Recruiting the right person is a big challenge for you and your growing business.
Full-time, part-time, casual workers, fixed-term? Are you confused? Don’t panic! Offering a permanent role could be the solution you are looking for because if you want to attract talent you need to offer job security and stability (and as a business you benefit from greater loyalty and commitment).
The purpose of this blog article is to give an overview of what permanent employment contracts
are so that employers know where they stand when the time comes to take that leap of faith and take on a permanent member of staff.
What is a permanent contract?
A permanent contract is a contract that will not expire, but will remain valid until either employer or employee chooses to end the contract.
What are the key aspects of a permanent employment contract?
A permanent employment contract should be a comprehensive contract covering all of the relevant terms of the employee’s employment. It should, as a minimum cover off all of the aspects laid down in section 1 of the Employment Rights Act 1996, which includes (amongst other things) details of the following:
- Names of parties
- Date of commencement
- Remuneration details
- Hours of work
- Sick pay
- Job title and description
- Place of work
You may wish to go further than the minimum terms, and include additional clauses such as:
- Additional benefits including car allowances, bonuses and commission payments.
- Post-termination restrictive covenants, such as restrictions on poaching staff and clients, joining competitors or setting up in competition. Often such clauses are termed ‘non-poaching’ and ‘non-compete’ clauses. Particular care should be taken when including and drafting such terms, to ensure that they are only utilised where reasonably necessary and are reasonable in terms of scope and duration.
What are the pros and cons of this contract type?
The pros from the point of view of the employer are that these contracts are intended to secure certainty and continuity of labour-supply. For the employee, they provide the best class of employment contract, with a security of income. The permanent contract also provides a platform from which the employee can develop and enhance their career with the employer and climb the promotion ladder if they are ready, willing and able to do so. Such a contract will also be most useful to an employee in securing credit and mortgages etc as they are seen by lenders as a ‘safer bet’ with a permanent contract than without. The cons from the point of view of the employer are that these contracts are arguably the most burdensome, since the employer is making a significant commitment in hiring permanent staff, both financially and also from the point of view of time and management resources, since the staff member will need to be trained and supported. There are fewer cons from the point of view of the employee; generally if somebody is happy to take on an employed role with an organisation, they will be happy to be issued with a permanent contract providing of course it fits the circumstances at hand.
What to be particularly careful of?
The contract must be issued to the employee within two months of the employee commencing their role. This is a legal requirement.
Which situations are they most suitable for?
These contracts are suitable for situations whereby both parties wish to have a long-term, fully-committed employer / employee relationship. The employee will have the benefit of the full range of employment law protections. They tend to be less suitable whereby parties wish to have a shorter-term, time-limited or project-specific working relationship, or whereby one or both parties is seeking a more agile or flexible working arrangement that might not fit the confines of the traditional permanent employer / employee dynamics.
It is important when employing staff to give a good deal of thought as to the terms that will make up the employee’s contract of employment. It is important that they are well thought-out, easy to understand, that they cover off all the requirements of s1 ERA 1996 and that the employee will consider them to be reasonable and sign them off. A well-drafted document will provide a stable platform for the working relationship as it progresses over time.
How can we help?
How much does it cost?
At LawBite our expert lawyers can check whether your contract:
- Contains everything you need
- is clear and unambiguous
- contains clauses that are unfair or dangerous for your business
- conforms with current law and regulation
Prices start at £149+VAT for contracts up to 20 pages. The author of this article is LawBrief Ashley Gurr
. Ashley Gurr is an experienced Solicitor who has represented SME clients for many years in the fields of Commercial Property, General Commercial and Employment Law.