A strong and stable support team is key to achieving success in any walk of life. When you have multiple business interests and an international lifestyle, it is not so much a luxury as an essential.
This guide sets out the legal fundamentals for employing private and domestic staff to help you be an effective and compliant employer and make these relationships work.
Checklist: Employing private staff
1. Obtain legal advice:
- At the outset to ensure that you begin on the right footing (including live-in arrangements).
- At the end of the relationship to deter claims and avoid an unfair dismissal finding.
- “Health checks” throughout the employment to ensure that you keep abreast of changes in the law (such as changes to the national minimum wage).
2. Consider the most appropriate form of legal relationship (employee, worker, self-employed or agency worker) and document it.
3. Before the individual starts to work:
- Ensure that you have a signed contract/agreement.
- Check the individual’s original documents evidencing their right to work in the UK.
4. Ensure that you have express confidentiality and other key terms in your contracts/agreements
5. Have security arrangements in place to protect your private and confidential information.
Employment or a different type of arrangement?
There are various options for taking on staff.
Taking on an employee directly is the most common arrangement. Employees provide their services personally and the employer controls what the employee does and how they carry out their duties. Employees have wide-ranging legal protection, including a right not to be unfairly dismissed (see below), paid holiday, statutory sick pay, the national minimum wage and family-friendly rights (maternity/paternity leave and pay etc.).
Employers must make deductions for tax and national insurance from the employee’s pay before payment is made to them through a Pay As You Earn (PAYE) system. They must also provide an auto-enrolment pension scheme (see below).
If you don't want to operate PAYE yourself, there are accountants/payroll agencies that will do it on your behalf (though you remain responsible to HM Revenue and Customs).
These individuals run their own business and provide services to clients, on agreed commercial terms. Unlike an employee, they can subcontract their duties to a third party. They may provide their services through a limited company. Self-employed individuals are responsible for paying their own tax.
Self-employed individuals have far less protection under employment law than employees, and their relationship with you is mainly governed by the agreed contract.
This is an intermediate status where individuals provide their services personally, often on a casual/ad-hoc/zero hours basis, but they are neither an employee (perhaps because there is no obligation to accept work) nor self-employed (as they don’t run their own business).
Workers are not as heavily protected as employees but still have a range of employment rights, such as the national minimum wage, paid holiday and protection from discrimination. Workers are usually taxed through the PAYE system.
Staff, such as a nanny, domestic or private staff, can be engaged through an intermediary agency. Such staff will normally have a contract with the agency, not with you. As a hirer of an agency worker, you have to offer equality of pay and working conditions (after 12 weeks) with any comparable permanent staff whom you engage directly.
Be aware that many "agencies" are in fact recruiters offering only to find suitable candidates and you would then be required to employ staff directly.
Beware: An Employment Tribunal or HM Revenue and Customs can look behind the ‘labels’ to see how the working arrangements operate in practice in order to determine employment status. If someone is incorrectly labelled as “self-employed” they may have employment law rights and you as the employer may be liable for tax and NI.
All agreed arrangements with private staff (or an agency) should be clearly documented in a written contract.
Staff from overseas
You must comply with all necessary immigration requirements when taking on staff. It is your responsibility as an employer to check that your staff are entitled to work in the UK. You must see original documents evidencing their right to work in the UK, before an individual commences employment with you, and keep copies.
It is unlawful to employ an individual who does not have the right to work in the UK or who is working in breach of their conditions of stay in the UK. You can be sent to jail for up to 5 years and be required to pay an unlimited fine if you are found guilty of employing someone who you knew or had "reasonable cause to believe" did not have the right to work in the UK.
Overseas employers should also be aware of the 6 month time limit on bringing domestic workers to the UK.
Employees must be given a written statement of certain key terms and conditions of their employment within two months of starting.
The employment contract cannot take away employees’ minimum legal rights. If the employment contract terms seek to do so (e.g. paying the employee less than the minimum wage), the employee will be able to bring an Employment Tribunal claim to enforce their legal rights.
We recommend that a contract should contain termination arrangements (garden leave, payment in lieu of notice etc.) and confidentiality terms (see below).
Every employment contract includes certain terms, whether or not they are specified in writing, including the employee’s duty of loyalty and a duty to respect the relationship of mutual trust and confidence between employee and employer.
Ensuring confidentiality and discretion
Private staff may have access to personal information about you (your finances, relationships etc.), your family and your acquaintances. Protecting that information is crucial. You should include clear confidentiality terms in the employment contract (or other agreement if not engaging employees).
You may also wish to include security, data protection and social media requirements, (e.g. not tweeting their whereabouts when with you). Workers and the self-employed are not subject to implied duties of confidentiality or fidelity so express confidentiality/discretion clauses will always be required.
