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1. We are planning to recruit our first travelling salesperson. What legal points should we consider?

2. What are the relative merits, in legal terms, of employing a travelling salesperson on salary plus bonuses, as against self-employed on commission?

3. We are taking on a sales director for Europe based in Munich. Should his contract be governed by UK law, German law, or does it make no difference?

4. We have taken on someone here to represent us abroad, who will be away for up to six weeks at a time. Are there any formalities to observe?

5. We use a self-employed sales 'consultant', whom we hardly ever see. Now the Inland Revenue is saying she is employed. How can we refute this?

6. A non-executive director does occasional consultancy work for us. The Inland Revenue claims he is employed. How do we prove otherwise?

7. We employ a sales director in America. Should we be paying tax and NI for him here, or there?

8. We are making an employee normally based in Paris redundant. Do we have
to make a redundancy payment?

9. We have to make two salesmen redundant. They arrange their own working hours. How do we calculate their redundancy pay?

10. A travelling salesman has landed us with a ruinous contract. He was acting within his powers. What should we do?

11. We suspect one of our saleswomen may be using visits to our clients to sell
goods on her own behalf. What should we do?

12. An employee travelling in a company car was involved in a bad smash. At the time he was on private business. Is our insurance company liable?

13. We want to replace our current company cars with something more tax efficient, but the sales force is objecting. Can we just do it?

14. One of our sales people has been clocking up improbable mileage, he says on company business. We don't believe him. What should we do?

15. A travelling employee has run up a huge room bill - we suspect for porn. Can we deduct the excess from his next pay cheque?

16. Can we set subsistence payments off against tax? Is there a limit?

17. Are there health and safety limits on how far our sales people can drive in a day, or over how long a period?

18. Do the normal 20-minute breaks after six hours apply to people travelling on company business?

19. Are we responsible for safeguarding the client information on our salesman's laptop? And if so, how?

20. Is it reasonable to make the use of a hand-held mobile phone while driving a sackable offence?

21. An employee has been accused of attempting bribery abroad, and now we are banned from the country in which he was operating. What can we do?

22. A salesman seems to be unable to recover from a back injury, and cannot
travel. Can we dismiss him?

1. We are planning to recruit our first travelling salesperson. What legal points should we consider?

Your sales people can make or break your business, and they can be particularly volatile, so it is worth putting some thought into this.

· You need to establish what your sales person's duties will be. In particular, are you expecting him (or her) to concentrate on maximising sales, or do you want him to spend time and effort on developing your market? Who does he report to? And when?
· What powers are you going to give him? To what extent can he negotiate over price? How big are the deals he can commit you to? What sort of expenses are you willing for him to incur?
· Do you want to use him on an employed or self-employed basis (see question two)?
· If you are going to use him on a self-employed basis, what sort of restrictions (if any) are you going to place on his right to sell competing products or do business for rival firms?
· Do you want to pay him on salary (or retainer) with or without a bonus, or on commission, or a mixture of the two?
· What sort of benefits are you willing to provide - for example, by way of a company car?
· Where do you expect him to be based?
· Are you going to start off with a trial period, and if so, for how long?
· What restrictions (if any) will you attempt to place on him when he leaves? If you want to introduce restraint of trade clauses, you must note them in writing, under the Commercial Agents Regulations. Are they limited in area, time etc, as required under these regulations?

You need a reasonably clear statement of expectations in case things go wrong, particularly as sales people tend to get the kind of money that makes breach of contract a much more likely recourse than a claim for unfair dismissal. On the other hand, the more precisely you specify these matters, the more you tie your own hands. This really is an area in which you should take legal advice.

2. What are the relative merits, in legal terms, of employing a travelling sales person on salary plus bonuses, as against self-employed on commission?

There are arguments for and against, in both cases.

If you employ someone, on a salary-plus-bonus basis:

· the bonus is not guaranteed
· you can make it a condition of his (or her) employment, that he does not work for anyone else;
· you will have much more control over his time;
· you should have much better control over how he deploys his time - for instance, the extent to which he spends time on keeping existing customers happy, as opposed to chasing new ones (or vice versa); and
· depending on how much you are prepared to pay in salary, the overall package is likely to be much cheaper.

