AHLAWAT & ASSOCIATES ADVOCATES
AHLAWAT & ASSOCIATES ADVOCATES
5 Major Employment Law Issues For Startups To Avoid
AHLAWAT & ASSOCIATES ADVOCATES
• Starting a business is not an easy task and hiring employees for it makes it even more difficult. Most startup owners face employment law issues as they do not hire a labour law consultant thinking it to be an unnecessary expense. • Here are some major employee law-related issues that all new entrepreneurs must avoid:
AHLAWAT & ASSOCIATES ADVOCATES
1. Wrong Classification Of Employees • One of the biggest mistakes that new business owners make is to incorrectly classify their employees. Hiring someone on a contractual basis is much cheaper than hiring a full-time worker. • Most new employers do not know whether salaried staff members are exempt from overtime payment or not. Both scenarios can lead to hefty penalties as they violate important labour laws.
AHLAWAT & ASSOCIATES ADVOCATES
2. Inefficiently Planned Equity Incentive Plans •
A common problem that most startup owners face is the inability to hire exceptional talent as they are unable to pay high salaries. The equity incentive plan is an effective solution that is used by many entrepreneurs to attract good professionals towards their organization.
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Company shares are offered to prospective employees as compensation for the low salary being paid to them. It is thought to be a good motivational tool as the good future of the firm will make the worker richer.
AHLAWAT & ASSOCIATES ADVOCATES
3. Paid Leave Policy Not Complies With Local Law • One of the most common employment law issues faced by startups is because of the unlimited time off leave offer. • When a person leaves a job, the employer pays for all the unused leave days. In order to avoid this, they offer unlimited time off to staff members. Labour law consultants in India, as well as other nations, advise that this is not a sensible move.
AHLAWAT & ASSOCIATES ADVOCATES
4. Failure To Create An Employee Manual • Another common mistake committed by new businesses is the failure to create an employee manual. • This document which contains an organization’s employment policies, ethics code, and other information is a helpful tool in preventing employee litigation. • A handbook will prevent a worker in coming up with the argument that he/she was unaware of a rule or condition because of which he/she was penalized or sacked.
AHLAWAT & ASSOCIATES ADVOCATES
5. Drafting Improper Employment Contracts • A startup owner hires workers in the Indian city of Delhi without using proper employment contracts. It felt that hiring labour law consultants in India who specialize in advising small businesses will be an unnecessary expense. • It drafted the documents herself and used them to make appointments. When a worker sued her over some issue, she had to pay a hefty penalty as there were no sufficient protective clauses in the contract.
AHLAWAT & ASSOCIATES ADVOCATES
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