1. Recruit staff lawfully

1.1. Do not allow any prejudice to affect your decisions.

Discrimination - whether it be intentional or otherwise - can be made on a number of grounds. For example, discrimination because of a person's race, age, nationality, sex, sexual orientation, disability, religion, marital status, parental responsibilities, pregnancy or philosophical or political belief is illegal (see section 4).

Focus only on the requirements of the job when placing advertising and hiring people.

Maintain records, so you can explain why you chose one candidate over another. Applicants can request to see interview notes.

1.2. Remember that a legal contract of employment exists as soon as you offer a job - even verbally.

Make it clear at the interview that you are not offering a job at that stage.

In any job-offer letter, explain that the contract will be governed by written terms and conditions to be provided later.

A contract can be conditional on the basis that the candidate provides evidence of suitability - such as adequate references.

If the condition is not met and the employee has not yet started work, the contract does not take effect.

1.3. You must provide a written statement of terms and conditions.

You must do this within the first two months of employment.

This must cover specified areas including pay, working hours, holiday entitlement, job title (or job description) and place of work.

Include a statement that you reserve the right to amend or add to the job description.

Reserve the right to change your employee's place of work. Otherwise, you will be in breach of contract if the business relocates.

You must include details of your business' discipline and grievance procedures.

This should include who the employee with a discipline or grievance issue should contact, how to go about it and what further steps will follow as part of the process.

Make sure the disciplinary procedure clearly states the grounds for which employees can be dismissed. These include gross misconduct, being convicted of a criminal offence, unauthorised absence and, in certain circumstances, regular or protracted absence for ill health.

1.4. Remember that you cannot unilaterally change the terms of the contract.

Altering fundamental terms and conditions without the employee's consent can be a breach of contract

Unless the change benefits the employee, you could be sued for constructive dismissal, breach of contract - or both.

2. Obligations on working hours, leave and pay

2.1. Comply with statutory requirements on working hours and leave.

Most employees are entitled to work no more than a 48-hour maximum average working week. Each employee can voluntarily agree to disapply the rules. Any agreement must be in writing and signed by the worker.

There are detailed regulations on minimum rest periods.

An employee who is a parent or carer of a child under six, a disabled child under 18 or who is a parent or carer of a dependent adult has the right to make a request for flexible working. Employers must give this serious consideration.

Part-time workers have the right to be treated no less favourably than full-timers. So, for instance, part-timers are entitled to holiday on a pro rata basis.

• Full-time employees are entitled to a minimum of four weeks' paid leave a year.
• Employees are entitled to maternity leave, paternity leave, adoption leave, parental leave and leave for family reasons. Parental leave and leave for family reasons are unpaid, and there are limits on how much can be taken and when.

2.2. Pay employees at least the national minimum wage.

This stands at £5.35 an hour for staff aged 22 and over.

There is a lower minimum wage of £4.45 for those aged 18 to 21

Employees aged 16 and 17 - excluding apprentices - must also be paid at least £3.30 an hour.

2.3. Deduct your employees' tax and NI contributions and pay them to the HM Revenue & Customs.

You can get more guidance on this from HM Revenue & Customs.

Visit www.hmrc.gov.uk

2.4. Give every employee a wage slip.

This must show total gross pay, deductions and net pay.

Deductions (eg tax, NI, pension contributions and union subscriptions) must be itemised.

2.5. Keep up to date on employer's National Insurance (NI) contributions.

You must pay these contributions on employees' wages and taxable benefits.

2.6. Account for employees' tax and National Insurance on benefits in kind.

Some benefits are free of tax and NI. Check with HM Revenue & Customs.

3. Understand employees' rights

3.1. You must not undermine the relationship of 'trust and confidence' with employees.

Employees have reciprocal obligations to serve the employer honestly and faithfully and to work with due diligence and care.

3.2. Provide a secure, safe and healthy working environment.

For more information visit the Health & Safety Executive website

3.3. Remember that employees have the right to belong (or not to belong) to a trade union.

Unions must be recognised by businesses with 21 or more employees where a specified percentage of the workforce votes for recognition.

