Making Sense of Employment Contracts

Without a well-drafted contract, you risk misunderstandings, legal disputes, and potential financial or reputational damage.

Written contracts are important as they clearly outline the terms and conditions of a staff member's employment.

This can avoid a lot of confusion between an employer and employee.

Why do I need to issue employees with an employment contract?

Written contracts are important as they clearly outline the terms and conditions of a staff member's employment. This can avoid a lot of confusion between an employer and employee.

Every employee should, by law, receive a written statement of employment particulars. The written statement is made up of the principal statement which must be provided no later than their first day of employment, and a wider written statement which must be provided within two months. Employers often find it easier, however, to include all mandatory provisions within one employment contract, issued to the employee on or before their first day of employment.

This ensures that both you and your employee have a clear understanding of what is expected during the term of employment. 

What is the penalty if my employees do not have a compliant contract?

Whilst employees cannot bring a standalone claim for not having an employment contract, in the event that they bring a claim in an Employment Tribunal for another matter, the Tribunal can add compensation of up to four weeks’ pay (subject to a statutory cap) for failure to provide a compliant employment contract.

What should the employment contract contain?

In order to be legally compliant, the principal statement must include (but is not limited to):

1. The names of both the employer and the employee;
2. The employee’s job title (or job description) and start date;
3. The rate and frequency of pay;
4. The hours and days to be worked by the employee (including any anticipated variation in these);
5. Holiday entitlement;
6. The location of work, whether there is any expected variation in this (including any other locations from which the employee will be expected to work);
7. The duration of the engagement (including an end date to the employment, where the contract is a fixed term arrangement);
8. Details of any probationary period applicable to the role including how long this period is, and any specific conditions applicable to this period;
9. Details of the benefits the employee will receive;
10. Mandatory training which the employee must undertake, whether or not this is to be funded by the employer; and
11. Any period of continuous service with the employer from previous roles.

Should I inlcude any other information?

There is also additional information which must be provided in relation to employees who are expected to work outside the UK for over one month.

While it does not have to be included in the principal statement (although it can be) on the first day of employment, you must also provide the employee or worker with information about:

• sick pay and procedures;
• other paid leave (for example, maternity leave and paternity leave); and
• notice periods.

You can choose whether to include this information in the written statement of employment particulars or in a separate document, for example a staff handbook which can be created using the EEA Staff Handbook Creator tool.

If you provide it in a separate document, this must be something that the employee or worker has reasonable access to.

Details of the following must also be provided within 2 months of the start of employment as the wider written statement:

1. pensions and pension schemes;
2. any collective agreements in place;
3. any other right to non-compulsory training provided by the employer; and
4. disciplinary and grievance procedures.

The Wright Hassall team recently worked with the EEA on an update of their online Contract Creator. This handy tool – which meets the latest employment law requirements – assists with creating a legally compliant contract of employment and is free for all EEA members.

When creating a contract using the contract creator, please ensure that the information included is accurate, up-to-date and reflects the practical reality of the employment relationship.

Contracts are not a one-size-fits-all document, so you must take care to ensure that the contract is tailored (using the creator) for each employee.

What if I need to change an employee’s contract?

Once the contract is signed by both parties, changing the terms of the employment without the employee’s consent may amount to a breach of contract and/or result in a claim for constructive unfair dismissal.

Whilst employment contracts will often include a reserved right to change the terms, known as flexibility clauses, they are designed to make reasonable changes only and employees must still be consulted prior to any fundamental changes.

Prior to making fundamental changes, employers must consult with the impacted employees and obtain the express consent of the employee. Once the change is agreed, this should be recorded in writing and signed by both parties for clarity.

If you have any questions or need assistance with your contracts, please do not hesitate to reach out. We are here to help and guide you through the process to ensure everything is in order.

Wright Hassall are here to assist you with your Employment law and HR queries, providing advice and guidance as required.