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Employment issues for growing businesses

FAST-growing businesses continue to change throughout their lives.

One facet of this is that often, some parts of a business fail to keep up with the pace of this change and companies frequently outgrow their initial structures and the initial make-up of their workforces.

Adapting to these changes can lead to employment issues and disputes where the right legal advice can prove invaluable.

For example, a bonus structure which was set up when a company only had two sales people on its books and a turnover of £2m is unlikely to work as well with 25 sales people and a £30m turnover.

Changing that structure to suit the current shape and needs of the business is likely to cause issues amongst the workforce which need to be carefully handled.

In a similar vein, smaller fast-growing companies tend to concentrate almost all of their efforts on developing the products and services which will enable them to expand. As a result, things which seemed less important as the business was starting out – such as administration of the company – can get left behind in the drive to expand and companies can find themselves with a fairly substantial workforce but no supporting documentation or policies.

As employment lawyers, we often come across this kind of situation and are able to work with the fast-growing company to ensure their paperwork and documentation is in place to support the employees they have recruited and those which they bring on board in the future.

This is far from being a mere paper exercise – getting things like employment conditions and policies down in writing not only gives fast-growing businesses greater control over the way they manage their workforces, it also helps when it comes to bringing in additional investment, carrying out joint ventures or selling the business.

Any due diligence exercise undertaken by potential funders, partners or buyers will look at a company’s workforce and what arrangements it has in place with its employees.

Fast-growing businesses often need to take on additional employees quickly, particularly in the wake of something like a major contract win.

However, it is important that companies don’t act in haste and repent at leisure. A business which doubles its workforce on the back of a big contract may end up with some of that workforce kicking its heels if the contract has been finished and another one hasn’t been won to take its place.

Companies often need to be flexible when it comes to taking on more workers, particularly in areas where demand is subject to peaks and troughs.

At Ward Hadaway, we often help with consultancy arrangements and flexible ways of engaging with the workforce via agreements such as flexible hours contracts to cope with these fluctuations.

We also regularly advise companies and organisations on how best to manage agency staff, a popular way of accessing additional workers in a short timescale.

Companies which have grown quickly after being started by a handful of senior figures can find that, as their business changes, so can relationships between those senior people.

As a firm, we can and do help companies in areas such as exiting senior managers and directors, shareholder disputes and other situations which can and do occur when a business is growing.

As the economy recovers and as more companies expand, some of the focus in the employment sector has shifted from people looking to hold on to their jobs to increased competition for workers with particular talents or skill sets.

Keeping hold of these key employees is rising up the priority list for many businesses, particularly in fast-growing companies who may have one or two key staff in charge of expanding divisions of the business.

That is one of the reasons why it is important for companies to put in place agreements over ownership of client lists and restrictive covenants which make it harder for senior staff to leave a business and take all their clients with them.

We have recently added cover for companies who want to enforce restrictive covenants as part of our fixed-price package of employment protection for just this reason.

As part of a business which itself has grown considerably, we appreciate that in fast-growing companies, time is precious and you have to deal quickly with issues which hold you back.

That’s why we respond quickly when our clients come across an employment issue and devise strategies which resolve problems swiftly and work commercially to ensure that growth is not held back.

Joe Thornhill
Partner, Joint Head of Employment Law

* For more information on the issues raised by this article, please contact Joe Thornhill.