3.4. Provide employees with a reasonable degree of privacy.

In particular, the circumstances under which employers may monitor phone calls, emails or Internet use are regulated under the Data Protection Act (DPA) and the Regulation of Investigatory Powers Act (RIPA).

To find out more about the DPA visit www.ico.gov.uk

To find out more about the RIPA visit www.homeoffice.gov.uk

3.5. Protect employees against discrimination.

You are responsible for any discrimination by or towards your staff. Make sure your discipline and grievance procedures are robust (see section 6).

3.6. Bear in mind that employees are entitled to blow the whistle on their employer's wrongdoings.

If they are subsequently sacked or demoted, they can sue for full compensation for any losses incurred. There is no ceiling on such claims.

3.7. Give all employees with more than one month's service details of their notice period.

The statutory minimum is one week (after one month's service), rising to two weeks after two years, with a maximum of 12 weeks after 12 years.

3.8. Remember that most employees are entitled to keep their jobs if the business changes hands.

In most cases, sackings would constitute unfair dismissal under the TUPE Regulations. Employee rights are generally protected when all or part of a business is sold.

3.9. Deal with discipline and grievance issues according to the minimum three-step procedure.

You can find more details in the Acas Code of Practice.

Visit www.acas.org.uk/media/pdf/l/p/cp01_1.pdf

4. Avoid discrimination

4.1. Understand what 'discrimination' means.

Discrimination is treating someone less favourably because of their race, colour, nationality or ethnic origin, sex, sexual orientation, disability, religious or philosophical belief, membership or non-membership of a trade union, political beliefs, parental responsibilities, marital status, pregnancy, part-time employment status or their age.

Any less favourable treatment on any of these grounds is unlawful.

4.2. Avoid indirect discrimination.

Indirect discrimination occurs if you impose a 'provision, criterion or practice' which places people belonging to certain groups at a disadvantage, which cannot be objectively justified.

• For example, introducing irregular shiftworking patterns or only employing factory packers who have GCSE English.

4.3. Do not victimise staff involved in a discrimination claim.

If you treat someone less favourably because of their actions (or potential actions) in connection with discrimination proceedings against your business, it could count as victimisation.

• For example, failing to promote someone who has brought a sex-discrimination case against you.

4.4. Make 'reasonable adjustments' to enable people with disabilities to work for you.

These aim to remove physical and non-physical barriers.

In some circumstances, you may be justified in refusing to make adjustments.

• For example, where you can prove it would be ineffective, not practicable, or in breach of health and safety legislation regulations.

4.5. Bear in mind you are legally responsible for discrimination by your staff.

Be prepared to investigate complaints thoroughly and impartially. If the complaint is justified, be ready to offer redress and change your policies.

5. Understand sick pay

5.1. You must pay statutory sick pay (SSP) to qualifying employees.

This is set at £72.55 a week in 2007/08, for up to 28 weeks.

Employees qualify from the fourth day of sickness onwards.

They must earn more than the lower earnings limit of £87 a week.

They must be aged between 16 and 65.

You can withhold SSP under certain circumstances.

For more information visit the Department for Work and Pensions website

5.2. Consider paying higher levels of sick pay.

It is common to continue with full pay for a given period, often up to six months.

If your company's arrangements are more generous than the statutory minimum, you can offset your payments against the SSP you would have had to pay.

5.3. Be prepared to prove your case if you sack someone for sickness or repeated absence.

If the employee's continued or repeated absences are causing real problems, in certain circumstances you can end their employment.

The employee might take you to an employment tribunal, so you must be able to prove your actions were reasonable.

6. Get discipline and grievance procedures right

6.1. Make sure you have discipline and grievance procedures in place.

Basic information on disciplinary and grievance issues must be included in your employees' written statement of employment terms and conditions.

Make sure employees know what offences merit disciplinary action, and apply the rules consistently.

Disciplinary procedures should follow the Acas Code of Practice.

You must also follow a minimum three-step procedure when dealing with discipline and grievance issues.

Visit www.acas.org.uk/media/pdf/l/p/cp01_1.pdf

6.2. Make sure you have a good reason if you choose to dismiss someone.

Good cause might include:

Redundancy might also be grounds for dismissal. But the reason must be genuine and the selection fair.

