So you may have just recruited your new team for the season ahead or just looking at your current staffing structure. Now you need to make sure that each member of staff is given the right contract that clearly defines their correct employment status. But do you know what it should be? What is the difference between a worker and an employee? Let us help clear the fog!

In law, an individual can be an employee, a casual ‘worker’ or someone who is genuinely self employed. Each of these groups have different levels of protection in law with employees enjoying the highest level of protection.

Employee

An employee is someone who has entered into a contract of employment. As they have a contract of employment they enjoy employment rights including Unfair Dismissal protection unlike workers. You should give this type of contract to any individual where, if you give them work, they are expected to accept it. They do not have the option to turn it down (unless they are sick or on holiday). This type of contract can be used whether the individual works set hours, or limited, variable hours. A good example would be an employee who expects to work (and is expected to work) every Saturday.

Workers

It is very common to have an agreement between an employer and an individual which simply says that the employer will not guarantee hours and the individual is free to turn work down.

This is not an employment contract, but a causal or seasonal worker agreement. This type of

agreement can be very useful for employers and workers, particularly in hospitality and leisure. For employers, it allows them to have a bank of workers to be called upon if necessary. For workers, they can be great to allow for flexibility in working hours. This is helpful if a worker is trying to fit work around studying or child care commitments.

A worker has the same right to holiday as an employee because the Working Time Regulations apply to all workers. Also, if a worker is scheduled to work a shift but is off sick, they may be entitled to Statutory Sick Pay. However, importantly this type of relationship does not confer employee status on a worker so they will not have employee rights such as the right to claim Unfair Dismissal but, generally, the worker is free to work elsewhere too and is free to turn down the offer of hours from the employer.

It is important that you are aware that the label that the parties apply to a relationship i.e. worker or employee are not definitive. That is an agreement may say that an individual is a worker, but in actual fact they are an employee. If an individual argues that their written agreement doesn’t truly reflect the type of working relationship that exists in practice, the Tribunal will apply a range of tests, to weigh up what is the genuine nature of the relationship in practice.

However, the starting point for any Employment Tribunal would be, “what does the written agreement say?”

Continued on page 2

Contracts and status: are all your staff on the right contract?

Welcometo the Spring edition of our Hospitality, Retail and Leisure Sector BriefingEmploying staff is rarely straight forward in the hospitality, retail and leisure sector. There are many exceptions and quirks that can apply to the general employment rules that then give rise to myths and unclear guidance.

This briefing has been put together specifically for the hospitality, retail and leisure sector to dispel some of these myths and give you clear guidance for managing your staff whether they are permanently employed, with you for a season or engaged on a casual basis.

Our favourite quote

The true definition of “Hospitality” - Making your guests feel at home when you wish they were.

ContentsContracts and status

What are the rules on hours that staff* can work?

Employing 16-17 year olds: What do you need to know?

Managing staff issues

Guest article: Tax points for hotel, leisure and catering workers

How we can help your business

Hospitality, Retail and Leisure Sector Brief

Hospitality, Retail and Leisure Sector Briefing Spring 2015

clarkewillmott.com Great service... Great people...

ing

What happens if my staff work too many hours, or do not have sufficient rest breaks?

As employer, you are responsible for taking reasonable steps to ensure that each member of staff has adequate time off and takes the necessary rest breaks during work time.

You are required to keep records of the hours worked by your staff over the past 2 years. You may be able to demonstrate this information from payslips if your workers are hourly paid. If you have salaried staff, the best way is to keep weekly timesheets.

You must make sure that your staff are aware of their entitlement to take a rest if they work a certain number of hours, and that they can take their rest breaks. In order to be sure of this you must make sure you have enough staff covering each shift, particularly through busy times of the day, week or season.

If you breach the working time rules, there are a wide range of penalties available against you, depending upon the rule in question that has been broken. You may be ordered to pay a fine, or to pay financial compensation to the worker.

