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Avoiding employment law compliance isn't a good strategy

Head in the sand is not an employment law compliance strategy

We all know someone who thinks ignorance is bliss – sticking your head in the sand and all that. But in the world of employment law, staff and payroll management, it never is. Even so, the number of decision-makers failing to educate themselves, and their staff, on requirements and rights is staggering.

In many ways this attitude isn’t hugely surprising. Unless you specialise in business law professionally it’s unlikely the thought of keeping up to date on the latest regulatory changes and requirements will fill you with excitement. Chances are there’s a whole host of business priorities that seem more pressing. Ultimately, though, that’s because you don’t appreciate how much of a business priority compliance actually is.

April 2019, for example, saw the start of a new UK tax year, and the biggest shake-up in the history of the National Living Wage. Just under 2 million British workers will now be more than £2,750 better off each year compared with 2015 when the Living Wage was introduced, while a further 2.1 million will benefit from a boost to the minimum wage. Any company that hasn’t adapted to this change is non-compliant and liable to be fined.

A recent article published by HR Magazine outlined the prevalence of ‘wage theft’ resulting from employers failing to educate staff on entitlement to holiday pay. In some situations this is simply due to the fact management doesn’t fully know what true business law compliance involves. Other examples reveal far murkier attitudes at play. A small but damaging proportion of the business world ignores requirements knowingly, exploiting the insecurities and lack of understanding of rights many temporary or low-income workers often have.

Payslips are also causing a major problem for some. Many staff find this legally-required breakdown of earnings and tax contributions confusing, if not impossible to decipher. Others simply never receive them, meaning they have little-to-no idea of income to-date or payments made to HMRC on their behalf. Considering how many people find themselves on an incorrect tax code it’s vital for staff to know exactly what’s going on with their wages.

Roubler’s Online Document Library allows you to ensure this information is readily available in clear English for staff. It’s also a great idea to bring new recruits into the on-boarding process, training them in their role while also educating them in entitlements.

Ethically, failing to take the necessary steps to make sure all employers are aware of their rights is blatantly unacceptable. In terms of ‘business sense’, it’s also downright illogical. The less content, valued and cared-for staff are the more likely they are to feel unmotivated, discontented and resentful. Or, worse still, the more likely they are to walk out the door and find themselves a job with another company that will treat them with the respect they deserve.

For a handful of employers, though, ethics count for little when it comes to the time and effort they feel it takes to be brought up to speed on rules and regulations. For an even smaller but hugely problematic proportion, they actively believe that by keeping staff in the dark they stand to gain financially, reducing overheads associated with annual leave, sick pay and so forth. Clearly, this segment knows little about business law, as nothing could be further from the truth.

The financial repercussions of non-compliance can be huge. HMRC is coming down hard on companies that fail to meet regulations, even those that may not realise internal policies are tantamount to legal infringements. Supermarket giant Iceland celebrated a PR boon back in Christmas with its environmental positioning but scored an own goal recently after it was ruled that a staff Christmas savings scheme – whereby a proportion of wages is paid into a savings account operated by the firm – added up to non-compliance of minimum wage laws.

The solution to what you might call ‘complete compliance’ is not singular, though, and relies on a number of best practices:

  1. Use HMRC’s vast online resources to increase knowledge of what is expected.
  2. Implement good internal communications to ensure everyone in the business understands what is required of them, and what is required of the business on their behalf.
  3. Buy up-to-date workforce management and payroll system to make the process of self-auditing for compliance easier. Find out how Roubler does this.

Ultimately, this all highlights how reliant companies are on having the right technology in place, not least for HR and payroll. What could seem like a large investment at the time is far cheaper than the potential fallout that results from failing to take the necessary steps to be compliant with employment laws. Just ask Iceland, who could now be looking at a bill for £21million in back pay, plus fines.

 

Words: Richard Trenchard

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