7 things you need to know about hiring franchise staff

New franchise owners are not usually familiar with employment law, but it's essential to act within the legal framework when hiring and dealing with employees.

When your new franchise is up and running, you'll soon  come to realise that your staff are one of your biggest assets.

Think of them as an extension of yourself. Even when you can't be there to manage your business, your employees will ensure the business is running smoothly and successfully.

Hiring good employees is something that takes time and careful consideration, particularly when you've just opened a new franchise. Here are 5 things you need to know when hiring franchise staff.

1. Register as an employer 

New employers usually need to register as an employer with HM Revenue and Customs (HMRC) when they start to employ staff or use subcontractors. 

New employers must register before the first payday, the registration can take up to two weeks and they cannot register more than two months before they start paying a wage. 

2. National Minimum Wage

When employing someone for the first time employers will need to decide how much to pay them. The National Minimum Wage (NMW) is the minimum wage most workers are entitled to by law. However, this rate will vary depending on the worker's age and whether they are an apprentice. 

Workers must be over 25 to get the National Living Wage (NLW). It is a criminal offence for employers not to pay someone either the NMW or the NLW and HMRC have the right to carry out checks ar any time and to see the franchise's payment records.

3. Right to work documents

New employers will need to check if their desired candidate has the legal right to work in the UK by checking their original documents. 

Employers must conduct these checks with the applicant present, make and keep copies of these documents and date the copies with the dates that the checks were made. 

Employers could face a civil penalty if they fail to do checks correctly and employ an illegal worker. 

4. Employers liability insurance 

As soon as someone becomes an employer, they will need to get Employers' Liability (EL) Insurance. EL insurance helps employers to pay compensation if any of their employees become ill or injured. The policy must cover them up to £5 million and come from an authorised insurer. 

Without EL insurance, employers can be fined up to £2,500 for every day they are not properly insured. 

5. Contracts

One of the most important things that a new franchise owner can do at this initial stage is to draw up a contract of employment. It is a legal requirement that all staff are at least given what is known as a Written Statement of Particulars of Employment within two months of starting work.

This document must contain certain information, including the names of the employer and employee, the date when employment commenced, rate of pay, when the employee will be paid, hours of work, holiday entitlement, sick pay arrangements and the required length of notice to terminate employment.

It must contain a job title and description, and state if the employee is required to work outside the UK for longer than one month.

Many franchise owners choose to give staff full contracts either before or when employment commences. This is the best situation, as having everything written down clarifies arrangements and means that employees know where they stand. However, it is not always possible, so the two month limit is a buffer.

6. Employee rights

From the day that they start work, employees have certain legal rights. Further rights are acquired after certain periods of time. An important right that all employees have from the first day is the right to not be discriminated against on the grounds of age, sex, race, disability, sexual orientation, religious belief or other criteria. 


The law on pensions changed under the pensions Act 2008, now every UK employer must put their staff into a pension scheme and contribute towards it. Automatic enrollment applies to all employees with at least 1 member of staff. 

Unfair dismissal

Employees have the right to not be unfairly dismissed after one year of continuous employment. So if an employee is performing poorly they may be dismissed within the first year. However, to do this the franchise owner still needs to follow certain steps correctly, known as the disciplinary procedure.

The franchise owner also needs to ensure they are dismissing the employee on relevant grounds, for example for poor performance or misconduct, and not because of discrimination.

Redundancy pay

Employees are entitled to redundancy pay after two years’ continuous service. Redundancies must arise naturally because the position is no longer required. They must not be artificially manufactured by the franchise owner in order to dismiss an employee for a different reason.

7. Disciplinary Procedures

It is a statutory requirement that certain steps are taken when disciplining or dismissing an employee. Failure to do so can result in an automatic verdict of unfair dismissal, even if there was a legitimate reason to dismiss the employee.

The franchise owner must provide the employee with a written reason for any disciplinary hearing. This must state when the hearing will take place, whether or not there is a possibility of dismissal, and inform them they have the right to be accompanied by a colleague or full-time union official.

The hearing between the franchise owner and employee then needs to be held. It is helpful to document what takes place, so where possible minutes should be taken by a third party. Then the franchise owner needs to write to the employee with the outcome, giving them the option to appeal. An appeal hearing must be held if requested.

Where possible this should be held by a more senior member of staff, though this is unlikely to apply in small franchises. The franchise owner must then provide the employee with the final outcome.

David Pottingham

About the author

David is a guest author for BusinessesForSale.com and FranchiseSales.com.