02 Hospitality, Retail and Leisure Sector Briefing Spring 2015

B i r m i n g h a m • B r i s t o l • L o n d o n • M a n c h e s t e r • S o u t h a m p t o n • Ta u n t o n

If this document is signed by the employer and the individual, it will be difficult for the individual to convince a Tribunal that they were in fact, an employee and that they have additional rights.

These types of agreement should be used by businesses which have genuine varying requirements relating to staffing. A catering company may well use causal workers for big events. They are also used frequently for seasonal workers.

Self employed (Contractor)

The self employed individuals are different again. They invoice the business for work they have done, are free to work elsewhere, use their own equipment etc. Businesses must make sure such workers are genuinely self employed to ensure that they do not attract individuals rights to holiday and so forth or full employee’s employment rights.

This type of arrangement is generally governed by a consultancy agreement which deals with the obligations on each party.

Summary

To recap, the real point of caution is that you must ensure that you get all the individuals that work for you, to sign a contract or agreement issued to them, that accurately reflects what happens in practice.

Without a written agreement, signed by both parties, it is more difficult

for an employer to demonstrate whether an individual was an employee, worker, or self employed.

This is often not a problem when an individual is working for you. However, what if you suddenly have no more work for them? You notify them and because they are, for example, a worker, you simply do not offer them further work. The worker is disgruntled because they want to continue working for you, and so they try to claim that in actual fact they were an employee all along. They claim to the Tribunal that they have been unfairly dismissed and that they are owed notice pay and perhaps a redundancy payment. Without a written agreement, this claim could be very time consuming and costly for your business and we have seen this happen many times.

If you would like any assistance on any of the points raised in this article, please contact a member of the team. We can draft all the essential documents that you need.

Status Document needed

Employee Employment Contract

Worker Casual or Seasonal Worker Agreement

Self employed/ Contractor Consultancy Agreement

Contracts and status: what you need to know continued

The Working Time Regulations can be confusing and there are exemptions to some of the rules that can apply to particular workers in the hospitality sector. We have put together some of our most frequently asked questions on this area so that you don’t get caught breaching the regulations.

How many hours can a member of staff work per week?

A member of staff should not work more than 48 hours per week (including overtime) on average under the Working Time Regulations. Usually this average is taken from the last 17 weeks worked.

However, staff can “opt out” of the rule of working no more than 48 hours per week. If you would like your staff to do this, to avoid being penalised you must get them to sign a specific opt out form. We can help you to draft this.

What rest breaks must staff have?

Workers are entitled to the following:

• A daily rest period of 11 hours’ uninterrupted rest each day.

• A weekly rest period of 24 hours’ uninterrupted rest per week.

• A rest break of 20 minutes for every six hours worked. This can be unpaid.

There are certain sectors where the above entitlements do not apply to. Whilst the hospitality and leisure sector is not exempt from these rules, certain workers are excluded such as:

• Shift workers where they cannot take such rest between the end of one shift and the start of the next.

• Workers who work split shifts, such as some bar, restaurant and kitchen staff.

If shift workers are not given the rest periods set out above, they must, wherever possible, be given an equivalent period of compensatory rest. Shift workers who lose rest when changing some shifts will usually receive additional rest upon other shift changes that may satisfy their compensatory rest entitlement.

Young workers have greater entitlements to rest breaks than adult workers – see next article.

What about workers on night shifts?

A night worker must on average not work more than 8 hours per shift. This includes any compulsory or regularly worked overtime.

What are the rules on hours that staff* can work?*Reference to “staff” includes “employees” and “workers” throughout this article.

03 Hospitality, Retail and Leisure Sector Briefing Spring 2015

clarkewillmott.com Great service... Great people...

The rules on employing young workers can be complicated. There are rules that apply on the hours and types of tasks they can undertake. So here are the facts:What is the definition of a young worker?