On the other hand:

· you are committed to paying a salary, whether or not there are results to justify it;
· you will have to spend time and money on managing your sales person, which both of you may find irksome; and
· you may end up with vicarious liability for some of his actions. For example if he causes an accident whilst visiting a customer's premises for you, you will generally be responsible for any injury, damage or loss arising from the accident

If you use someone on a self-employed basis:

· you will not have to pay anything (possibly not even selling expenses, depending on the contract), until sales have been made;
· what you pay will be directly related to sales made.

On the other hand:

· whatever volume of sales is made, it is likely to cost you far more than the same volume sold through an employee, even after allowing for the hidden costs of employment (holiday pay, sickness pay etc);
· a self-employed sales person is unlikely to be working for you alone, so to some extent you will have to take your turn in using his expertise;
· it will be more difficult to control what he is doing and how he is doing it;
· he will be entitled to a regular statement of the commission due, under the Commercial Agents Regulations, and access to all the information he needs in order to check the regular statement;
· you may have to consider other implications of the Commercial Agents Regulations.

3. We are taking on a sales director for Europe, based in Munich. Should his contract be governed by UK law, German law, or does it make no difference?

Normal practice is to offer the worker the choice of jurisdiction. However it may be the system of law with which the parties are most familiar. If no choice of jurisdiction is specified in the contract, then the contract is governed by the law of the country in which the work is generally carried out, in this case, probably Germany. However even though the work is generally carried out in one state i.e. in this case Germany and the employer's place of business is another state i.e. in England, it does not deprive the employee to the better minimum terms and conditions, for example, on maximum working hours, annual holidays, health and safety at work, or discrimination in England.

4. We have taken on someone to represent us abroad, who will be away for up to six weeks at a time. Are there any formalities to observe?

Yes. If any of your employees are asked to work abroad for more than a month at a time, you must inform the employee within two months of their employment:

· the period for which they are to work outside the UK;
· the currency in which they are to be paid while they are outside the UK;
· any additional remuneration or benefits to which they are entitled because they are required to work outside the UK (for example, living accommodation); and
· any terms and conditions relating to their return to the UK.

As you are required to do this it would be appropriate to review the terms of their employment contract, as well as the law of the country in which the employee will work. Take legal advice.

5. We use a self-employed sales 'consultant', whom we hardly ever see. Now the Inland Revenue is saying she is employed. Can we refute this?

They may be coming down on you because she has not paid her tax bills, in which case you might have some difficulty in getting her to co-operate. Essentially you need to establish some or all of the following:

· she is not subject to your normal disciplinary and grievance procedures;
· she is not receiving holiday and sick pay
· your paperwork indicates that she is not an employee;
· you are not obliged to give her work;
· you have no say in how she runs her business;
· you put no money into her business;
· she is responsible for the losses, as well as the profits;
· you have no control over how she works for you, when she works for you, or where;
· you provide her with none of the equipment she needs to do her job;
· she receives no regular payments;
· the bulk of the money that you pay her relates to her results; and
· she works for other businesses as well.

This kind of situation, in which you could get landed with paying for her tax and National Insurance (NI) bills, underlines the importance of having a clear contract with self-employed sales people (see question six).

6. A non-executive director does occasional consultancy work for us. The Inland Revenue claims he is employed. How do we prove otherwise?

A director (executive or non-executive) will always be taxed under the Schedule E (employment) regime, by virtue of holding an office.

A consultant who is not a director (of any kind) will need a strong contract for services (self-employed), as opposed to a contract of service (employed). This should be written by an employment lawyer.

A contract for services should include agreement on all or most of the following: that:

· the consultant can substitute personnel (if possible);
· he (or she) will remedy defective work;
· he may work for other organisations;
· there will be minimal supervision or control;
· he will provide equipment;
· there will be flexibility on the time and place of work;
· there will be flexibility as to how he does the work;
· he has the right to decline work;
· he is not paid for holiday and sick pay;
· he is not subject to your normal disciplinary and grievance procedures;
· he will issue invoices; and
· he will provide insurance.

It should also contain a statement that the contract is a contract for services.

This is not an exhaustive list, but merely identifies some of the factors necessary to prove self-employment.

