By Claire West

Millions of small businesses in the UK are breaking the law and risking costly employment tribunals with lax HR policies, according to research by business insurance comparator SimplyBusiness.co.uk.

Two fifths (40%) of firms have no written HR policies, and despite it being a legal requirement, over a fifth (21%) of SME employers have no formal contracts in place for permanent employees, rising to 28% for those employers using freelance, contract or temporary workers.

Jason Stockwood, CEO of SimplyBusiness.co.uk, comments:

“Millions of SMEs are unnecessarily placing themselves in a very precarious position, and face potential legal nightmares due to a lack of formal HR policies and documentation.

“Small businesses are a lot less capable of weathering costly legal action than their corporate counterparts, so it is vital they have the necessary structures and guidelines in place to protect the business.”

Workplaces at Risk of Offensive Conduct

By failing to ‘set the rules’ for conduct, SMEs also put themselves at risk by potentially allowing inappropriate or offensive behaviour to surface in the workplace.

More than half (54%) of firms have no formal, written health and safety policy, whilst around three quarters have no policies on equality (76%), alcohol and abusive substances (75%), smoking (73%) or appropriate use of email and the internet (79%).

And when it comes to responding to breaches of appropriate behaviour, less than a third (30%) have a formal grievance and disciplinary process.

Jason Stockwood continues:

“In the vast majority of instances, firms are able to rely on the professionalism of their staff to behave in an appropriate manner, however, without a commonly agreed set of guidelines for exactly what is and what is not acceptable, SME leaders risk allowing offensive, or even dangerous behaviour to creep into their business.”

“There is a wealth of information on these issues available through BusinessLink and DirectGov - business owners should consult these or similar sources for information on their legal requirements and best practice advice in this area.”

SMEs Open Door to Poor Timekeeping and Dubious Expenses Claims

The research goes on to reveal that around three quarters (73%) of firms have no formal rules laid out in relation to attendance and time keeping, whilst 62% have no official policy on sickness, and nearly three quarters (72%) have no written guidelines on business expenses.

Jason Stockwood concludes:

“By failing to formalise exactly when employees are expected to be at their place of work each day, and what will happen if they fail to meet these expectations, there is the possibility of workers taking advantage of their employers, costing firms valuable man-hours.

“The MPs expenses scandal has shown us what can happen when organisations leave expenses rules open to interpretation by employees - firms should tighten policies to ensure they don’t suffer similar abuse.”