People management and leadership requires an understanding of the legal and local regulatory requirements that need to be considered and implemented in your business strategies and operations.
As a business leader you must be aware of all your legal obligations. You will need to adhere to employment laws and regulations. Although the obligations will vary in each jurisdiction, there are some common features shared by most countries.
In general, you may need to:
• Register as an employer with the appropriate governmental authority, such as the government ministry responsible for employment.
• Comply with any minimum wage laws. These set the minimum pay per hour or day and apply to almost all workers irrespective of the size of the employer. The rate may vary according to the age of the employee or the type of work – for example, internships may carry different rates.
• Obtain employers’ liability insurance to cover compensation if an employee is injured or becomes unwell during the performance of their job. Usually, a minimum level of coverage is required by law.
• Hire personnel that are legally allowed to work at the job position you are offering. This means individuals that have valid working permits or that are duly qualified if qualifications are required by law.
• Enrol all employees and make proper tax and health insurance deductions from their wages. You may also be required to pay payroll taxes.
• Provide your employees with a written document detailing the main employment conditions. This would usually include the job position, salary, hours and days of work, holidays and so forth.
• Comply with health and safety regulations. This is particularly relevant for employees exposed to higher risks such as in kitchens or on construction sites to whom you might need to provide personal protective equipment (PPE).
• Keep records and report payments (through payslips) to employees.
To find out about the specific labour-related regulations that may apply, see the International Labour Organization (ILO) overview for the country in which you are operating.
Employee agreements are made when a person formally agrees to provide their services for a fixed term or for an indefinite period. The general contractual obligations and minimum requirements and obligations are defined by employment legislation in most countries.
In most cases, a contract of service or employment is legally an agreement, whether oral or in writing, in any form, whereby a person formally agrees to render services to or to carry out work for an employer, in return for wages. Although not encouraged, in some limited situations, apprenticeships may be unpaid but nevertheless covered by legally binding agreements.
Bear in mind the following additional specifics of binding contracts:
• any obligations of the employer to deliver a signed copy of the contract to the employee
• the differences between fixed and indefinite employment contracts and full-time or part-time contracts, including any related legal and tax implications
• obligations relating to the expiration of fixed-term contracts: in some jurisdictions, if an employee continues to work on expiration of a fixed-term contract, the employee may be deemed to be retained on an indefinite period contract if the employee is not given a new fixed-term contract within a specific timeframe.
• probation period obligations: the majority of employers have a standard six-month probation period, unless otherwise agreed, during which the contract of employment may be terminated without assigning any reason, subject to any minimum notice requirement, except for specific situations such as maternity or parental leave.
Employment arrangements and contracts are closely related to the type or classification of the employee. Typically, there are two distinct employee classifications:
— Full-time employee: an employee who works a typical full working week for an employer. Employees are usually entitled to:
— public holidays with pay and annual vacation leave
— legally-defined maternity leave, parental leave and leave for urgent family reasons
— a pension scheme
— injury leave.
— Part-time or seasonal employee: an employee who works for less than the typical number of hours of a full-time employee or works for only part of the year. These employees are usually paid pro rata the wage applicable to a full-time employee in comparable employment and may be entitled to a pro rata share of the full-time employee benefits listed above, including any annual bonus.
Pay and entitlements
Generally, legal and regulatory frameworks define that one of the fundamental rights of every worker is the right to receive payment.
When it comes to wages there are a number of considerations including:
— Is there a legally defined minimum wage?
— Does the minimum wage automatically increase every year by law?
— Are there any legally defined adjustments, such as regulatory or tax adjustments that need to be applied to employees’ wages? For example, your employees may be eligible for certain reimbursements.
— Are there any tax obligations, social contributions, medical contributions or other employer obligations?
— Are there any documentation requirements? For example, you may have to issue monthly tax statements or payslips, or state specific information on pay cheques such as details of working hours, by law.