Young people over school leaving age and under 18 are known as young workers and have different rights to child workers. There are special laws to protect the employment rights of young workers. These concern their health and safety, what jobs they can do, when they can work, and how many hours they can work. These laws are very strict and an employer can be prosecuted for breaking them.

What do you have to pay them and what records do you need to keep?

Young workers are entitled to a National Minimum Wage which is currently £3.79 an hour.

Employers will need to record and report young workers pay as part of running payroll and where applicable will also need to do other regular PAYE tasks such as making statutory deductions.

Are they still entitled to holiday pay?

A young worker is legally entitled to paid holiday, in the same way as other workers.

What work can young workers do?

Under the Management of Health and Safety at Work Regulations 1999, an employer has a responsibility to ensure that young people employed by them are not exposed to risk due to:

• lack of experience

• being unaware of existing or potential risks and/or

• lack of maturity

An employer must consider:

• the layout of the workplace

• the physical, biological and chemical agents they will be exposed to

• how they will handle work equipment

• how the work and processes are organised

• the extent of health and safety training needed

• risks from particular agents, processes and work

Certain types of work have special restrictions, these are:

• work which they are not physically or mentally capable of doing;

• work which brings them into contact with chemical agents, toxic material or radiation;

• work which involves a health risk because of extreme cold, heat or vibration.

Young workers are only allowed to do the work above under the following circumstances:

• where it is necessary for their training;

• where an experienced person is supervising them; and

• where any risk is reduced to the lowest level that is reasonable.

Can young workers serve alcohol in a bar or restaurant

Young workers are allowed to sell alcohol in a bar or restaurant provided that each sale is specifically and expressly authorised by the DPS (designated premises supervisor).

However, a local authority may have bye-laws which stop people aged under 18 selling alcohol except in sealed containers, such as in cans or bottles, so it is recommended that further checks are made.

What hours can young workers work?

The law states that young workers must not work more than eight hours a day, or more than 40 hours a week.

What rest breaks are they entitled to?

They must have twelve hours’ rest between each working day, and 2 days (48 hours) rest per working week. These 2 days should be taken together with no working in between them.

They are also entitled to a 30 minute rest break when they work for longer than four and a half hours. Rest breaks must be:

• taken in one block;

• taken somewhere in the middle of the work period, not at the end;

• spent away from the place of work, if wanted; and

• taken when the employer says, as long as it meets these conditions.

There are special limits on the hours they can work at night. Generally young workers can’t work between 10pm and 6am, but it can be agreed to change this to be between 11pm and 7am. There are some exceptions for young people who work in, for example, retail, hotels and catering, agriculture and hospitals.

Young workers are not allowed to work between midnight and 4am, except in the most exceptional circumstances.

What rest breaks are they entitled to?

Employers will need to:

• Be aware of the age of their employees and when they legally qualify as young workers.

• Be aware of the national minimum wage of young workers, how much they are earning and potential operations of PAYE.

• To know the restrictions for individual young workers doing certain types of jobs. This may vary for each individual young worker and will need to be assessed on their own capabilities.

• Be aware of the legal restrictions for young workers selling and serving alcohol and any local authority bye-laws which may further restrict this.

• Mindful of hours of work, rest breaks and the exceptions to the normal rules for young workers. The main area for potential confusion is the exceptions for night work and an employer must be fully aware of these exceptions and the rules that go with them and follow them to the letter.

• Be aware that the law protecting young workers is very strict and prosecution for employers who break them is a real possibility. Employers should err on the side of caution.

This guidance is intended to cover the general basic obligations of employers. If you are concerned about the employment of young workers in your business please do call us. More detailed advice should also be sought from your local Council for specific situations.

Employing 16-17 year olds: What do you need to know?

04 Hospitality, Retail and Leisure Sector Briefing Spring 2015

B i r m i n g h a m • B r i s t o l • L o n d o n • M a n c h e s t e r • S o u t h a m p t o n • Ta u n t o n

We have worked with a large number of hospitality, retail and leisure clients over the years and have seen many come unstuck on what seem like small issues. We have taken some of the issues we have resolved for clients and put together these frequently asked questions to ensure that you don’t fall into the same traps.What do I have to pay my staff?

