5 legal and HR issues to consider in a small business - Preparing you for the future of work.

5 legal and HR issues to consider in a small business

If you run a small business, you probably spend most of your time doing client work, finding new business and managing your team. With all these responsibilities, it’s common for small business owners to overlook legal and HR issues – besides a lack of time, they also may not understand where and how to be compliant in their operations. But doing this is extremely important: if you find yourself in legal hot water over an HR or client issue for example, the resulting expense and reputation damage could be significant. Here are five issues you should look into:

1. Issue client contracts

Whenever you take on a new client, whether on a retainer or project basis, you should have a solid contract in place that details the exact scope of work to be done and provision for if that scope changes. It should also contain details such as timings and remuneration structure, how work will be delivered, and applicable jurisdictions for where the contract applies. Having a solid client contract in place helps manage expectations on both sides, and provides a course of action if something goes wrong.

2. Issue employment contracts

No matter how small your business is or whether you have full time, temporary or contract employees, South African labour law states that you need to give all employees a written document that outlines the terms and conditions of work. An employment contract as with a client contract is also vitally important to outline what’s expected from both parties. Employment contracts should include details such as duties required to be performed, working hours, payment details, benefits, leave allowances and notice periods. You should also update this contract if the law changes, if you and your employee agree to different employment conditions, or if their pay or benefits increase.

3. Decide on a maternity leave policy  

As a South African employer, you’re legally required to provide four months of maternity leave to all pregnant employees, during which time their job is reserved for them. You’re not required to pay them during that time, but many employers make separate arrangements to pay at least part of their salary while they’re on leave. As a small business, you’ll need to look at your projected cash flow to see how much you could contribute to maternity leave pay for part or all of the time. You could also look at other arrangements for when they return to work, such as job sharing, flexi-time or reduced hours. While these arrangements aren’t a legal requirement, being a flexible employer can improve your employees’ job satisfaction, loyalty and productivity.

4. Have a proper HR policy in place

When it comes to things like employee grievances, misconduct or breaches of employment contracts, it’s crucial that you’re following the correct legal procedures. If what you’re doing doesn’t fit within current labour law, you could face complications such as your employee taking you to the CCMA. A comprehensive HR policy also looks at things like disciplinary processes and procedures, and performance reviews. You should also make other managers and employees aware of these processes so that they can implement them correctly across the board.

5. Make sure you’re tax compliant

If you’re a South African company, you need to make sure you’re operating within tax laws governed by SARS. For example, you’ll need to pay provisional tax twice a year based on projected profits. You’ll also need to withhold income tax on behalf of your employees and then pay that over to SARS as PAYE, which you’ll declare in a monthly EMP201 form submission for each employee. If your business earns over a certain amount per year you’ll also need to register for VAT, which is paid bi-monthly. For these and other tax issues, it’s highly recommended that you use the services of an accountant or financial advisor who understands tax law in the context of your particular business.

For all legal issues relating to your business, it’s important that you stay legally compliant, which typically means getting advice from an HR, legal or tax professional. Although this will involve additional costs that could put pressure on your small business’s cash flow, the long term benefits are huge in terms of avoiding fines, penalties, or legal issues if things go wrong.

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