— Are there any other benefits defined by law, such as transportation subsidies, health and pension benefits, social security benefits, days off for important family events and circumstances?
Local regulations typically define the standard working period. This differs between countries, but the average standard working week is around 40 hours during a seven-day period. In addition most jurisdictions define the maximum allowable overtime on a weekly, monthly or bi-annual basis.
Employees are often entitled to a minimum daily rest, also defined by the local regulations. This is usually the case where the working day is longer than four or six hours. The rest break (unless specified in the provisions of any collective agreement in place) must be for a certain uninterrupted period and of a certain minimum time, such as 15 minutes or 30 minutes. Furthermore, an employee is usually entitled to a minimum uninterrupted weekly rest period (normally of 24 hours) in every seven day period.
Some jobs will require specific night or shift work. This may include special hazards or heavy physical or mental strain, and therefore typically should not exceed more than eight hours within a 24-hour period. These special working conditions will be further defined in any employment contract and are often subject to local legislation.
In situations where employees are required to work during a period which would otherwise be a rest period or break, employees will be allowed compensatory rest equivalent to the requirements of daily rest and weekly rest. In exceptional cases where this is not possible, employers are obliged to provide appropriate protection to safeguard their health and safety.
In every country, there are a number of statutory or public holidays which are considered paid days off. If the nature of work is such that employees need to work on those days, they need to be adequately compensated. This type of work may also be considered as overtime work and compensated as such.
Allowing time off
Employees are legally entitled to specific time off during their working periods. This varies depending on the nature of the business, but the most common are:
Paid annual leave
Based on their regular working hours and assuming a full year of regular working periods, employees are entitled to paid annual leave. This also differs among countries, but in general, a total of 20-25 working days (equivalent to four working weeks or more) during a year is considered paid annual leave, while some countries also require employees to be on leave for a minimum of two continuous full weeks during a year (approximately 10 working days).
Sick leave entitlements vary between countries and industries and the period of entitlement may depend on the duration of employment. Usually there is a prescribed number of days that an employee can take as sick leave during a year on full pay. In some countries it is 20 days but it can vary to 40 or more days. During this time, the employer may be obliged to pay the full salary to the employee and if necessary find a temporary replacement. Thereafter, an employee usually receives a percentage of their full pay based on the social security systems in place.
Maternity and parental leave
An employee may be entitled to apply for maternity leave for an uninterrupted period of a certain number of weeks and this may be with full wages. An employee on a fixed-term contract usually enjoys the same rights for the duration of the contract. In some countries, both parents are entitled to unpaid parental leave on the grounds of birth, adoption or legal custody to enable them to take care of their child for a certain period of time.
Urgent family leave
Employees may be entitled to time off from work for urgent family reasons in cases where a family member’s illness or accident makes the immediate attendance of the employee indispensable. Employees are usually granted a certain number of hours per week with normal pay.
Days off may be given for specific personal reasons, such as the birth of a child, marriage, injury, bereavement and so on.
Termination of contract
Before terminating a contract of employment for an indefinite period, the employee or the employer must usually give due notice to the other party. In practice, once notice by the employee has been given, the employer may elect to either:
— keep the employee in his employment during the notice period or
— terminate the employee immediately by paying the employee a sum equal to the full wages that the employee would have earned during the notice period.
Notice of termination, in most cases, may not usually be given by the employer if an employee is pregnant, has recently given birth or is or has recently been on maternity or parental leave.
In the case of contracts of employment for fixed-term periods, if an employee is dismissed before the expiration of the time specified in the contract of employment, the employer must usually pay the employee a certain percentage (depending on local regulation) of the full wages that would have accrued in respect of the remainder of the time specifically agreed on.
When terminating the contract, both employees and employers have certain obligations. These include providing legally required notices and informing the tax authorities and other relevant institutions such as health insurance and pension schemes. If an employee was laid off or their contract terminated, in most cases, they will be entitled to unemployment benefit. Local specifics will determine the details such as for how long after termination and what amount is received.
