How to avoid the big mistakes in business, keep your employees happy and save you £10,000's.
Websites you can visit - with upto date info
Detailed notes to go here
I often wonder why people set up businesses, with all of the red tape rules and regulations, but people do and they succeed despite (to quote a friend of mine) “recession, crap governments, and tight arsed banks” .
Not as daft as it seems, too many times I have come across business owners having a “Frank moment” - “they did it my way”.
This is fine if you are signing the Frank Sinatra hit “My Way” in a Karaoke bar. Most definitely not if you are making a business decision, especially when it comes to employment law. The long and short of it is that “Your way” will nearly always end up at an Industrial Tribunal.
It probable made him millions over the years, but it could cost you a fortune.
changes in Employment law
Over the five year period of this story, it might be interesting to note that the following changes have happened in employment law.
Employment law is constantly changing, tings come and go so it is an area where you need to be updating yourself regularly.
Who should use this book
Anyone in business who wants to make a success - aim it at your ideal client
Should the book be through the eyes of the Danni - whose idea was it anyway
Not sure, may be look into this later
The impact on my business
Employment law can work for you and against you, having a great understanding of it will help you in your business no end - “embrace it rather than condone it”.
Detailed notes on
where it all starts
Most businesses start with someone having an idea, be that an individual or a group of people getting together, to pursue their own way of creating a product or service and selling it to a customer.
The concept of making money for themselves is the driving force behind making the first step into a new business venture and actually doing something about it.
It’s about taking the leap into the unknown, your first plunge into the swimming pool, How deep is it? Will I be able to swim? Who can I turn to for help?
This applies to all sorts of businesses both new and existing, especially existing businesses who are developing new products or going into new markets. Creating a new business can be a daunting task, but with the right help and support it can be achieved.
The characters in this book are fictitious but the experiences they will face are real, they have happened and you may read this book and see your self reading about yourself.
It all stared five years ago, when four friends and colleagues, Alan Smith, Brian Jones, Charlie Wright and Danni Porter decide that enough is enough. It was time for them to shape their own future rather than for someone else, who looked likely, not too appreciate what was being done for them.
You see, they all worked for a long established family run Shop fitting company and decided the time was right to break free. The company they were working for was in to its third generation of owners. The company had an established name for quality product, support and service they had people queuing at the door to work for them. This was mainly down to the the four managers, they had created a great place to work and actually had a waiting list for any vacancies that transpired.
In the past the family members who were invited onto the board new what they were getting into and what their responsibilities were. In the past the company had a good succession policy in place even though it relied heavily on the fact of the next generation of the family being capable of running the company.
The problems began with a series of illnesses and deaths in the family. What ensued was a series of arguments on what should happen in the business the cracks began to appear. The next generation were still in there first year of University on the very training courses that would prepare them for succession. In the holiday period the latest successors had continued to argue over who should be in charge and what direction the company should go in.
The illnesses had meant that the current board could not manage the business. They could wait until the family members finished University. They had to promote the management team to the board of directors. Now the thing is the management team of Danni (General manager), Alan Smith (Production manager), Brian Jones (Finance manager) and Charlie Wright (Sales manager), were more than capable and amply qualified to take on these new roles. Only Alan Smith the production manager declined the directorship, he did not want the responsibility, he was happy to remain in his current role.
Let me introduce the roles of the four….
Alan Smith had started as an apprentice fitter, the company had a good training programme in place. He had been trained as a fitter been on site and worked with some very experienced people along the way. He had also attend the company’s in house management training programme and had been promoted at various stages as his roles changed within the organisation. Eventually he rose to the position of Production Manager, he had a keen eye for quality and detail.
Brian Jones was hired as a cost clerk in the management accounts department, even at school, he had always been good with numbers. As a trainee in the management accounts department he was put through an accountancy training programme and qualified as a Management accountant some four years later. He went on to become the company’s Financial Manager in charge of all of the finance departments.
Charlie Wright, had the gift of the gab, he could sell “ice to Eskimos” even before he went on the company’s sales and marketing courses. He was the top salesman for four years running before being promoted to regional sales manager. Eventually he took on the role of Sales Manager where he is now in charge of the whole sales team.
Danni Porter, came to the fold last of all after completing a university degree, she started on a management training programme. This entailed a very intensive three year programme and a stint of working in every department in the business, including in the production team. She had excelled out of all of the graduates that were taken on in the year she joined. The family were so impressed that she now holds the position of General Manager.