The current minimum wage hourly rates are as follows:

21 and over 18 to 20 Under 18 Apprentice

£6.50 £5.13 £3.79 £2.73

From October 2015 this will increase to:

21 and over 18 to 20 Under 18 Apprentice

£6.70 £5.30 £3.87 £3.30

Don’t forget that if you pay a salary to employees, you still need to comply with the minimum wage. Say, for example, you pay someone over the age of 21 a salary of £14,000pa for a 40 hour week. If they then work 45 hours a week, unless you pay them overtime for the additional 5 hours, you will be paying below the minimum wage. That is £14,000pa / 52 weeks / 45 hours = £5.78 per hour. Be careful not to get caught out!

Do we need to have a staff handbook?

If you have any employees, you are legally obliged to have a disciplinary and grievance policy. These must be referred to in all contracts of employment and all employees must be given a copy of each policy, or know where they are kept if they want to read them.

There are a raft of other policies that you can have, which will assist you enormously to manage specific and often difficult situations, such as frequent or long term sickness absence, employees’ use of social media, what to do if bad weather stops your employees getting into work, to name but a few.

Does my staff handbook apply to workers as well as employees, or just employees?

Usually only your employees will have to follow your staff handbook. However, the right not to be discriminated against applies to workers as well employees, as do the Health and Safety regulations, so it is sensible to have an equal opportunities policy and a health and safety policy that applies to workers as well.

It is also useful to set out general work rules for all your staff, which sets out the expected standards for your entire workforce, that everyone must follow. This can include rules, for example in relation to dress code, use of mobile phones at work, what to do if a worker is sick and cannot carry out their shift, social media policy etc.

It is important that you make all workers aware of these rules by giving them a copy and talking through them as part of an induction programme. It is essential to provide health and safety training to all workers.

What procedure do I have to follow if a casual worker breaks a rule? E.g. social media post.

First and foremost it is really important to explain to all of your staff what your rules are. This should be done through a thorough induction process regardless of whether they are a casual worker or an employee.

If a member of staff does break a rule, always investigate this thoroughly before taking any action and contact us for further advice on how to proceed.

Are all staff entitled to notice pay?

Employees are entitled to statutory minimum notice which is one week for each complete year of service up to a maximum of 12 weeks.

Workers usually aren’t entitled to minimum notice periods if their engagements will be ending. However, if they have worked a consistent number of hours it is best to take advice on this if you decide not to offer any more hours.

Do I need to “dismiss” seasonal workers at the end of the season or casual workers if the work dries up?

It may be clear to a worker that no work will be provided for them after the season ends or if you have not offered them any work for a number of weeks. However, it is important to write to them confirming their last day of work and the termination of their casual worker agreement, along with their P45. If you just send a P45 you run the risk that they will argue that the casual worker agreement continued. If they come back to work for you for future seasons or shifts they may be able to argue that they have continuous service over several years. If they can argue that they have continuously worked for you for long enough, they will be deemed to be employees and will have earned unfair dismissal rights and other employment protections. If you have seasonal workers, be clear in the seasonal worker agreement when a season ends.

Are seasonal and casual Workers entitled to holiday pay? If so, how do I work this out?

All staff are entitled to the statutory minimum level of paid holiday. This is 28 days per year for full-time employees including the normal bank holidays.

The amount that they are entitled to can be calculated on the basis of the number of hours (or days) worked. Workers accrue holiday at the rate of 12.07% of the hours worked, which is calculated as follows: 5.6 weeks divided by 46.4 weeks (which is 52 weeks less 5.6 weeks).

Are staff entitled to sick pay?

If a casual or seasonal worker has been allocated hours of work in advance and then they subsequently cannot work those hours because they are sick, they may be entitled to statutory sick pay (SSP). However SSP is not payable for the first 3 days of absence.

