Seven deadly sins of management

Wading through reams of new legislation and caught between frustrated managers and aggrieved employees, the lot of the HR manager is often unenviable.

Daniel Isaac, principal in the employment group at law firm Withers LLP, has identified some of the most common mistakes which, if avoided, can make life easier for HR teams.

1. Indiscretion: writing down legal advice

When a solicitor gives legal advice to a client, it is protected by ‘legal professional privilege’ and does not need to be disclosed to an opponent in litigation. However, if an employer gives legal advice, or expresses an opinion, that document (including the unfavourable sections) must usually be disclosed to the other side during any litigation.

“Memos from HR often influence the outcome of a case,” said Isaac. “Either because they contain good advice, ignored by the managers, or because they concede that something is unfair.”

2. Imprecision: summarising insurance terms

Often, employers summarise insurance policies in contracts of employment rather than referring to the long form terms and conditions. A poorly summarised permanent health insurance policy which guarantees payment rather than making it clear this is at the insurer’s discretion, could result in an employer having to pay the benefits to the employee (eg two-thirds of salary for life) if the insurance company refuses to pay.

3. Carelessness: slipping up on the statutory dismissal procedure

Slipping up on the new statutory dismissal procedure will lead to a finding of automatic unfair dismissal and an increase in the compensation payable to the employee of between 10% and 50%. This could be done inadvertently, by inviting an employee to a meeting orally rather than in writing; by not holding a meeting when a fixed-term contract expires; or by not offering a redundant employee the chance to appeal.

4. Sloth: neglecting unsigned contracts

Always follow up on employee contracts (and variations) to ensure that they are signed. Staff who do not like a particular term often file away a contract so that they can challenge its validity later.

5. Recklessness: paying in lieu of notice

Although common practice, to pay an employee in lieu of notice where there is no contractual right to do so is technically a breach of contract. Although this has certain advantages, such as the payment being potentially tax-free, it can also render the restrictive covenants in the contract void.

6. Misrepresentation: offering tax-free payments

Offering tax-free payments is common, but it is vital first to check that this is possible. Mistakes commonly occur when there is a contractual right to pay in lieu of notice, meaning that any such payment must be taxed.

7. Verbosity: issuing side letters

To give comfort to employees during negotiations, managers often issue “side letters” which contradict carefully drafted legal agreements. A side letter that guarantees a payment which is officially discretionary could have serious tax consequences.

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