7. We employ a sales director in North America. Should we be paying tax and NI for him here, or there?

If your employee remains resident in the UK, you as a UK employer will still be liable to deduct tax and NI contributions, even though all or most of the duties are performed abroad.

If the employee becomes non-resident, you are no longer required to deduct tax and NI contributions. However, you will have to take advice as to whether local tax is payable.

If any income is taxed in both countries, then double taxation relief will apply, with any foreign tax paid being set off against the individual's UK tax liability.

8. We are making an employee normally based in Paris redundant. Do we have to make a redundancy payment?

Under UK law you do not have to make redundancy payments for any employee normally based abroad. Hhowever, you may be bound to do so if the terms of the employee's contract or local law requires you to do so. Take legal advice.

9. We have to make two salesmen redundant. They arrange their own working hours. How do we calculate their redundancy pay?

You need to calculate their average weekly remuneration over a 12-week period ending with:

· the calculation date (if that is the last day of a week); or
· the last complete week before the calculation date.

You then follow the normal formula relating to age and length of service (unless their contract of employment specifies otherwise). However it is likely that when the age discrimination legislation comes into effect, which is expected in October 2006, age will become irrelevant, and the calculation will be based on a flat rate payment per year of service.

10. A travelling salesman has landed us with a ruinous contract. He was acting within his powers. What should we do?

Seek early legal advice. Depending on the circumstances, your best bet may be to repudiate the contract as soon as possible, in the hope of limiting any losses made by the other party in relying on it. But take advice in order to ensure that you do not get caught with this kind of vicarious liability in future and to ascertain whether you are able to make a claim against the travelling salesman for any losses you have sustained as a result of his behaviour, should you wish to do so.

11. We suspect one of our saleswomen may be using visits to our clients to sell goods on her own behalf. What should we do?

An employee working remotely is bound by the express and implied terms in her employment contract just as thoroughly as one working under direct management scrutiny. The implied terms, though not spelt out, form part of every employment contract, and include the obligation on the employee to serve the employer honestly and faithfully, and not to enter into competition with the employer's business. So you need to investigate more thoroughly, and if there is evidence to suggest that your suspicions are correct, consider activating your disciplinary procedure, if any, and the statutory disciplinary procedure.

12. An employee travelling in a company car was involved in a bad smash. At the time he was on private business. Is our insurance company liable?

That depends on the terms of the insurance policy. Where private use of a company car is permitted, the insurance policy will normally cover accidents on private as well as company business. If, however, the employee was not authorised to use the car privately, any insurance cover may be invalidated. In that case you not only have to worry about the cost of repairing or replacing the car. However you may have to worry about being sued by third parties, for neglecting to ensure that your employee observed your rules. Check your policy details, and if necessary, take legal advice.

13. We want to replace our current company cars with something more tax efficient, but the sales force is objecting. Can we just do it?

To begin with, check the terms of the relevant employees' contracts of employment. If the contracts are silent on this, i.e. they say nothing about it, then in theory at least your sales force might be able to argue that you are breaching terms established by custom, even if never spelt out. If in doubt, take legal advice about the situation, with a view to ensuring that your terms and conditions make it quite plain in future that the choice of company car is yours.

14. One of our sales people has been clocking up improbable mileage, he says on company business. We don't believe him. What should we do?

Ask him to account for it. If he cannot then consider commencing action under your disciplinary procedure, if any, and the statutory disciplinary procedure and if there is still no satisfactory explanation discipline him accordingly. Bearing in mind that it is unreasonable to expect your sales people always to travel from one appointment to another by the most direct route. Although if there is a variation in the mileage of more than, say, 25%, they should be expected to account for it.

15. A travelling employee has run up a huge room bill - we suspect for porn. Can we deduct the excess from his next pay cheque?

Unless there is a specific clause in the contract, entitling you to make deductions from the employee's salary for personal expenditure incurred, the answer is no. Ask the employee in question to account for the bill, and if necessary, to come up with suggestions as to how he intends to reimburse the excess. If there is no satisfactory explanation, and no proposal for reimbursement, you may want to consider disciplinary action in light of your procedure if any and the statutory procedure. Either way, you should probably establish guidelines on subsistence expenditure, to curb the risk of a similar situation developing in future. Also you should ensure that you are able to make deductions form the employee's salary where it is warranted by ensuring the employee's contract provides for this.

