One of the questions we're often asked when working with small business owners is what paperwork is needed when employing staff. Now the term 'staff' is used loosely here as we are including all those mentioned below.

It's important to ensure you've given your staff the correct paperwork to ensure your working relationship is clear, unambiguous and mutually beneficial. ‍

‍We hear on a daily basis how employer-staff relationships have broken down because it had not been described clearly on paper – if it had been it would have saved both parties wasted time and headaches later on.

Employment status

The types of documents you need to provide, whether a legal requirement or through your own prudence, will depend on what type of staff you hire, whether they are:

• Permanent or fixed term contract employees (full or part-time)
• Directly hired casual PAYE workers (on a casual or zero-hours contract)
• Casual workers or contractors employed via an agency (you are the ‘hiring’ employer)
• Freelancers or contractors/consultants (whether sole-traders or limited companies – you are their ‘client’)

Working out somebody’s employment status can be very complicated. If there is a dispute where you, the employer, believe you are employing someone as a self-employed person/contractor and the reality, decided by a Court, is that they are actually an employee, there may be tax liabilities for you and financial penalties, as well as the staff gaining the employment rights of permanent employees (see our Guide to employment rights), which may be applied retrospectively.

The Court will essentially not just look at what is written on paper about the relationship between you and the staff (i.e. any contract that exists) but will look at the actual reality of the working relationship. Therefore you must make sure you have the correct paperwork to suit the actual circumstances.If you are unsure of the best way to hire staff, or how to determine their employment status and what rights they have, and/or help with all types of staff documentation then please talk to The HR Kiosk, a Human Resources Consultancy for small businesses, run by the author of this article, Lesley Furber.

You can read more about employment status here.

n terms of the staff documents that you should provide - while it is not essential to provide a written contract (except for PAYE employees and PAYE casual workers) as a verbal contract still stands as a legally binding contract, it is advised to have the main terms of the contract written down so everyone knows where they stand.  A contract is created when an employer agrees to pay a member of staff in return for them doing the work – for more information about this, see our piece on contract terms (express and implied).

For details of what documents you need to obtain from staff to prove they have the legal right to work in the UK, check out our guide.

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What documentation should you have in place?

For PAYE employees (on permanent or fixed-term contracts) or directly employed PAYE ‘casual’ staff:

• Give them an ‘Offer Letter’, before they start, setting out the basic terms of their engagement. This offer letter should also confirm that the offer of employment is conditional upon you receiving evidence of their legal right to work in the UK. The letter should also confirm if the offer is subject to other conditions, for example, you receiving satisfactory references for the employee, ensuring they have a valid driving licence, satisfactory Criminal Records (DBS) check, and so on

• Employers should store recruitment records for one year for all job applicants who are not successful at the job interview. Obviously, when you offer a job to someone you will be keeping their application records throughout and beyond their employment with you, in line with your GDPR policy

• From 6th April 2020, all PAYE employees and all PAYE casual staff must legally have a Written Statement of their terms and conditions of employment before they start work, or at the latest on their first day at work (which must be kept for all the time they are employed and for a period after they leave). The earlier you give employees their written statement, the better, so there is no misunderstanding. There are minimum requirements of the types of details that a Statement must contain and it is usual to include these in a comprehensive written contract of employment. See our Guide to Contracts of Employment. Contracts/statements are legally binding and therefore become terms the employee must follow and you must provide
• Currently, employees must be given itemised payslips; however, from 6th April 2019, Casual Workers must also receive payslips. You can read more details here
• Give all staff a General Data Protection Regulations compliant Staff Privacy Notice, so they understand what you do with their personal information and why
• The contract often refers to a company/employee handbook for further information, and these are a crucial tool for combining all the policies you need to have by law and include the details of key terms and conditions where there are minimum requirements set out in law. Although sounding tedious, policies are a good way to ensure your employees know the rules and procedures they need to follow and allow you to comply with legislation and deal consistently with issues in your business – this should help to avoid future time-consuming problems - and they do not have to be long or tedious or written in legalese!
• Handbooks often contain a mixture of ‘contractual’ (binding) policies and those that are not contractual (not binding) – this can be a complicated area so you may want to take advice about what policies should be contractual and what should not.

Policies you should include in a handbook

There are policies you should provide that are required by law for employees. They are:

• Disciplinary and Dismissal Policy (you must legally outline to staff in their written statement your discipline and dismissal policy or where they can find it  - you must operate this policy fairly; allow staff to be accompanied at any meetings; not unfairly dismiss employees; keep records of disciplinary action)
• Grievance Policy
• Health and Safety Policy (needed by law if you employ over five people) and you should keep records of accidents, injuries and dangerous occurrences.

