Hiring an Employee

Bringing a new employee into your business may seem like a very simple proposition. For example, if your restaurant needs a chef, you simply interview candidates and give the best one the job. But the decision to hire a new employee raises a series of important questions that must be answered, such as whether to hire the chef on a full-time or part-time basis, or whether to give him or her a fixed-term contract. In addition, it brings your company under the vast umbrella of laws and regulations designed to protect employees in Ireland.

There is a long list of factors that can be taken into account in determining if a person is an employee or a self-employed service provider. But for the most part, you can assume that anybody who works solely for you, for a set hourly, weekly or monthly wage, using materials and/or workspace provided by you, will be considered your employee and will therefore be covered by the many Irish statutes protecting employees and requiring employee tax withholdings, PRSI (Pay Related Social Insurance) contributions to national social insurance and pension levies. This includes employees who are not working full-time.

A “part-time” employee is one who works less, in terms of time, than a comparable employee at your company, i.e. less than a person who is performing the same of similar type of work. There may be many reasons to hire a part-time employee: the job involved may not require full-time work, a good worker may not be available full-time, your company may not be able to afford a full-time worker, etc. But do not think that by hiring workers part-time you will avoid the legal responsibilities and protections afforded your full-time workers.

In fact, almost all of the laws that apply to full-time employees apply to part-time as well, and part-time workers even have their own statute to make sure they are protected. The Protection of Employees (Part-Time Work) Act 2001 was enacted to provide that a part-time employee cannot be treated in a less favorable manner than a comparable full-time employee in relation to conditions of employment, and to provide that all employee protection legislation applies to a part-time employee in the same manner as it applies to a full-time employee.

So if you hire a part-time chef, then his employment conditions, pension, holidays and the like must be proportionately the same as an equivalent full-time chef. If they are not, then the chef can bring a legitimate claim against the company, including one for constructive dismissal. Also keep in mind that once you have hired an employee on a part-time basis, you cannot demand that the worker go full-time, and vice versa, without the employee’s consent.

Another consideration when hiring a new employee is whether to do so on a fixed-term rather than a continuous, open-ended basis. Fixed-term contracts may, to a certain extent, make it easier to dismiss an employee without having to make statutory redundancy payments, but only if the Employment Agreement expires naturally at the end of its term.

A fixed-term arrangement may make logical sense if the work involved will only be necessary for an estimated period of time, such as to cover maternity leave or a busy holiday or summer season. Another case where it may be appropriate is with respect to senior management employees, who may demand that the company agree to hire them for a minimum number of years and pay severance if they are terminated before that time. In any event, fixed-term employees are also given the same protection as continuous service employees, and once again they have their very own legislation to ensure this is the case—the Protection of Employees (Fixed-Term Work) Act 2003.

The statutes protecting part-time and fixed-term workers are only the tip of the iceberg of laws and regulations applying to employees, and you must be familiar with these legal provisions or else run the risk of inadvertently giving an employee a claim against your company. There are also statutes governing a safe and healthy work environment (including requisite insurance coverage) and prohibiting discrimination both in hiring and in the workplace. Others cover the required minimum wage, maximum work week and benefits such as pension, holiday time and sick leave provided to employees, as well as the right to redundancy payments in the case of unfair dismissal. And of course there are the requirements that all businesses withhold taxes and make contributions to national social insurance programs with respect to all employees.

One other requirement in Ireland is that all employees have a written document, or “Employment Agreement”, setting out the basic terms of their employment. Such an Employment Agreement typically covers the following matters:

  • Job description and title
  • Date employment begins
  • Salary, wages and bonus to be paid and payment dates
  • Hours of work
  • Place of work
  • Probationary period (if any)
  • Holiday and sickness leave
  • Pension and other benefits such as health insurance
  • Disciplinary, dismissal and grievance procedures
  • Reasons for termination
  • Notice requirements for termination
  • Confidentiality
  • Non-competition
  • Ownership of work product

Each Employment Agreement needs to be carefully crafted so that on the one hand it meets all statutory requirements and clearly describes the terms of employment, while on the other hand it maintains the flexibility you need as an employer to make some adjustments that do not trigger a claim for constructive dismissal. For example, the job description should specifically list the duties that the new employee is expected to perform, while also stating that the employer can alter the description as long as it does not significantly change the nature of the work the employee must perform.

You should also state that the Employment Agreement contains the entire agreement between the company and the new employee unless specifically stated otherwise (such as saying that all disciplinary procedures will be handled according to company policy described in the employee handbook). This is so that there can be no claim that a side conversation between the hiring manager and employee is part of the agreement. Also keep in mind that company policy, such as annual payment of holiday bonuses, may become part of the employment terms. Therefore, if any benefit is intended to be discretionary, make that absolutely clear in the Employment Agreement.

With respect to matters that are covered by law or regulation, such as minimum wage rates and holidays, it is never possible for the Employment Agreement to provide less than what the law requires. So even if your employee agrees to do so in writing, you cannot contract away his or her statutory protections. You can, however, give an employee greater benefits or protections than the law provides. But once you agree in writing to do so, you will not be able to change those terms without the employee’s consent. If you do, you may be subject to an unfair or constructive dismissal claim.

One final thing to keep in mind is that senior management and certain key employees may require more in-depth Employment Agreements covering company goals and bonus arrangements, etc. It may also be necessary with these persons to beef up the confidentiality and non-competition provisions. For example, you may want the non-compete to run for a number of months or years after the employee leaves the company, especially if severance is being paid. This is to ensure that a key employee does not take the knowledge gained from working at your company and set up a competing operation in the same location. However, be aware that non-competition agreements are often viewed skeptically by the courts, and should be reasonable under the specific circumstances of your company and the employee in question.

Despite our warnings in this section that all employees will be covered by almost all legislative protections and other employment related laws, there is one way to avoid some, but not all, of these requirements. That is to hire self-employed service providers to perform some of the work your company requires.

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