Health and safety
Safety measures will directly impact the smooth day-to-day functioning of your business. It is your duty as an employer to provide your employees with a safe and healthy work environment and to provide safe and secure premises for your customers.
Typically, health and safety regulations must be implemented by all employers, and if your sector is within specific regulated sectors (such as those operating heavy machinery) you may need to implement additional regulations. Health and safety usually relates to the following requirements and duties:
— to ensure health and safety at all times of all workers who may be affected by work being carried out for a business or employer
— to take measures to prevent physical and psychological occupational ill health, injury or death, following a number of general principles of prevention
— to provide the information, instruction, training and supervision required to ensure occupational health and safety. For example, your business may be required to have a dedicated member of staff responsible for health and safety.
As an employer, you have the obligation to be aware of your country’s laws and regulations regarding any pension requirements for your employees. These may include the requirement to enrol any employees into private pension schemes, to make regular minimum contributions to a pension scheme, and to provide certain information to employees about any pension arrangements made by you as their employer.
In most countries, the legal framework will also define employee rights in important areas to protect employee well-being. Typical areas include:
— Discrimination: labour legislation usually recognises harassment and victimisation as legally punishable offences. Discriminatory treatment may include any distinction, exclusion or restriction which is not justifiable in a democratic society, including discrimination made on the basis of personal characteristics such as:
— political opinion
— affiliation to a union
— ethnic, social or indigenous origin
— religion or belief
— marital or family status
— pregnancy or potential pregnancy
— physical or mental disability
— sexual orientation
— gender identity
— other characteristics as recognised by society or by law.
— Trade union memberships: in most countries, employees have the right to join specific trade or industry unions, where they are represented by a workers’ union. If your employees are trade union members, you may be required to negotiate certain terms with workers’ representatives or obliged to comply with collective agreements. In some countries, there may be the requirement for mandatory employee representative bodies for businesses that meet certain criteria, such as businesses with a certain number of employees.
Collecting and handling personal information
When dealing with employment processes and people, you will need to collect certain personal information and should be mindful of any data protection requirements.
The information a business collects represents immense value and can be indispensable for a business to maintain its competitive advantage. Do not ignore the importance of consistent data protection when creating an effective system for data collection and analytics. There are many ways to protect data and one of the most commonly used is encryption. Businesses should also have a crisis plan in case of cyber attack or data leakage. Businesses that lack a strategy to deal with such events can find themselves in trouble in the future. Raising awareness of and regular training on data protection also has a significant role to play.
Employee records are private and confidential. To process employee personal information you will need a lawful basis, which could be the performance of the employment contract. To transfer the personal data of an employee to a third party you will also need to comply with privacy rules. Consent may be required for this, unless the transfer also falls within the purpose of performing the employment contract, such as to process payroll.
Employer tax obligations
When contracting employees, you will also be obliged to comply with tax requirements. You will usually have to deduct tax from employees’ pay.
Legal obligations when training employees
As an employer, you are legally obliged to make sure your employees are trained to do their jobs safely. Certain industries also require specific training. Remember to keep a record of any training your employees complete.
Workplace health and safety training
As an employer, you must provide workplace health and safety training in order to keep your workplace safe for you, your employees and any visitors or customers. You should train your employees when they start and provide regular refresher training. This will depend on the industry and jurisdiction you are operating in, but even in an office-based environment, certain training may be required – for example, fire evacuation procedures.
Certain industries and job functions will require specific training. For example, if your employees need to drive a forklift truck or operate machinery, you must make sure they have the appropriate licences, they are trained and assessed regularly, as well as adequately insured for the specific risks of injuries or hazards.
Government support initiatives
Your government may have a number of programmes and schemes to help your business and employees. These could include subsidies for employees in certain sectors, grants for upskilling employees, subsidies for entrepreneurs and women in business and more.