Something that is a bone of contention with the latest generation who will be the next to take charge of the company, all of whom are men! is the fact of Danni being a female and in overall charge of the business. Something, which you would have thought would have been levelled at the previous generation. Not so, they are dead set against it even though it may come back to bite them. They are definitely against equal opportunities for women.
A further problem which is exacerbating the current situation is the fact that the new shareholders currently squabbling amongst themselves and vying for positions. A most disconcerting position for the top management, trying to manage a company where the owners cannot agree, and where the leadership lacks cohesion and direction.
why did it start
When the previous Directors and shareholders had promoted the Management team they had omitted to create new contracts of employment. Such was the state of there health, they were only interested in maintaining stability in the company. This was fine whilst the old board member’s were in in charge. There was a great degree of trust and respect between both sets of parties and had they approached the subject of new contracts it would have been resolved in a way that was agreeable to both sides.
The whole thing kicked off when the new bosses decided to implement some new contracts of employment. These new contracts were very onerous and nothing had been discussed. Basically the contracts were written in a way that it was tying them in knots if ever they wanted to leave. It was a contract that restricted what their current duties and responsibilities were. It also stated when the new bosses finished their courses they would be taking back control and they would be reinstating the new directors back to their previous roles of managers rather than directors.
Why did it get to this point
The new owners philosophy changed from one of caring about what was being produced to one of greed and I am the boss, it’s my way or the highway. The characters chose the highway, the previous family members had lots of trust and the contracts of employment reflected this.
With the latest board of Shareholders, a new set of problems have arisen, they effectively have been born into money, they minimal trust funds and want more and more money out of the company. Something which is in conflict with the current board, they have plans to expand the company which in turn will create a stronger and healthier company but it will take time for these plans to come to fruition. The shareholders are impatient and want the cash dividends now, they are putting so much pressure on the directors to deliver. This becomes the tipping point at which the four friends decide they do not need the pressure and decide they can do this under their own company.
The new bosses were not interested in making a long term financial commitment, they could only see short term gin and it became apparent that there only aim was to sell the company and live off the proceeds.
They had meetings to discuss what to do and how it should be setup
The goose that laid the golden egg for the old shareholders was about to implode as far as Danni was concerned. With the writing on the wall, she had gathered the four friends together and agreed that they should set up a new company.
The four current Directors had the blue print already, they knew what they wanted to achieve. They had been planning some major expansion plans with the old company and whilst they did not have the financial backing of the old company they wasted no time in making their own plans.
Danni and Brian had set up a company called Premier Fixtures and Fittings Ltd, a shop fitting and exhibition stand company. They had taken the budget from the old company and modified it to suit there new idea. The plan in the old company had been very ambitious and would have required a serious financial input and commitment from the shareholders. Danni and Brian had to curtail this for now so that they could now put into action the plans that they had created.
It would have been a new direction for the old company so they did not think they would have too many problems in leaving.
How wrong could they have been?
Could it have been prevented
The whole scenario could have been sorted out with the proper advice, meaningful negotiations and following the right procedures. Unfortunately the attitude of the new owners, they win at all costs was about to blow up in there faces.
That wasn't supposed to happen
The four friends decided that they must meet with the new shareholders as a collective. They would sit down and discuss the situation and come to a sensible resolution.
This did not happen, the shareholders wanted to meet with them individually. What they were trying to do was to divide and conquer, split the team and get them fighting against each over. They couldn’t have got it more wrong.
When the four of them found out that they would be met separately they agreed together what the stand would be.
Each of them met with the shareholders on an individual basis. They all cited the fact they did not agree with the direction in which the shareholders wanted to go. It was something none of them could agree with. They had all worked for over twelve years for the company and had seen it flourish and grow and were proud of what they had achieved.
What they had not worked into the scenario was for the shareholders to take it badly. Firstly they asked the Sales director to leave immediately, they did not want him to either take customers away or to take their best sales people. The others were allowed to carry on for a month and then soon found themselves pushed out on gardening leave after the shareholders had managed to take control of the finances.
What really stifled there plans, was the letters they received from the company Solicitors stating some trumped up restrictive covenants stating that they could not work for a competitor or approach the current customers for the next 12 months.
These letters were based on the new contracts the solicitors had drawn up, they had assumed that the new bosses had managed to get them signed and so based all there information and letters on this fact. They had put in some restrictive covenants which would have tied up the friends for quite a while before they could either move to a competitor or even start a new business for themselves.