For employees there is no statutory right to receive full pay for time off sick, although you may agree differently in the employee’s contract of employment.

In some cases an implied right to be paid while off sick may arise, for example where you have routinely made such payments to your staff. As an employer you should be cautious about how you exercise any discretion to make payments for periods of illness, as making ex gratia payments in one case but not in another could give rise to claims of discrimination.

Managing staff issues

05 Hospitality, Retail and Leisure Sector Briefing Spring 2015

The treatment of payments to casual workers and students

Up to 5 April 2013, employers were able to pay students without operating PAYE provided the student worked in the school holidays only and completed a declaration form P38(S) confirming that they were a student and would be returning to full time education until the end of the tax year.

The student declaration was withdrawn from 6th April 2013 and employers now need to operate PAYE normally for all students and other casual or seasonal workers other than the genuinely self-employed. Failure to do so might lead to some nasty surprises!

Dealing with tips, gratuities and service charges

Amounts that workers receive as tips, gratuities and service charges in the course of their work are taxable, but how they are subject to tax and whether they are also subject to national insurance contributions depends on how the tips are paid to the workers.

1) If the employer collects the tips and subsequently pays them to the workers, then the employer needs to operate PAYE on those payments and deduct tax and national insurance. The employer must also account for and pay over employers’ national insurance contributions on the amount paid to the worker.

• If workers receive their tips through a ‘tronc’ then the troncmaster, that is the person who operates the tronc, should operate a PAYE scheme and deduct tax from payments to workers. As long as the employer has no say over which workers get how much by way of tips, then no employees’ or employers’ national insurance contributions will be due. In this regard, the employer can appoint the troncmaster but is not allowed to influence troncmaster in deciding how the tips are allocated between the workers.

• If the employer does determine how the tips are allocated, then national insurance contributions are due on the tips. The troncmaster accounts for PAYE tax, but the employer must account for employees and employers national insurance.

• If the employer were to keep some of the tips before handing the remainder to the troncmaster to allocate as the troncmaster sees fit, then although the employer is affecting the overall level of the tips to be allocated, provided they do not influence how or to whom the tips are allocated to the workers then the payments to the workers are not subject to national insurance.

2) Where customers pay tips directly to workers, or leave cash on the table, and the workers keep those amounts, then the employer does not need to operate PAYE in respect of those tips. The worker should report the tips directly to HMRC, and HMRC will collect the tax due by amending the worker’s tax code, but this is the responsibility of the employee, not the employer.

Provision of Staff uniforms

Where employers require their staff to wear uniforms, the employer can provide the uniform to the worker without the need to account for tax or national insurance contributions.

The same exemption applies where clothing of a protective nature is provided to workers. For clothing to qualify as a uniform, HMRC say that the clothing should be recognisable as a uniform by the person in the street and should identify the employer, preferably by having the employer’s name and/or logo sewn onto the clothing.

Attaching a detachable badge to the clothing will not usually make the clothing a uniform, even if staff all wear similar clothes in the employer’s corporate colours. There are certain jobs where HMRC accept that the uniform may consist of clothing which is traditional for that particular job and need not conspicuously bear the logo or name of the employer. Examples would be the formal wear of doormen/women at hotels or the evening dress of waiters in restaurants.

If the employer provides other clothing to workers that does not consist of items of uniform or of protective clothing, then that provision is treated as a benefit in kind and subject to class 1A national insurance contributions. Class 1A contributions are paid by the employer at a percentage of the value of taxable benefits in kind. Where the employer pays money to the worker in order for the worker to buy the uniform, then the payment will not be treated as subject to NICs but should be included in PAYE for tax. The worker will then be able to make a claim against tax for the cost of the items of uniform.