The policies you should provide because they have legal minimum requirements are:

• Pay (legally - you must pay your employees and workers at least the National Minimum/Living wage and ensure Equal Pay between men and women; you must also provide an itemised pay statement (which you need to keep copies of to show compliance with the NMW/NLW) and not make any unauthorised deductions from employees pay)
• Equal Opportunities (legally - you must not discriminate against staff or allow harassment and bullying and you must make reasonable adjustments for staff in the work-place if they are disabled)
• Working Hours and Overtime including rest-breaks and holidays (legally - you must comply with Working Time Regulations provisions for employees and workers and keep records)
• Sickness policy and unauthorised/authorised absence (legally - you must make statutory sick pay payments to employees/workers and keep records; allow employees time off for dependant emergencies, Jury Service etc.).  From 6th April 2014 Employers will no longer be able to recover SSP costs
• Maternity, Adoption, Paternity Leave, Parental Leave, Parental Bereavement Leave and Shared Parental leave (you must make statutory maternity/adoption/paternity payments to employees and workers and give the appropriate leave, alongside antenatal leave, and keep records)
• Leaving policy (which includes at least the minimum legally required notice periods you should give staff, and they should give you, and the legal requirements you need to follow if you make redundancies – which are that you must consult staff if you are making redundancies, pay at least the statutory minimum redundancy pay and allow time off to look for work or training if they are being made redundant). You may want to consider restrictive covenants for your Contracts of Employment, e.g. non-poaching of staff or client clauses, but these need to be drafted carefully. See our article on the costs of replacing leavers – retention is important
• Flexible Working (you must consider all employees flexible working requests, if they meet the eligibility criteria)
• Whistle-Blowing and Bribery Act 2010 (receipt of gifts) Policies (you must not treat workers who ‘whistle-blow’ less favourably and you should consider the implications of the Bribery Act for your business)
• Comply with Pensions Auto-Enrolment legislation at your companies 'staging' date
• Provide a GDPR Policy (which complies with the GDPR requirements for ‘documentation’) explaining why peoples’ information is collected and processed and how long it is kept for, and their right to see their data.

There are other policies that are also recommended to ensure consistency for example personal e-mail/internet usage, alcohol/drugs in the workplace, dress and grooming codes, details of company benefits, workplace surveillance and intellectual property (if appropriate), travel expenses etc.

Many of the policies you may want to apply to casual staff and freelancers too, so you need to consider what they need to know and understand while working for you.

For comprehensive information about all of these obligations please talk to The HR Kiosk.

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For casual workers or contractors employed via an agency

Since October 2011, the Agency Workers Regulations were introduced which requires that agency workers are eligible to equal treatment with the permanent employees they work alongside in respect of basic and overtime pay, holiday entitlement/pay, rest breaks and working hours, paid time off for antenatal treatment - after 12 weeks of them working in the same job at the same employers.

This, therefore, means that for any agency temps/contractors you hire you need to have a full discussion with the supplying agency about their applicable terms and conditions and the impact of the AWR on you. If you hire a lot of agency temps this means you will need to keep closer track of how long they work for you, what they do and be aware of their ‘comparable’ permanent employees terms and conditions.

For freelancers and contractors (sole traders or limited companies)

At The HR Kiosk we would say that contracts are an essential document for you the employer and for the freelancer/contractor you hire and it is crucial it details the exact and true relationship between both parties. It is vital the ‘status’ of the freelancer is correct to avoid any future tax investigations – we’re not going into the details of IR35 here but you can read more information on our IR35 hub. Our IR35 hub is the perfect place to discover all of our articles, our business guide, and the further support we offer. To ensure that the freelancer is not in scope of the Agency Workers Regulations; also that you as an employer are not caught by the False Self-Employment legislation.

Freelancers, unlike employees and most workers have relatively few true ‘employment rights’, but they are covered by Health and Safety laws and will be covered by discrimination laws if they provide their services to you personally. They may also be covered by the rest break and holiday provisions of the Working Time Regulations in certain circumstances. Freelancers also may be eligible for Statutory Maternity Allowance in certain circumstances.Other than these details the contract between you should determine the wants, needs and expectations of both parties, and it should act as a legal framework and provide a formal definition of the business relationship between the freelancer and you. They help to avoid any future confusion or conflict.

Finally, please make sure your freelancers/contractors see and agree the contract before they start work, so there are no arguments about their terms and conditions and contractual provisions later on.Also see our guide to what you should include in your contracts.

If you are an Employer and need ongoing professional help with any staff/freelance issues then talk to Lesley at The HR Kiosk - a Human Resources Consultancy for small businesses.

‍Please note that the advice given on this website and by our Advisors is guidance only and cannot be taken as an authoritative or current interpretation of the law. It can also not be seen as specific advice for individual cases. Please also note that there are differences in legislation in Northern Ireland.