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Time to Hire Your First Employees? Read These Three Tips First

29.11.2017

When a startup hires its first employees, it becomes an employer and is subject to a number of new obligations – breaches and neglects of which are often heavily sanctioned. To avoid risks, commit talented employees and ensure that your startup’s needs as an employer are appropriately protected, especially the following three matters should be considered.

Draft Appropriate and Functional Employment Contracts

It is in the mutual interest of your startup and your employees that you agree on the terms and conditions of employment clearly in writing. In addition to ordinary terms, such as trial period, place of work, working hours, main duties, pay, and notice periods, you should consider whether your business requires additional specific contractual clauses. For example, if an employee is recruited to develop new technology, you may want to agree in detail on the intellectual property rights to the results of the work. Also, specific confidentiality clauses are often recommendable. Under certain circumstances, the parties may also agree on a non-competition clause to limit the employee’s possibilities to, for example, go work for a competitor directly after the employment. Employment contracts may also include a reference to possible incentive programs to commit and reward first employees. Collective agreements may limit or widen the scope of matters that the parties can agree upon and should therefore be checked as well, if applicable.

Remember All Practical Obligations

A new employer may be subject to several practical obligations relating to withholding tax, payment of employers’ health contribution, and the provision of pension, accident, unemployment and other insurance coverage, to mention a few. Also, as an employer you are obliged to draft necessary working hours documents, consider compensation for possible business trips, and organise occupational healthcare. If you do the work thoroughly from the start, hiring new employees in the future will not be as heavy a burden.

Business Changes that Affect Employees

When your startup faces business changes, don’t forget to keep obligations under employment law in mind. For example, if your startup sells or buys a business, employees could automatically move in the transfer to the transferee’s service. As the number of employees grows, new employer’s obligations relating to, for example, co-operation may also arise. Use of external workforce triggers certain employer’s obligations, and in case it is necessary to lay off or terminate employment contracts, employment legislation requires specific grounds and procedures to be followed.

Considering employment law effects in advance as part of a startup’s business planning protects it from unnecessary risks and costs and enhances its possibilities to recruit and keep the best employees.


For further information, please contact:
Annamari Ala-Louko

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