Other payments that the employer makes to the employee for purchasing clothing are subject to both tax and national insurance.If workers are responsible for laundering or maintaining the items of uniform there is a flat rate allowance that workers may claim against tax in respect of the cost of doing so. Currently this is £60 per year. This rate is reduced proportionately if the employer bears some of the cost. The worker can claim the actual cost of cleaning and maintaining the uniform but claiming the flat rate removes the requirement to keep evidence of the expenditure.

Tax points for hotel, retail, leisure and catering workers – areas where mistakes are often made! This edition’s guest contributor is Martin Lock of Francis Clark.

Martin Lock Partner 01823 275925 martin.lock@francisclark.co.uk

Great service... Great people...clarkewillmott.com

06 Hospitality, Retail and Leisure Sector Briefing Spring 2015

Our Employment and HR team have a great deal of experience in the hospitality, retail and leisure sector and we can assist your business in a number of ways including:

Legal or HR advice and strategic support

• Dealing with day to day HR queries such as disciplinaries, grievances, capability concerns, short term and long term absences, maternity and paternity rights or flexible working requests.

• Removing tricky employees including advising on ‘without prejudice’ conversations and Settlement Agreements.

• Working with you on longer term projects such as implementing new changes to terms of employment, redundancy consultation and selection or ensuring compliance with TUPE regulations on the sale and/or acquisition of a business.

• Defending employment tribunals and providing step by step advice on the Tribunal process. We also have a strong team of advocates who are able to represent your business at an employment tribunal hearing without you incurring additional costs of instructing external barristers.

Employment documentation

• Contracts of employment

• Bonus schemes

• Seasonal Worker Agreements

• Consultancy agreements

• Company induction programme

• Staff handbooks tailored to include only the specific policies your business needs

• ‘How to’ guides for managers and supervisors on dealing with HR issues

• Settlement Agreements and without prejudice letters

• Key HR letters to employees

As well as drafting the above documents for your business, we also offer a review of your existing employment documentation and will provide you with a risk assessment to highlight key gaps and non compliance issues free of charge.

Training

We can provide effective supervisory and management skills training to help the managers in your business feel more confident and autonomous in their decision making but also pre-empt and deal with employment issues at an early stage.

For further information, please do get in touch with one of our team.

How we can help your business

Key Contacts

Kevin Jones, Partner - Bristol 0845 209 1140 kevin.jones@clarkewillmott.com

Sharon Latham Partner - Bristol 0845 209 1332 sharon.latham@clarkewillmott.com

Emma Hamnett Partner - Manchester 0845 209 1878 emma.hamnett@clarkewillmott.com

Marc Long Partner - Southampton 0845 209 1581 marc.long@clarkewillmott.com

Kate Gardner Partner - Taunton 0845 209 1420 kate.gardner@clarkewillmott.com

Bex Sinclair Head of HR Consultancy Unit - South West 0845 209 1831 bex.sinclair@clarkewillmott.com

If you would like to receive future editions of Hospitality, Retail & Leisure Sector Briefing please contact Bex Sinclair: bex.sinclair@clarkewillmott.com

HR Guardian: Employment Law insurance that protects your business - click to find out more >>

Your HR: Your business, your people, your choice of HR support - click to find out more >>

Your People: The complete HR solution - click to find out more >>

Come and join our newly created “HR Bristol” Networking Group on LinkedIn. This dedicated LinkedIn group will provide you with news, updates and information on HR issues and employment law. We have already established a great networking group, so why not join us?

Click here to find out more >>

clarkewillmott.com

Clarke Willmott LLP is a limited liability partnership registered in England and Wales with registration number OC344818. Authorised and regulated by the Solicitors Regulation Authority (SRA number: 510689), whose rules can be found at www.sra.org.uk/handbook. Its registered office and principal place of business is 138 Edmund Street, Birmingham, West Midlands, B3 2ES. Any reference to a ‘partner’ is to a member of Clarke Willmott LLP or an employee who is a lawyer with equivalent standing and qualifications and is not a reference to a partner in a partnership.

Great service... Great people...