade union subscriptions, or the total figure for fixed deductions, when a separate standing statement of the details has been provided (see below);
• the amounts of any variable deductions and the purposes for which they are made;
• the net amount of any wages or salary payable;
• the amount and method of each part-payment when different parts of the net amount are paid in different ways, for example the separate figures of a cash payment and a balance credited to a bank account.
Rita indicated that there are, in fact, two types of pay statement and an employer may choose to give either:
(a) a pay statement which specifies the amounts and purposes of every fixed deduction separately; or
(b) a pay statement which specifies only the aggregate amount of all fixed deductions without any explanation of their purpose.
If an employer chooses the latter, the employer must give the employee a standing statement of fixed deductions at or before the time when the pay statement is issued.
When a standing statement of fixed deductions is used it must:
• be in writing.
• state for each item deducted:
o the amount;
o the intervals at which the deduction is made;
o the purpose or description, (e.g. trade union subscription).
• be given to the employee at or before the time of issuing any pay statement which quotes the total figure of fixed deductions.
• re-issued at intervals no longer than 12 months, incorporating any amendments.
Adhil mentioned to Rita that when the employees who would be working in the recordings studios were interviewed it was made clear to them that working times had to be flexible because of the nature of the work. Some days of the week there might be very little work to do but on other days it might be necessary to work into the night to lay down the tracks for a new album. Adhil looked at Rita and said that he hoped that the company as the employer would not be contravening any regulations concerning working time. Rita said that there was a set of regulations known as the Working Time Regulations 1998 that had been made by the UK government to implement a European Directive on working hours. These Regulations were designed to ensure that the health and safety of workers was not compromised by the working of excessively long hours. She said that the aim of the Regulations was to set a limit of 48 on the average amount of time worked in a week. However, she pointed out that an employer could obtain an employee’s agreement to work for longer than this maximum and that, provided Adhil obtained an employee’s agreement in writing, the company would not be infringing the Regulations.
Health and Safety
Rita stated that all employers (whether an individual or organisation) have a statutory duty under the Health and Safety at Work Act 1974 s. 2 to take reasonable precautions to protect the health, safety and welfare of their employees, and other people who might be affected by what they do. She indicated that employees too have obligations under s. 7
(a) to take reasonable care for their own health and safety and for that of other likely to adversely affected by their acts/omissions,
(b) to cooperate with the employers to enable the employer to carry the legal responsibilities imposed.
There is a website http://www.hse.gov.uk/smallbusinesses/must.htm for the Health and Safety Executive. It has wide powers to enter and investigate workplaces (including building sites) and to bring prosecutions if this is thought to be necessary. More often than not, however, inspectors issue ‘improvement notices’ under s. 21 requiring some contravention to be corrected within specified time limits but compliance may be subsequently enforced by a prosecution if no action is taken. Adhil and Chuma said they would check the website and then thanked Rita for her time. Rita said “I am pleased to have been of assistance but I will be sending you my firm’s bill in due course.
Adhil at the Gym
Adhil felt quite overwhelmed by the amount of regulation and compliance and decided he would take some time off and go to his health and fitness club to ‘work out’. He was doing some work on the weights and who should walk but Deena, the legal executive employed by Shah & Co LLP. They recognised each other immediately and Adhil smiled and said that he had spent rather a long session with her boss. Deena said that she supposed that there were many matters to attend to when establishing a new business. Adhil said to her that there certainly were. He added, however, that he did not understand how it was that European Law could impact on British business in the area of employment. Deena said it was really quite simple. The UK has been a member of the EU since 1973 except then it was known as the European Economic Community. As a Member State and signatory of the Treaties it has a legal obligation to comply with EU Law. She said that many Directives were passed at the European level and that these had to be implemented in the national law of the various Member States. In the UK, sometimes they are implemented by means of primary legislation (Act of Parliament) but more often they were implemented by means of subordinate legislation (Statutory Instrument). Most Directives dealing with employment are implemented by means of Statutory Instrument made under a general authority conferred by the Westminster Parliament under the European Communities Act 1972. Deena then said that although a great deal of Employment Law is European in origin, there is still a considerable amount that is enacted by the Parliament as a result of Bills being introduced by the government.
Tasks for you to complete:
Visit the website www.dti.gov.uk/er/ and the website www.legislation.hmso.gov.uk/legislation/uk.htm to answer the following questions:
1. When must the written statement be given?
2. What must the note of disciplinary and grievance procedures in the statutory statement contain?
3. Which of the required particulars may be given by reference to some other document, rather than in the written statement itself?
4. What notification is an employee entitled to receive when a change occurs in one of the particulars of employment?
5. What information is an employee entitled to receive when there is a change of employer?
6. How can an employee enforce the rights described above?
7. How can a contractual employment dispute be resolved?
8. How is a reference or complaint made to an employment tribunal?
9. After referring to the HMSO website and looking up the Employment Rights Act 1996 what section of the Act stipulates that an employee is entitled to an itemised pay statement?
10. There is a right not to suffer unauthorised deductions from pay. Which section deals with that and what is the extent of the right?
Visit the Health and Safety Executive website and discover the ten then that every new business should do to comply with the health and safety requirements.
Visit http://www.parliament.uk/directories/educationunit.cfm#enquiries and click on ‘Making a Law’. After reading the content, explain the difference between primary and subordinate legislation.
Can you discover an Act of Parliament that was enacted to implement a European Directive? Can you name a piece of subordinate legislation that has been made to implement a European Directive on some aspect of employment other than the one on working time?
Adams, A. (2003) Law for Business Students (Harlow: Logman) pp 259 – 272
Keenan, D. & Riches, S. (2005) Business Law (Harlow: Longman) pp 488 – 515 pp 532 – 535