The four of them quite rightly took the letters to a solicitor for some advice, he advised that as they had not signed the new contracts and that only a short amount of time had elapsed between the time they were issued with them and the time they left they were not valid.
The only thing that was in force was the old contract for which they had a three month notice period. This all happened in September 2009, they all decided they would delay the start until the January of the following year (2010) just to be clear whilst they were still under there notice period.
Then they would be full steam ahead, regardless of the letters from the Solicitors. The old companies Solicitors had not been informed, they were still on the old contracts and the new terms did not apply to them.
Due to the length of time they had all worked for the company, they had to give three months’ notice, to them this was not an issue. The contracts they had were old contracts with standard terms in them, they had never been renewed updated all of the contracts a couple of years ago. They had checked the details out before hand and were to work the three months’ notice, with the previous shareholders they had an agreement. They would, if necessary, have worked until new replacements could be found, although this had never been put in writing they would have adhered to it. In the past the company had been good to them and they all felt obliged to play by the conditions set in the contracts.
What happens when key employees leave
A big whole was created, when they left,it caused a rift in the company and one that would not heal and would eventually cause the downfall of the old company.
This saddened them greatly to be going down this path, after all they had been working for the company for over twelve years, three of them started straight from school in various roles whilst Danni the only girl in the group had joined later after completing a degree at university.
The friends new that if they were going to make a success of the new business they would have to set down the rules of engagement. For them this would take the form of a Shareholders agreement. Being a shareholder does not always mean you have a right to be a director and that is usually one of the provisions of a shareholders’ agreement. Sometimes in smaller companies the shareholders may work in the company but may not always want to be a director. They will however want to have some say in the management of the company in which they have an investment.
The agreement that they drew up contained a list of management decisions that require the agreement of all the management team before being actioned. The Directors would be allowed to extending the company’s overdraft (which often all directors have personally guaranteed), borrowing above agreed limits, employing or dismissing staff in unusual circumstances or bringing or defending legal proceedings.
The most important item contained in the agreement was the provision for Share transfer. You see one of the most important areas is the rules that apply when a shareholder wants to transfer his or her shares. They had personal experience of this and wanted to make sure that everyone understood what would happen to there shares in the vent they left the company, or what would happen to them in the event that a shareholder dies. These can be set out either in the articles or in a shareholders’ agreement.
Who was going to do what jobs
Who was going to be responsible for doing what job was fairly cut and dried. The each held a specific function in the old company so they would continue into the new company.
They did have to re allocate a few jobs, when you star a new company their is always some thing that needs to be done and can often get overlooked.
They did not want to get into a position of “I thought you were doing that”. So as Danni was the Managing Director of the new company she took responsibility for making sure everything was covered and everyone agreed that she could reassign any jobs as necessary.
They were now all on garden leave until the end of their notice period and rather than sit around doing nothing they began to plan what needed to happen so that they could get off to a flying start in January 2010.
What staff would be needed to get this started
Their budget contained detailed plans of what staff they would need and when. It is a key element of any budget to plan for staff and the costs associated with employing them. It is something that is quite often overlooked. Who would have thought that in an employment book we would be talking about budgets.
It is a key area especially if you want to get he right staff. Advertising for new staff can be expensive.
Where would they get the staff from
How to recruit
Could they tempt staff away from the old company
inducted into the new company
What you should have learned - One
One of the things that you should learn when you set up a new company is to see what is in place to stop you leaving or see what is not in place. Think about what you would have done to stop your self leaving and make sure those things are covered.
Be up front do not hide things in the small print it will come back to bite you. Explain why you want something in place, it should be to the benefit of both parties.
contracts of employment
Change or Update contracts of employment
non compete clauses
Long Term Incentive plans
hooks that keep you where you are
Detailed notes on 2010
What you should have learned - Two
Detailed notes on 2011
What you should have learned - Three
Detailed notes on 2012
What you should have learned - Four
Detailed notes on 2013
What you should have learned - Five
Detailed notes on 2013-2014
What you should have learned - Six
Detailed notes on 2014
What you should have learned - Seven
Detailed notes on 2015
What you should have learned - Eight
Main Employment Topics
what to put in here
what to put in here
what to put in here - ACAS
what to put in here
what to put in here - Various Acts
what to put in here
what to put in here
what to put in here - buying a business