• persistent or gross misconduct, incompetence, lack of qualifications or a legal bar on that employee doing that job.
• inability to do the job because of frequent or prolonged absences due to sickness or injury.
• Redundancy processes and timescales are carefully prescribed, and it is essential to follow them.

Visit www.acas.org.uk/media/pdf/l/p/cp01_1.pdf

6.3. Beware of unlawful and unfair dismissal.

An employee can claim unfair dismissal if he or she has been dismissed for an 'unfair' reason, or if unfair procedures are followed. In general, they must have one year's service and be under retirement age. But in some circumstances, age and length of service are immaterial.

It is illegal to dismiss anyone on grounds of race, sex, disability, sexual orientation, religion or philosophical belief or their age. There is no statutory upper limit on the amount of compensation that can be awarded in such cases.

• Where you have breached a fundamental term of the employment contract, or made it impossible for employees to do their job, they can sue for 'constructive' (unfair) dismissal. The basic award can be up to £9,300. But a tribunal also has powers to award compensation for financial loss up to a maximum of £60,600.

7. Understand parents' rights

7.1. Allow mothers-to-be paid time off for ante-natal care.

This is a legal right you must grant to all employees, regardless of length of service.

7.2. Give statutory maternity leave (and pay if appropriate) to mothers.

Every mother is entitled to 26 weeks' ordinary maternity leave, during which all her contractual rights (except remuneration) continue.

You must pay statutory maternity pay (SMP) if the mother has completed 26 weeks' service by the end of the 15th week before the expected week of childbirth (EWC).

Every mother also has the right to additional maternity leave, if she has 26 weeks' service (by the end of the 15th week before the EWC).

Every mother has the right to return to work up to one year after having the baby, if she has 26 weeks' service (by the end of the 15th week before the EWC).

Remember that a mother has the right to claim automatic unfair dismissal and sex discrimination if she is dismissed for any reason to do with the pregnancy or childbirth.

• You must inform her of the date when she is due to return to work. She can come back earlier, but must give you 28 days' notice.
• It is illegal to let a woman return to work within two weeks of childbirth, or within four weeks if the work is in a factory.
• Statutory maternity pay is paid at a higher rate, equal to 90 per cent of average weekly earnings (if more than £112.75), for the first six weeks. It then goes down to a fixed rate of £112.75 per week or 90 per cent of average earnings if lower for up to 20 more weeks (33 weeks for mothers of babies due on or after 1 April 2007).
• You may be able to deduct most (if not all) of the SMP you pay from your employer's NI contributions.
• A woman who is not eligible for SMP but has paid enough NI can claim maternity allowance from the Department for Work and Pensions.
• If the baby is due on or after 1 April 2007, a pregnant woman has the right to additional maternity leave regardless of length of service.
• Additional maternity leave starts at the end of ordinary maternity leave and runs for up to 26 weeks.
• If you have five employees or fewer and it is not reasonably practicable to offer suitable re-employment, special exemptions apply.
• If she is dismissed, you must give written reasons for the dismissal without having to be asked.

7.3. Provide paid paternity leave.

If an employee will have - or expects to have - responsibility for a child's upbringing, is the child's biological father or partner of the child's mother, they are entitled to two weeks' paid leave following the birth of the baby.

• They must have worked for you for at least 26 weeks by the end of the 15th week before the EWC.
• The pay is set at the same level as SMP.
• You can deduct this payment from your business' tax and National Insurance contributions.

7.4. Give paid leave to adoptive parents.

Employees who are newly matched with a child for adoption can take adoption leave if they have worked for you for at least 26 weeks.

• One member of a couple - or an individual - is entitled to adoption leave and pay (six months' paid and six months' unpaid leave). The other member of a couple will qualify for paternity leave.

7.5. Allow unpaid leave for parents of young children or children with disabilities.

Parents can request unpaid leave to look after children aged under five or children with disabilities under 18.

• Parents can take up to 13 weeks.
• They retain all their employment rights during their time off.

7.6. Consider flexible working for parents and carers.

Legally, you must 'consider seriously' requests to work flexibly from parents or carers of children under six, children with disabilities under 18 and parents or carers of dependent adults.

• Flexible working includes provisions such as annualised hours, flexitime, job-sharing, shift-working and term-time working.