You started your business or got the job running it because you are really good at what you do. You have a passion for a product or a service, and you thrive from growth and success.
You know you don’t have the skills for the legal bit, so you hire a solicitor to make sure your commercial contracts are robust. You also recognise that when it comes to filing year-end accounts and tax advice you probably need an expert, and therefore will have an accountant on hand.
So why, oh why, do business owners think that they can DIY employment law and HR?
Household DIY has become something of a national pastime, and a public holiday would not be complete without a trip to a hardware store. But it is not always advisable to tackle every job yourself!
If you are lucky, you might save time and money taking on certain tasks like painting or putting up shelves. But there are also jobs where it would definitely work out cheaper in the long run to call in the experts. The same is true of HR in your business.
The biggest HR DIY mistakes
The biggest HR DIY error we see in SMEs is with the employment contract. This is the most important legal arrangement between you and your employee and it is designed to protect you both. An employment contract is an agreement between an employer and employee that sets out the terms and conditions of employment. It can be written or verbal. Your employment contract cannot provide less than the legal minimum set out in the National Employment Standards or the industry awards or registered agreements that may apply.
Although it is not legal requirement to have an employment contract it is definitely best practice.
Free downloads and templates are just not going to be suitable for your specific business. They will no doubt have key clauses missing that would otherwise protect you. Employment contracts that are borrowed often give unaffordable benefits or totally inappropriate restrictions or clauses that are not applicable to your staff. Downloaded or borrowed legal documents may also be out of date. How do you trust the source?
So, we are going to set out the contract DIY mistakes you are opening yourself up to. We implore you to call in the experts to save you time and money in the long run!
Common HR DIY contract mistakes
1. Wrong employment status
The first big mistake is the nature of the employment itself: Independent contractor, fixed-term, employee – part-time or full-time or casual. Employers often decide to engage people on the wrong type of contract, opening themselves up to future Fair Work claims. It’s really complex as recent high-profile cases such as Uber show. Get expert advice on the status of your staff to save you time, money and a headache later.
2. Not taking Awards or Industrial Instruments into account.
Employment contracts cannot be drafted to completely avoid enterprise agreements or modern awards applicable to employment. Even if your company is paying well above minimum wage you cannot ignore Awards or Industrial Instruments. You can however draft an employment agreement that lessens the administrative burden while still ensuring compliance.
3. Extra (and costly) liabilities
Borrowing contracts from other companies, or cutting and pasting a contract you were employed on in a previous life, can lead to unintended or extreme generosity!
We frequently come across contracts that are wholly unsuitable for an SME that give executive level benefits packages (which would be fine if done with intent and the business can afford it). These then leave businesses wide open to huge costs they didn’t really need or want!
Contracts borrowed from other companies may provide for more notice periods for termination then the minimum standards therefore you may need to pay out more if you terminate that employee than legally required.
4. Missing minimum conditions
Employees are protected by National Employment Standards with or without an employment contract. Employees are also protected by any applicable registered agreements. You cannot provide for less than the minimum conditions under the law and workers cannot contract out of the rights they have under employment laws.
One DIY contract botch job we came across recently was drawn up in-house at a company and didn’t meet the minimum wage. Totally illegal!
5. Over the top restrictions
Time and time again we see inappropriate and unnecessary non-compete clauses placed on the whole staff body. This is because a contract has been borrowed from another company for a different role, and then applied to a whole staff team. We have seen a cleaner being bound by a non-compete that prevented them from going and working in finance and tax for 12 months after leaving employment! In addition, if you put these in everyone’s contracts, it could make them all completely unenforceable!
6. Out of date clauses
The law is not static and new regulations are routinely changed of employment law. If your contract is more than 12 months old, some of it provisions may not be valid any longer under current regulations. Regular review of contracts and updating of agreements is essential.
7. Making the staff handbook or employment policies contractual
Big mistake! This is totally unnecessary and can leave you wide open to breach of contract claims. You are essentially making all your company polices contractual. So if and when you want to change them you have contractual negotiations to do with staff! SMEs need the flexibility to add and change their business policies as needed.
How to get a fit-for-purpose employment contract
Every business needs a robust employment contract that is bespoke to them, fit for purpose, is legal and up to date and protects them against any eventuality. You are simply not going to get this from a template download or a DIY job. So please, for the sake of your business’s bottom line and your stress levels, get the professionals in before you need to shout “Help! HR DIY SOS”.