By Liam Grime, Employment Law Consultant at ELAS Group
A contract of employment, also known as a contract of service or statement of terms and conditions, is a document that sets out the framework for the relationship between an employer and employee. But what makes a good employment contract? ELAS employment law consultant Liam Grime looks at the key points:
Employment law is derived from contract law in that for any employment relationship to exist, there must first be a contract in place. Although a contract of employment can be established verbally, both employers and employees will find it beneficial to have a physical contract drawn up to help avoid any misunderstanding, uncertainty or doubt as to what the terms of their relationship are.
One key to writing good employment contracts is ensuring that whoever writes the contract is aware of what must be included and that the document is both compliant with current legislation and reader friendly.
The Employment Rights Act 1996 sets out employees’ statutory rights and protection. The law provides that employers who have not given an employee a written contract must provide a Statement of Initial Employment Particulars, also known as an S1 Statement, no later than eight weeks after the employee begins work. Failure to provide this could lead to a tribunal claim which, if successful, could see the claimant being awarded two to four weeks’ pay.
When drafting employment contracts, employers need to ensure that anything that is required to be in the S1 statement is present in the contract of employment.
There are certain things which an employment contract must contain, including:
- Names of both employer and employee
- Dates on which employment and the period of continuous employment began
- Scale and rate of remuneration
- Intervals at which remuneration is paid
- Any terms relating to hours of work
- Terms relating to annual leave entitlement and incapacity for work due to sickness or injury, including provisions for sick pay
- Notice of termination obligations from both employer and employee
- Job title
- Period of employment, if not permanent, and the date on which it will end
- Place of work
- Information as to whether or not there are any collective agreements applicable to the employment
So long as all the above have been included in the contract of employment, then employers will have met their statutory obligations, however, there is additional information which could also come up. Company sick pay, bonus or commission schemes and enhanced annual leave entitlement can also be considered when drawing up a contract of employment but it’s important to note that if they are included then they become a contractual right, so employers need to consider whether they are able to sustain the terms before putting them down in writing. If you prefer to have more control over which benefits are provided and when, then it’s best to ensure that the wording in the clause(s) detailing the terms makes them a discretionary or conditional entitlement, dependent on the employee meeting certain factors or criteria.
One of the most important things to consider when putting together contracts is ensuring that they are as reader friendly as possible, avoiding any legal jargon that may confuse or worry employees. Employees should be allowed time to go through any contract offered to ensure that they understand and agree to the terms contained within; remember that a contract is an agreement between two parties rather than a one-sided order, so you should give employees the opportunity to raise any concerns or queries they might have about the terms contained within it.
Many employers often believe that a contract of employment must be signed and returned to them, however, there is no legal requirement for this to happen. So long as the employee has been issued with their contract and continues to work under its terms without raising any concerns, then it can be reasonably implied that the employee has agreed to the terms contained within the contract.
Due to the ever-changing nature of employment law, employers must ensure that they have access to regular legislative updates as contracts will need be kept up to date, regardless of how long an employee has been with the company.