Key among the things to be addressed when launching a social enterprise is staffing. A variety of workforce issues need to be considered. These will vary depending on whether the organisation is a new business with no existing staff, a startup, or a business that is spinning out from a larger organisation, often in the public sector, with existing employees transferring with it. The nuances are outlined below.
Startups
When forming a social enterprise it is crucial to get the right people on board to ensure that the values and ethics that will drive the social enterprise to success are understood and filter down throughout the organisation. As such, you must ensure that your recruitment process reflects this.
The recruitment process should consist of at least two interviews to ensure that applicants are suitably vetted. Interview questions and, if applicable, exercises should be considered carefully to succeed in identifying key qualities. At least two references should be requested from former employers or, where appropriate, a non-employment referee. A probationary period can be used as a trial to test the employee's suitability in practice. The period will usually be between three and six months, depending on the role.
Employees employed after 6 April 2012 will only be able to claim unfair dismissal after completing two years' service (prior to this the qualifying period was 12 months).
This gives employers a better opportunity to vet employees but note that certain claims may be pursued without needing a qualifying period, including discrimination, so a probationary period is still a useful way of managing expectations.
The Employment Rights Act 1996 requires employers to put in place a statement of specific terms and conditions of employment within two months of an employee starting work. These are usually set out in a contract of employment which would include more than the statutory minimum terms.
On the whole, employment legislation is designed to protect the rights of employees but a well-drafted contract of employment can offer the employer flexibility and protection.
A staff handbook should be put in place, as this can go into further detail than the contract to manage the employment relationship and expectations of the parties. It could include policies such as health and safety, family rights, dress code, and internet and mobile phone usage. The list is endless and should be bespoke to each organisation, so as to offer maximum protection.
The staff handbook need not be contractual. Contractual policies must be followed by the parties and can only be varied by agreement. Non-contractual policies serve as guidance. Ideally, the handbook should be drafted so that obligations on the employee are contractual and obligations on the employer are non-contractual to give the employer more scope to vary the policy or deviate from its terms.
Spinning out
Employers seeking to spin-out into a social enterprise will face very different staff issues. Where a service transfers from one organisation (the transferor) to another (the transferee) the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) may well apply to transfer employees' contracts of employment to the transferee, so protecting their continuity of service and terms and conditions of employment.
Employees transferring from the public sector benefit from greater protection in terms of pension provision than those transferring from private sector organisations. The transferee will need to ensure that it can offer comparable pension benefits, which can be costly. A comprehensive due diligence exercise will need to be carried out to confirm the application of TUPE, identify which employees will fall within the scope of the regulations and to determine the terms and conditions of employment of those employees to establish what the staff costs will be.
TUPE prohibits the harmonisation of contracts of employment with existing employees. However, terms and conditions may be varied in limited circumstances. This might include changing working hours or pay, but caution must be exercised in such circumstances, as the legislation is not always clear cut.
TUPE requires the transferor to inform and consult with employees prior to a transfer. Particularly when spinning out, it is a good idea for the transferee to take part in the consultation process and engage with trade union representatives to get employees on board early on and share the vision of the new organisation.
It would be prudent to go through contracts of employment and the staff handbook carefully to ensure you are familiar with the employees' entitlements and avoid any disagreement in future.
Whether starting up or spinning out, employers would benefit from familiarising themselves with their legal obligations in relation to staff to avoid costly claims.
Gemma Brown is employment law specialist with public services law firm TPP Law
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