You should also take practical steps to protect your privacy, such as marking documents as “private and confidential”, ensuring documents are locked away securely, and limiting access to sensitive or confidential information. You can also have procedures to monitor staff conduct and usage of any IT equipment that you give them access to, subject to data protection and privacy laws.
You must ensure that you comply with the data protection legislation in place from time to time. You should put in place a privacy notice for staff which sets out how and why their data will be used. There is certain statutory information that employers are required to provide to data subjects regarding the processing of their personal data. We would recommend that you seek legal advice on the drafting of the privacy notice, to ensure that you are legally compliant.
If an employee will live at your property, or is provided with accommodation as part of their job, this needs to be clearly documented to ensure that they are not entitled to remain in the property once their employment/engagement has ended.
Staff who need to live-in to perform their role may be service occupiers, so that their occupancy will terminate automatically when their employment ends. We recommend this is confirmed in a written agreement.
You should take legal advice to ensure that the correct arrangements are documented before staff move in.
You must pay your workers at least the national minimum wage. The minimum hourly rates vary depending on age and status and are regularly increased. This includes overseas workers working in the UK for short periods (e.g. spending the summer holidays in the UK), and workers employed here who are temporarily working abroad (e.g. spending the summer holidays overseas).
There are some exceptions, such as workers who live in your home and are treated as a member of the family and are not charged for food or accommodation (e.g. some au pairs). Also exempted are workers who participate in the running of the family business, provided that they are family members and live in the family home.
Accommodation provided without charge counts toward the national minimum wage. It is treated as having a set cash value, called the accommodation allowance. If you charge your workers rent for their accommodation, any rent in excess of the accommodation allowance value will be treated as a deduction, so as to reduce the pay for national minimum wage purposes. You can agree with your staff if they will be paid hourly, weekly, monthly or annually and also agree whether overtime should be paid (this is not a requirement so long as they receive the national minimum wage rate).
All employees and workers are entitled to 5.6 weeks' paid holiday in each holiday year (up to a maximum of 28 days). You can require staff to take holidays at particular times by giving them notice to do so. Private staff contracts often state that employees may take some of their holiday entitlement at times they choose but must take the remainder when the employer directs.
All employers (regardless of size) are required to automatically enrol eligible workers into a pension scheme and pay minimum pension contributions of 3% of qualifying earnings for these workers (commonly known as “auto-enrolment”).
Employers are required to pay Statutory Sick Pay (SSP) to employees who are off work sick and who meet certain conditions, including notification requirements.
SSP is payable where an employee has been off sick for at least four days in a row (including non-working days). You start paying from the fourth day (if that is a normal working day) as the first three days are unpaid. It is usually payable for 28 weeks. Many employers offer (either as a contractual or discretionary arrangement) to provide sick pay at the normal rate of salary (or a proportion of it) for a period of time in each rolling 12 month period. Any such arrangements should be set out in the contract.
There are limits on working hours for employees and workers, as well as legally required rest breaks and arrangements for night-time workers. You are also required to keep and maintain records to show compliance.
Some types of employees are exempt from certain aspects of these laws – for example some of the laws are relaxed for those employed as domestic servants in a private household.
Working hours for private staff (particularly carers) can be, by nature of the job, quite changeable and involve employees being “on-call”. We recommend taking advice to ensure that working patterns do not fall foul of the law and that they are accurately reflected in the employment contract.
Employees are entitled to minimum notice periods prescribed by law (or you can provide for longer periods of notice in their employment contract). Employees are only required by law to give one week’s notice after they have been employed for one month. It is usually advisable to provide a longer period of notice in the employment contract to assist you in seeking a replacement during their notice period.
Your contracts with workers and the self-employed should include notice and termination provisions as there are no minimum notice periods that will apply in relation to them.
Trial periods (known as “probationary periods”) are a useful tool at the start of employment. During this period the notice period is often much shorter to aid a swift and inexpensive departure if either side do not feel the arrangement is working out.
Legal protection against dismissal
If you have employed a person for at least two years (continuously), they are entitled not to be unfairly dismissed.
There are certain circumstances where the two-year rule does not apply (such as if they have blown the whistle on perceived legal wrongdoing). You should always proceed with caution when ending arrangements with staff even if they have less than two years’ service. Employees and workers can bring some claims (including discrimination claims) regardless of length of service. To deter a claim and avoid a finding that an employee has been unfairly dismissed:
- A dismissal must be for a fair reason prescribed by law (redundancy, poor performance, misconduct, ill health, etc.).
- The reason must justify dismissal.
- You must follow a fair process (which can be quite onerous).
Even if you have only a few staff, it is a good idea to have some written policies and procedures for dealing with grievances or disciplinary matters for this purpose. You must also ensure you give staff the correct period of notice of dismissal (unless they are guilty of gross misconduct).
We would recommend you seek legal advice before terminating someone’s employment, to ensure that you do not fall foul of the law.