The Impact of Legislation on Employment (Cambridge (CIE) O Level Business Studies)

Legal Controls & Their Impact on Business

• Legislation refers to laws and regulations passed by governments that require businesses to conduct their behaviour in a particular manner

• Many countries have passed laws that determine the required behaviour of employers towards their workers

Diagram: legal controls over business

Legal Minimum Wage

• A national minimum wage (NMW) is a legally imposed wage level that employers must pay their workers

  • It is set above the market rate of pay

  • In some countries, the minimum wage varies by age

  • A minimum wage makes it illegal for an employer to pay an hourly rate below the minimum wage set

Impact of Legal Minimum wage on Employers and Employees

• Businesses in some countries are free to pay their workers very low wages leading to much lower business costs

• Businesses are often questioned about this decision as it compromises business ethics

Employment Contracts

• An employment contract is a legal agreement between the employer and employee, which sets out the terms and conditions of employment

  • It is often a legal requirement for employers to provide a new employee with a contract of employment 

• The contract of employment will usually include 

  • The name of employee and employer 

  • Employment start date

  • Working hours

  • Remuneration

  • Holiday entitlement

  • Duties and responsibilities of the role

  • Place of work

  • Notice period

• The main types of contract include full-time, part-time, job share and zero hours contracts

  • Often, a business will have a mixture of employees with a range of different employment contracts

• A contract of employment reduces misunderstandings around issues such as working hours, pay, and holidays

  • Both employers and employees know what is expected of them

• The contract provides some security of employment to the employee

  • E.g. If an employer ignores any terms of the contract, such as paying the worker less than the agreed amount, then the worker could take legal action against the employer

• If the employee does not meet the conditions of the contract, then legal dismissal is allowed

  • E.g. this could occur if the worker refuses to work the agreed amount of set hours in the contract of employment

Health and Safety

• Health and safety legislation requires businesses to operate in a way that protects the physical and mental wellbeing of its employees, contractors and customers

• Health and safety legislation covers areas including

  • The provision of adequate breaks and rest periods

  • Temperature and noise levels

  • The provision of safety equipment

  • Hygienic, safe and sanitary conditions

  • Preventing stress

• Implementation of procedures and equipment required to maintain healthy working conditions are likely to incur financial and time costs, such as

  • Staff training and supervision

  • Changes to working hours and rest provisions

  • Arrangement of manuals, signage and safety documentation

  • Purchase and maintenance of safety equipment

  • Drawing up and implementing a code of practice

• Serious health and safety breaches can lead to fines or investigations by the Health and Safety Executive and, in some cases, prison sentences

Discrimination

• Discrimination at work occurs when the employer treats employees with protected characteristics such as gender or race less favourably than one without these characteristics

  • In many countries, discrimination based on these characteristics is illegal

Diagram: the main forms of discrimination

• Employees who are victims of discrimination in the workplace can take legal action against the employer

  • Trade unions often support employees with legal claims against employers and provide legal advice and support 

• Businesses can miss out on recruiting the best applicant if recruitment policies are discriminatory

• Reputational damage may result if a business is found to have discriminated against employees

Unfair Dismissal

• Dismissal takes place when an employer ends an employee’s contract of employment with the business

• Dismissal can be fair for a number of reasons

  • The job no longer exists, which means the employee is made redundant

  • An employee cannot do the job properly e.g. they may lack the right skills

  • Long-term illness

  • Gross misconduct, such as theft or violence at work

  • For other “substantial” reasons, such as the employee has been sent to prison

• Unfair dismissal is when an employee of a business has their employment terminated without a valid reason or against government legislation

  • Reasons for unfair dismissal include discrimination or avoidance of paying for redundancies

• In cases where there is unfair dismissal, the worker may take his/her complaint to a court called an industrial tribunal to decide whether there is a case to answer

  • If the independent tribunal finds that the worker was wrongfully dismissed, then the worker receives compensation and their job is offered back to them