16. Can we set subsistence payments off against tax? Is there a limit?

Any payments 'wholly and necessarily' incurred for the business can be set off against the corporate tax bill, and this includes subsistence payments e.g. both accommodation, and the cost of meals while away from home. There is no limit, though the Inland Revenue might start asking questions if the hotel bills were quite obviously disproportionate to the success of the business and the standing of the individual running them up.

Where a business makes subsistence payments to an employee, whether by way of a refund, a scale charge or a round sum payment, the amount must be entered on the employee's P11D, and then set off by the employee against income in order to claim tax relief. However, provided that the Inland Revenue is satisfied that the business is paying the employee no more than the expenses incurred, and there are reasonable systems for monitoring and auditing them, it may be possible to obtain a 'dispensation' from your local tax office, so that you do not have to declare such payments.

17. Are there health and safety limits on how far our sales people can drive in a day, or over how long a period?

There are no restrictions on car drivers, as there are on lorry and bus drivers (where maximum working hours in a week are now limited to 60, and average hours to 48, over a four month period). However, employers have a duty to ensure the safety and welfare of their employees, and also a responsibility to ensure that others are not put at risk by their work activities. One third of road accidents in the UK last year are believed to have involved people working. So employers are under a duty to ensure, for instance, that work vehicles are properly maintained, and that their drivers are not put under unacceptable pressure by unrealistic schedules. The risk assessments required under the Management of Health and Safety at Work Regulations should include assessments of any dangers to employees travelling on business, with appropriate steps being taken to minimise the risks even though their employment contract provides that he/she will work more than the average hours.

18. Do the normal 20 minute breaks after six hours apply to people travelling on company business?

There is an exemption from these requirements of the Working Time Regulations for people involved in long travelling. However, they have to be given 'compensatory rest' when it is feasible. Since employers are responsible for the safety and welfare of travelling employees and third parties who might be affected by their actions (see question 17), it makes sense to insist on regular rest periods for travelling employees, as well as those in the office.

19. Are we responsible for safeguarding the client information on our salesman's lap-top? And if so, how?

Yes, it is your responsibility to ensure that this information does not fall into the wrong hands. You need to impress upon all your staff the importance of not losing their laptops, and keeping them secure at all times.

20. Is it reasonable to make the use of a hand-held mobile phone while driving a sackable offence?

Yes. 'Anyone who causes or permits any other person' to use a hand-held mobile while driving is guilty of an offence under the regulations banning the use of hand-held mobile phones. So you would certainly be liable if you required an employee to use one while driving, and possibly if you failed to forbid employees from using them under those conditions. Your disciplinary rules should demonstrate that you are taking the regulations seriously.

21. An employee has been accused of bribery, and now we are banned from the country in which he was operating. What can we do?

The use of bribery abroad is an offence under UK law, so you have presumably made it plain to your employees that you discourage it. Your first step should be to set up an investigation. If the investigation suggests that the charge is justified, you ought to refer the matter to the police, regardless of any disciplinary action that you may take against the employee.

22. A salesman seems to be unable to recover from a back injury, and cannot travel. Can we dismiss him?

Incapacity to do the job, on medical or any other grounds, is a potentially fair reason for dismissal. In theory it is therefore possible to dismiss an employee fairly on this ground, but only if you follow the appropriate procedure.

However, this is not the only consideration. It is possible that the salesman would be regarded as disabled for the purposes of the Disability Discrimination Act 1995. If so, you would be legally obliged to carry out an assessment as to whether any reasonable adjustments could be made, to ensure that he was not placed at a disadvantage.

There are other factors to consider, such as the effects of dismissal on any entitlement to receive benefits under a permanent health scheme.

In view of the very substantial compensation that can be awarded to employees unfairly dismissed in such cases, it will pay to obtain legal advice before taking any decision to dismiss.

Although these FAQs highlight some key issues relating to employment law, it should not be considered comprehensive and is not a substitute for seeking professional advice on a specific issue.

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Although we have made every effort to ensure that the information contained in these FAQs is accurate, Business Hotline Publications and the named experts disclaim any liability for any errors or omissions.

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