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Taylor Wessing On How To Avoid Legal Pitfalls When Hiring Household Employees

Chris Cooper

Taylor Wessing

2 December 2013

Chris Cooper, who is a senior associate in the employment team at international law firm , writes about some of the legal issues that involve private household workers. These are matters likely to interest high net worth individuals who employ such staff and who need to be aware of their rights, responsibilities and potential vulnerabilities. The views expressed are those of the author and not necessarily shared by this publication.

Private household workers are often a vital part of any family and many have a special relationship with their employer. However, it is often overlooked that the family employer is treated the same as any other corporate employer under employment rules. As a result, this can cause unnecessary stress and potentially be costly and embarrassing for the family.

It is therefore essential that the family treats its staff as a commercial employer would treat its employees notwithstanding that it may seem unnatural to do so given the intimate working arrangement. A commercial employer would look to protect its interests throughout the working relationship and a family employer should do the same. Forward planning can ensure that the family is well placed to manage the relationship effectively and is protected from risks.

So, what are the key issues that families need to be aware of when employing household staff?

First, it is important to clarify the role of employer and employee.

The employer

An individual can of course engage another person to work as his or her employee, worker or contractor. In the case of a family, a contractual relationship will be formed verbally or in writing between a family member and the person carrying out the work. That family member is then personally responsible for compliance with obligations in the relationship. The consequence of this is that the family member could be sued for payments and any failure to comply with applicable laws that regulate the relationship.

One way to avoid personal liability, is to create a private limited services company owned by the family with which household employees can be engaged. The private company would then be responsible for obligations in the working relationship and liability would not flow back to family members. Alternatively, the family could engage employees using a work agency which would act as employer and be responsible for fulfilling employment obligations. If a family member engages staff directly, however, it is important to agree the terms of the relationship in writing to minimise risks to the family.

The employee

The status of the individual carrying out the work is important, as it determines the extent to which employment laws in the UK will apply and the family’s obligations.

Generally, an employee is required to carry out work personally, usually for a minimum number of hours, in return for payment and is directed where, when and how this should be done. For example, this may typically include a personal assistant, nanny or cleaner where there is regular agreed work but may exclude a maintenance worker where ad hoc work is required. Employees have minimum legal rights that apply regardless of any agreement with the family, including entitlement to minimum wage, paid holidays, statutory sick pay and minimum notice of termination. In addition, employees are protected from unfair dismissal and discrimination.

What are the key issues prior to commencement of employment?

Prior to the commencement of an employment relationship, the family should review the prospective employee's CV and consider requiring consent to a background check to confirm their suitability for the role. It is common to check past work experience by way of references and sometimes credit history and criminal convictions, particularly if the individual will care for family children.

If the employee is suitable, it is a requirement that the family check that he or she has the right to work in the UK before commencement of employment. The family should request to see the employee’s original passport and, for non-EU nationals, a work visa and take a copy of the page confirming his or her immigration status. A failure to carry out immigration checks could result in a civil fine of up to £10,000 for each illegal worker and amount to a criminal offence.

After checks are complete, the next step is to prepare a written contract of employment. Employees have a right to receive a statement containing minimum terms and conditions, including the role title, start date, pay, holiday entitlement, sickness absence procedure and notice entitlement. A failure to do so could result in a basic claim for up to £1,800. More importantly, however, without a written agreement the family employer does not have its interests protected and significant uncertainty can arise in the future.  

The family should set out in writing the duties it requires the employee to perform and reserve the right to make changes to those duties, including where and when these are carried out. The agreement should also set out expectations regarding commitment, performance and conduct and the required notice to be given by either party to terminate the relationship.

A key issue for the family employer is trust and security in the protection of personal information relating to the family. Household employees should be required to agree to a robust confidentiality obligation that protects the immediate and wider family from the disclosure of personal information such as information about financial affairs, lifestyle and private lives and the family home as wells any personal documents.  This will ensure that, if an employee removed or disclosed personal information without authorisation (e.g. to the press), the family will be well placed to take further action to protect its interests.

What are the key issues during employment?

During employment, the family will be responsible for ensuring that the employee is provided with a safe working environment, arranging payment of wages with deducting tax and monitoring holiday and sick pay entitlements. The family should carry out a health and safety risk assessment of the family home to check for risks that could affect the employee.  The family should also obtain employer's liability insurance to insure against its liability for accidents or illnesses suffered by employees during the course of their work.

If the employee lives in a family property to perform his or her duties, this may result in the employee having a licence to occupy the property for as long as he or she is employed. In such cases, the family should enter into a service occupy agreement to agree the terms of occupation, including an obligation to keep the property in good condition and the family's right to terminate the occupation.

What are the key issues on termination of employment?

On termination of employment, the family will be required to provide the employee with the greater of statutory minimum notice or agreed notice, unless there has been gross misconduct. The minimum notice to be given is one week from the first month to first complete year of employment and then one additional week for each complete year of service up to a maximum of 12 weeks. 

If an employee has two years’ service or greater, the family employer will also have to have a “fair” reason to dismiss the employee and follow a reasonable dismissal procedure. A fair reason would include redundancy, capability or conduct. A failure to have a fair reason for dismissal and follow a procedure could result in a claim for a compensatory award of up to the greater of £74,200 or 12 months' pay.

Heading off trouble

Hiring a household employee can result in legal risks if not handled carefully. Families should think through all the potential issues that might arise in employing a household employee, put in place a well drafted employment agreement to minimise future risks and be mindful of employment laws when terminating the working arrangement.