We often answer queries around employment contracts, and find that many were unaware of the changes implemented in April 2020. Here are a few frequently asked questions and their answers. Read on to find out whether your contract templates are up to the task.
What is a contract?
A contract of employment is a legally binding agreement between the employer and employee. It is formed when the employee accepts a job offer made by the employer, whether it is spoken, written, or a combination of the two. It is a requirement, however that certain details of the contract are in writing.
The document must contain a summary of the main terms of employment, such as pay and working hours. But according to the law, the employment contract is broader than what is simply written in the document. For example, employment law is also part of an employee’s contract but usually the law will not be written in full in the document. That would be a massive undertaking! Equally, there will be a number of ‘implied’ terms that contribute to the contract.
When does the contract start?
An employment contract begins once the employee starts work, even when there is nothing in writing. It may even start earlier if all of the following apply:
someone has accepted a job offer verbally or in writing
the offer was unconditional or they met all the conditions (for example, the employer was satisfied with their references)
the employer set out the terms in a clear and definite way, verbally or in writing
This means that before any offer is made, employers should think very carefully about the terms and conditions in place, and to avoid confusion job offers should be in writing.
Do I need to issue one to every employee?
Yes, each and every employee had the right to a contract providing they are employed for more than 1 month. An employment contract should be issued from day one of employment, although it is best practice to get it to the employee before they start work with you.
Where do the contractual terms come from?
Express terms which have been agreed between the parties either orally or in writing. Some terms my also arise from a collective agreement which is in place. A verbal promise (for example relating to a pay rise or promotion) can be contractually binding. If this is ever challenged at an Employment Tribunal, they would take into account the situation in which the promise was made (e.g. giving less weight to the promise if it was made after a few drinks after work).
Implied terms reflect the presumed intention of the parties, by custom and practice (an arrangement routinely observed by the employer such as enhanced redundancy pay), by common law (to pay agreed expenses or act with reasonable skill or care) or by statute (for example observing statutory minimum notice periods and working time limits).
What should the employment contract cover?
The following details must be covered:
the employer’s and employee’s names
the day the employee starts work under the contract
the date that ‘continuous employment’ (working for the same employer without a significant break) started
holiday and holiday pay, including an explanation of how its calculated if the employee leaves
These details must also be provided, but can be in a separate document:
the amount of sick leave and pay
pension arrangements
the notice period either side must give to end the contract and terminate the employment
how long the job is expected to last (where it has an end date)
any terms and conditions that apply to other employees too (collective agreements)
who the employee can contact if they have a problem at work
disciplinary procedures (or where to find them)
the process for resolving problems at work, (or where to find them)
if the employee will work abroad, any terms that apply
If the employee is expected to work outside UK for over a month, the employer must also include:
the expected duration of this work
the payment currency they should expect
any additional pay terms relating to their non-UK work and
any conditions which apply to their return.
The following information is needed for those who started their role on or after 6 April 2020:
normal hours of work, days of the week they will be required to work and whether these days/hours may vary
other forms of paid leave such as family-friendly leave
details of other employee benefits such as benefits in kind or other financial benefits
details of any probationary periods; length and conditions
details of training provision and requirements.
What else can I include?
There are other clauses that you might want to include in an employment contract to support your business operation. Clauses on lay-off or short time working can be useful if your business sees peaks and troughs in demand. Or you can insert terms to recover the costs of training costs if the employee leaves within a certain period of time. We advise you to speak to a specialist before you do so to make sure that they are legal, practical and reasonable.
Do I need to have the employment contract signed?
The employment contract does not have to be signed for it to be valid. If the employee has been working in line with the terms of the contract, then you can assume that they have accepted it. That said, it is definitely good practice to get the contract signed wherever possible, and to hold it on file. That way there is no ambiguity or argument about whether it was ever issued or received.
What about future changes?
Every employer must keep the statement accurate and up-to-date. When the mandatory terms and conditions are changed during the period of employment, the employer must provide a written statement on the change within one month of the change. The exception is where the change means that the employee is now required to work outside of the UK. Under those circumstances the change must be notified earlier than one month if the date when they need to leave the UK for work is earlier.
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