Employment Contracts – A Guide For Employers

If your business employs people, it is crucial you understand how the employment contract establishes the rights and responsibilities of both the employee and the employer. Many businesses often overlook the importance of the contract of employment and that can lead to legal issues should a problem arise in the future.

The employment relationship is based on contract. Although easy to state, this is one of the most complex areas of Employment law. On or before the first day of work all employees and workers are entitled to a written statement setting out the particulars of their employment.

Although they may seem convenient, the use of template contracts of employment can mean that employers are not protecting their business’ interests and may not be meeting legal requirements. They are also potentially leaving their employees unclear as to the terms, leading to confusion and discontent in the workforce.

In this guide, we give an overview of what an employer must do in order to comply with legal requirements surrounding contracts of employment. Because of its complexities, it is difficult to cover all aspects in this short guide. If you have a question that we haven’t answered, please get in touch with our employment experts by calling *ruler number* or by filling out an enquiry form here.

What is a contract of employment?

A contract of employment is an agreement between an employer and an employee which sets out their rights, responsibilities and duties. These are called the “terms” of the contract.

An employment contract is made as soon as an employee accepts a job offer. If the employee begins work, it shows that they have accepted the job on the terms you have offered.

Even if there is no written contract, a contract still exists. This is because the employee’s agreement to work for the employer, and the employer’s agreement to pay for that work, forms an agreement.

However, employers are legally required to provide an employee (and workers) with a “written statement of employment particulars” on or before the first day of their employment. From 6th April 2020, this also applies to workers. Previously employers had two months in which to fulfil the obligation – now you need to be organized from the start.

Many businesses believe the written particulars to be the contract of employment, but legally this is not the case. The employment contract is broader than the written terms of employment and will, for example, include implied terms (see below). An employer is legally required to give a written statement of employment particulars to an employee. This should include:

• Your business name
• The employee’s name, job title or description of work and start date
• Any probationary period
• Pay
• Hours of work (including more specific details)
• Where the employee will be working including any requirement to work outside of the UK
• Holiday entitlement
• Sick pay arrangements
• Notice periods
• Information about disciplinary and grievance procedures • Any collective agreements that affect the employee
• Pensions and pension schemes
• Any other benefits provided
• Any other training they are required to complete

While this covers your business legally, we would recommend having a written contract of employment in addition to the written statement of employment particulars.

Terms of the contract of employment

A contract of employment is made up of both express terms and implied terms.

Express Terms

Express terms are explicitly agreed between you and your employee. They include everything mentioned above, including pay, overtime, hours of work, holiday pay, sick pay, and notice periods.

The express terms may not be written in one document but could be in a number of employment documents. They be included within:

• The job advertisement
• A written statement of main terms and conditions
• Letters sent to the employee before they start
• An office manual or staff handbook

Implied Terms

Every contract of employment has “implied” terms for both employees and employers. These are terms that have not been written down in the contract, but are understood to exist by both parties.

Implied terms could be implied because they are necessary to make the contract work, they are obvious and/or assumed, or they are implied by custom and practice.

For example, implied terms could include:

• You and your employee have a duty to trust each other. If the employee lies about being sick to get some time off, that will have broken an implied contractual term of trust
• As an employer, you have a duty of care towards your employee. You should provide a safe working environment for your employees
• The employee has a duty to obey any “reasonable and lawful” instructions given by the employer.

Terms to include in a contract of employment

While it is not legally required, having a written contract of employment could help keep any disputes to a minimum, and can also help your employees understand their employment rights and it gives clarity to both parties as to what the terms of the employment are. The terms to include mirror the details required for the written particulars, but may be broader for example to include details of:

• Deductions, detailing all of the circumstances you can make deductions from the employee’s salary
• Expenses, if the employee is expected to travel for business purposes
• Voluntary retirement information
• Severability, which states if one clause does not apply to an employee, the rest of the contract will remain valid
• Restrictive covenants, for example precluding your employee for a certain period of time from going to work for a competitor on termination of their employment
• Lay off clauses
• Entitlement to place the employee on garden leave

Do all employees have to have a contract?

As mentioned above, all employees have a contract as soon as they accept a job offer or commence working, whether it is written or not. This will cover:

• Full-time employees
• Part-time employees
• Fixed-term contract employees
• Zero-hour contract employees

Your business may, however, involve working relationships that are not standard.

Agency Workers

As a general rule, agency workers will have a contract with an agency while working temporarily for your business.

Remember, however, that even though you may not be the employer of the agency worker, you will have certain responsibilities. Agency workers have the right to use the same services as permanent employees (canteen, car parks etc). Importantly, after 12 weeks in the job, the agency worker must be treated equally with your employees. This means equal pay, pension enrolment and annual leave.

Apprentices

Apprentices can have something called an apprenticeship agreement. This should be signed by both the apprentice and the employer at the start of any apprenticeship, to confirm individual employment arrangements by both parties.

This is specific for apprentices, and an employment contract used for employees is not sufficient in this scenario.

Can an employer sue an employee for a breach of contract?

If an employee breaches a contract of employment, informal action should be considered but where informal action is not appropriate the issue can be dealt with following a disciplinary process, which may ultimately lead to their dismissal.

However, if the matter has caused financial loss to your company, employers can sue for damages in the same way employees can sue them.

Employers can use a county court for any breach of contract disputes. Damages would be awarded for the financial loss suffered as a result of the breach. This might occur if the employee has not given enough notice, for example. Your company may want damages for any extra cost of hiring temporary staff.

The most common types of breaches by an employee that may lead to damages being awarded include:

• An employee quitting without giving enough notice
• An employee going to work for a competitor when the contract doesn’t allow it

An employer’s contract claim can also be brought in the Employment Tribunal against a former employee but only if that employee has submitted a breach of contract claim in the Employment Tribunal.

How Percy Hughes & Roberts can help

Contract law can be a complex area of law, and it is so vital for company owners to get right. Ensuring you have the right employment contracts for your employees can help protect your company from an employment tribunal claims further down the line.

As you can see, there are a plethora of factors you need to consider when creating your contracts, and many types of employment that need to be considered. If you feel uninformed about what to include or how to proceed, we advise speaking to an employment law expert who can guide you through contracts of employment and can recommend the best way to proceed.

At Percy Hughes & Roberts, we have a team of employment lawyers who boast years of experience and promise a confidential, friendly, and honest approach to all issues within the employment law field.

If you have any questions regarding employment contracts, written particulars, or any issue surrounding employment law, you can get in touch with our team for expert advice. Get in touch with one of our Wirral Employment Lawyers today by calling *Ruler Number* or by completing the “Get in touch” form on this site.