Providing your employees with a written statement is a legal requirement. At the point where your business is taking on staff you must therefore ensure that your contract of employment document is robust. As an employer, it is essential that you understand the law around employment contracts. At a basic level, your staff need to
Providing your employees with a written statement is a legal requirement. At the point where your business is taking on staff you must therefore ensure that your contract of employment document is robust.
As an employer, it is essential that you understand the law around employment contracts.
At a basic level, your staff need to fully comprehend what you expect from them in their role. This is exactly why contracts of employment exist.
This article explores the importance of employment contracts and comes with a free downloadable template. Managing your business can be a stressful, time-consuming experience without worrying about contract law and other employment law implications.
Avoid litigation and facing claims of unfair dismissal at an employment tribunal by making sure your employment contracts are watertight.
If you need instant, actionable advice on employment contracts and other HR issues, contact Employer Advice on 0800 470 0613.
What are employment contracts?
An employment contract is a type of legal agreement that lays out your rights and responsibilities to the employee.
All employees should have a contract of employment. All of it doesn’t have to be written, but this is best practice. The contract will set out the “terms” of your agreement which include:
It is essential that you set your contracts up correctly because the contract will underpin the dynamics of your working relationship moving forwards.
What is the law on employment contracts?
Employers must ensure that you comply with employment contract law in order to avoid potential litigation. An employment contract doesn’t have to be all in one physical document for it to be recognized as legally valid.
You are, however, legally required to present all your employees with a written statement of main terms (SMT).
In accordance with UK law, a statement of main terms need to incorporate several pieces of key information. These include, but aren’t limited to:
Does an employee have to sign a contract of employment?
As well as there being a legal obligation for a contract to be produced by employers in writing, there is also no legal requirement for an employee to sign anything. This applies even if you offer your employee a written contract.
What is best practice when signing a contract?
Despite employment law on contracts not requiring signatories or written documentation, there is certainly best practice in this area.
Ensure your organisation has premium protection from any potential litigation arising from breach of contract scenarios.
To do this, make sure your employee signs and dates a written contract of employment (including the statement of main terms), and have it returned to you. This is for two main reasons:
It proves you are complying with your legal obligation as an employer to provide an employee with a written statement of particulars.
Clarifies what terms and conditions were agreed between the parties in case a dispute arises in the future.
You need to retain a copy of this document for your HR records and provide the employee with a copy for their own records.
What is included in a written statement of main terms?
As an employer you need to ensure that you provide your employees with a written statement of the main terms of their contract. Employees should receive this before the first day of employment.
This applies if your workforce is agency workers or even if your contract says you are self-employed. The only time you are not required to provide a written statement is if the person is running their own business and you are their client.
The written statement of main terms might be titled “Employment Contract” but it serves the same purpose.
A written statement should include the following information:
The employee’s job title.
The annual salary and frequency of salary payments (i.e. monthly, weekly, bi-weekly).
Any annual leave entitlement and holiday pay.
Statutory sick pay entitlement and sick leave.
The employee’s normal working hours.
The work location(s).
The duration of any probationary period and subsequent notice period.
You might also choose to include information about
Can I make changes to an employment contract?
An employment contract is a legally binding agreement, but that doesn’t mean it is unable to be changed. Employee contracts can be altered or have “variations”, but you cannot do so without the express permission of the employee.
As a general rule, if you would like to make changes to your employment contracts you should consider the following:
Consult or negotiate with employees or their representatives (for example, from a trade union or staff association).
Explain the reasons for the changes.
Listen to alternative ideas from employees.
Doing so will mean that you have involved your staff in a consultative manner and this will help you avoid grievances or potential legal action.
What information do employers need to include in a contract of employment in the UK?
Employment contracts don’t have to be written, but it’s strongly advised to have them written down. This will help prevent confusion later on down the line. Here’s a few pieces of information that should be included.
Basic job information
Provide your employee with key information relating to their role. This will include things like their job title, a brief description of their role, department, line manager, department head, and hours of work. You may also run a flexible working arrangement which should be detailed.
Pay and benefits.
In an employment contract, your employee should be able to clearly understand their pay and benefits. This includes annual salary, raises, bonuses (i.e. Christmas bonus), holiday pay, incentives, and any additional benefits.
Your pay needs to be legal, so ensure that it meets at least the national minimum wage.
Establish your annual leave policy documents and procedure and make it clear how many days the employee is entitled to, including public holidays. Include information on sick pay and leave, parental leave, unpaid leave, and flexible hours (if applicable).
Your employees rights are linked to their employment status. Your employment contracts should therefore define whether they are:
An agency worker.
Employed on a casual basis.
Written employment contracts should lay out whether your new starter is permanently employed, or for a fixed term contract?
Include the number of hours they are expected to work, working from home, working outside the office, and working weekends/nights. You should also mention any probationary period.
Your contract needs to outline what, as employer and employee, needs to happen to end employment. You should include express terms on how much notice both parties need to give.
Are there different types of employment contract?
As an employer, your workforce is often aligned with the industry in which you operate. For example, it is common in the hospitality and leisure sector to see zero-hours contracts to suit your business needs.
There are many different types of employment contract. The UK government lists the following types of standard employment:
Freelancers, consultants, contractors.
Flexible employment contract.
Temporary employment contract.
Apprentice employment contract.
What an employer chooses to utilise will be down to the industry standard and the needs of your organisation.
More information on the employment rights act can be found here.
Are there any other terms or clauses to include in an employment contract?
The main addition to an employment contract that you may want to consider is reasonable restrictive covenants.
Implied terms of the employment contract are not set out in writing or verbally but will form part of the legally binding agreement between the employer and employee.
There will always be some implied terms in employment contracts.
A variation clause is a section of an employment contract that allows you to make changes if there is a good reason. Use this if you foresee a variation in terms. A legitimate reason might be that the business is struggling financially.
A mobility clause is a contractual provision that ostensibly allows an employer to require an employee to move their place of work to a different location.
This move could be on either a temporary or permanent basis, such as moving office.
Maternity leave clause
Maternity and other parental leave should be covered in your contract of employment.
You should explain how a member of staff can claim the 52 weeks they have available to them.
Including a layoff clause clarifies what happens if the business is temporarily unable to provide work, staff can be told not to attend. There must be a clause put into the employment contract on it without pay.
Can Employer Advice help with an employment contract?
If you are a business taking on staff and you’d like a template for your written employment contract, why not check out our free, comprehensive download.
Employer Advice has a team of dedicated HR and employment law experts who only work with employers. With over 80 years of experience in helping employers take the stress of handling their HR and employment law obligations.
Get in touch with one of the Employer Advice experts on 0800 470 0613.