Hiring a new employee can feel like a big step for a business owner. One of the fundamental documents that facilitates your relationship with your employee is the Contract of Employment. Understanding the ins and outs of this document is important to ensure compliance with employment laws.
What does a Contract of Employment do?
A Contract of Employment is an agreement that spells out the conditions, rights and obligations an employee has at work. These can also be called the ‘terms’. You and your employees will need to adhere to these terms until they leave their employment, are dismissed, or the terms change (after an agreement with you and your employee).
Are Contracts of Employment a legal requirement?
Yes. It’s a legal requirement to provide a ‘written statement of employment particulars’ to all new employees (and workers). Technically, the written statement is comprised of two elements – the ‘principal statement’ and the ‘wider written statement’.
The principal statement is required to be issued on the first day of employment, whilst the employer has two months to produce the wider written statement. In practice, many employees combine both statements as part of a written Contract of Employment and simply issue this on or before the first day; that way, both legal obligations are met in one document at the same time.
How does a Contract of Employment protect you?
A Contract of Employment is important for both parties involved as it establishes the conditions of employment into a legally binding document.
Your new employee must have a clear understanding of what the contract terms are. They should be encouraged to query anything they aren’t sure of so there are no misunderstandings.
The contract is there to protect both parties if any disagreements were to happen between the company and the employee. It’s vital to ensure that all contracts outline clearly what’s expected of your employees. If there is a disagreement, a Contract of Employment can be used as a reference point to uphold the relevant rights.
How are Contracts of Employment established?
Contracts of Employment are established when the contract is issued and signed by both parties. This forms a legally binding agreement between the employer and the employee. The terms offered in the job offer letter become the starting point for the contract.
Can a Contract of Employment be verbal?
Verbal contracts can lead to misunderstandings and difficulties in proving the terms of the agreement. It's always advisable to have written contracts to meet legal obligations, avoid potential disputes, and provide a clear reference for both parties.
What should be included in a Contract of Employment?
Every contract will be different depending on the job role, type of work, length of contract and your business or sector. The contract will need to cover the following as a minimum:
- Parties’ names
- Job title
- Start date
- Paid holiday entitlement
- Length of contract (if fixed-term – see below)
- Probationary period length
- Pay/remuneration details
- Working hours and details of any shift work
- Place of work and any relocation obligations
- Notice details
- Any obligatory training
- Any other benefits (i.e. childcare vouchers, etc.)
They can also include:
- Details of the pension scheme
- Sick pay terms and allowance
- Maternity leave
- Any applicable post-termination restrictions
Can a Contract of Employment be changed?
Employment relationships can evolve because of changing business needs or other circumstances. To accommodate this flexibility, these contracts may include a flexibility clause (also known as a variation clause).
This clause outlines the conditions under which changes can be made to the contract. It's important to note that changes should be communicated and agreed upon by both parties to avoid any disputes or breaches of contract.
How long does a Contract of Employment last?
The duration can vary. Some employees are on permanent contracts, which have no fixed end date. Others might be on fixed-term contracts, which last for a specific period, often covering temporary roles or projects. You can read more about the different types of contracts below.
How often should a Contract of Employment be updated?
The business landscape is ever-changing, and your company's needs might also evolve. While there's no legal requirement to update contracts regularly, it's a good practice to review them periodically, especially when significant changes occur within your business. This could involve changes in roles, responsibilities, compensation structures or other key aspects of employment.
What are the different types of Employment Contracts
Not all contracts are the same. Depending on the type of position you’re looking to fill, you may need to use one of the following types:
Permanent Employment Contract
A Permanent Employment Contract is a contract that offers ongoing employment at an organisation until either terminated by the employee or the employer. A permanent employment contract can be offered as both a full-time or a part-time contract.
Temporary Contracts, also known as Fixed-term Contracts, provide a specific end date or milestone that will result in the end of your employee’s term of employment.
Zero Hours Contract
A Zero Hours Contract, also known as a Casual Contract, is typically created for the completion of one specific piece of work or for a business that requires on-call or casual workers. Employees on this type of contract don’t need to be given regular work. Because of this, they can also refuse to work when requested. Zero Hours Contract employees maintain various statutory rights, including the right to annual leave and National Minimum Wage under employment law.
Get legal assistance from LawBite
Employment Contracts are a cornerstone of the employer-employee relationship. They go beyond mere documentation, serving as a vital tool for compliance with employment law and ensuring a transparent and harmonious working environment.
If you need help deciphering or drawing up a Contract of Employment, LawBite is here to help. Our employment contract lawyers can draft your business robust Employment Contracts that protect your interests or review your existing contracts to ensure they’re compliant with UK laws. To speak to one of our expert employment contract lawyers, book a free 15 minute consultation or call us on 020 3808 8314.