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Employment Contracts - Worth More Then the Paper They are Written On

The concept of an employment contract as we know it now has been in existence for decades; however up to the mid-19th century, the very idea of fair labour laws were all but non-existent.

Until the abolition of slavery in 1833 and the subsequent boom in global trade and production, the relationship between employers and workers was based on status – typically one of subordination.  Through the Master and Servants Act 1867 and the Employer and Workman Act 1875, there was an increasing recognition that the health and safety of workers should be given a higher priority.  Over the 1900’s the rights of employees gradually evolved to ensure that workers were given the rights we now take for granted, including the right not be unfairly dismissed, parental pay and redundancy.  More recently, in 1997, the law was amended to make it easier for employees to seek flexible working arrangements.

11 December 2017
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What is the main purpose of an employment contract?

An employment contract is not a legal requirement. However, employees are entitled to a ‘Written Statement of Employment’, within two months of starting work. This sets out the key terms of the employment relationship, including pay, working hours and holiday entitlement.

If you do decide to have an employment contract in place, it will form the legal basis of the employment relationship between your organisation and its employees. While it is not strictly necessary for these to be in writing, it is highly advantageous for both parties if it is.

There are several types of employment contract, namely:

  • Full-time or Part-time employment – both contracts contain broadly the same information, however the number of contracted hours will be less for part-time employees. Contracts will include details such as sick pay / statutory sick pay (SSP) holiday entitlements, pensions and parental leave. Part-time contracts must clearly state the number of hours per week.
  • Fixed-term employment – fixed-term contracts may end on a specified date, or on the completion of a project or stated task. Besides this, a fixed-term employee will have broadly the same rights as a full or part-time person.
  • Agency employment – agency staff have a contract agreed and handled by an outside employment agency or recruitment company.
  • Freelancers/Contractors/Consultants – such staff are considered self-employed, therefore responsible for making their own tax and national insurance payments. The contract for such staff will differ from full or part-time staff as there no obligation to provide sick pay. It will define the start and end dates of employment, or define the project that once completed will mark the end of the contract.
  • Zero hours – under zero-hour contracts, no set hours will be defined within a contract, however there is no obligation for the employee to accept any work offered, and they can seek employment elsewhere if they wish to.

What are the main clauses in a good employment contract?

An employment contract can contain a large number and wide-variety of clauses, depending on the nature of your business, including:

  • Date of commencement of employment
  • Job title and duties
  • Hours of work & working time
  • Place of work
  • Probationary period
  • Pay
  • Sick pay & sickness absence (including SSP)
  • Holiday entitlement
  • Place of work & mobility
  • Intellectual property
  • Confidentiality
  • Data protection
  • Restrictions and other express terms of employment
  • Liquidated damages, repayment clauses and penalties
  • Garden leave and the right to work
  • Termination
  • Payment in lieu of notice (PILON)
  • Post-termination restrictions on competition
  • Micklefield clauses (explains how share awards/options may be forfeited if terminated)
  • Pension
  • Company property
  • Bribery & corruption
  • Collective agreements
  • Grievance and disciplinary procedures

Why is it important to have proper employment contracts?

As discussed earlier, formal written employment contracts are not legally required (although a Written Statement of Employment is required within two months of commencing employment), however a well-written employment contract which reflects your business is worth its weight in gold. A solid contract of employment protects the employee and employer. As an employer, you could incur a bill for thousands of pounds in litigation costs should a disagreement occur with an employee, which could have been avoided by the careful consideration of the clauses necessary for your business. The contract of employment should be drafted in such a way as to make it very clear what you lawfully require of the employee. Even a small omission, such as not making it clear that employees cannot accept a subsequent role with a competitor, or how data should be protected, could lead to considerable problems with loss of confidential commercially sensitive information, which could put your organisation in jeopardy. It is the job of an employment law solicitor to thoroughly understand your business and determine the contractual terms required to protect your interests while complying with UK labour laws.

Is an off-the-shelf contract of employment sufficient?

For small businesses, a standard employment contract may suffice, but even then, it is recommended that an employment law specialist reviews it. Even a minor omission or single word could cost you thousands of pounds in the future. To give yourself the confidence that your employment contract fully protects you, we recommend that you speak to one of our employment solicitors, who will take the time to truly understand your needs and draft a contract that is as water-tight as possible.

Guillaumes LLP Solicitors is a full-service law firm based in Weybridge, Surrey. We have a highly experienced employment law team who can assist you with drafting an employment contract. To make an appointment, please call us on 01932 840 111.