It is critical that employers get the fundamentals right when it comes to employment law. Being fully aware of what employment documentation is needed and how to draft these documents to best suit a business can be of huge benefit to an employer. Below are some of the main points relating to writing employment contracts that it is helpful for employers to know.
- Does an employer have to provide an employment contract?
- What is the difference between a written statement of particulars and contract of employment?
- Written statement of employment particulars - what do you need to include?
- Can you provide some terms of employment to an employee or worker after they start working for you?
- What should be included in a contract of employment?
- What if I do not provide a compliant written statement to my employee or worker?
- Is an employment contract legally binding?
Does an employer have to provide an employment contract?
There is no requirement for a written employment contract to be issued. An employment contract will be in existence if the working relationship is in reality one of employer and employee, whether there are terms agreed in writing or orally, express or implied.
However, there is a legal obligation on an employer to provide a written statement (or ‘section 1 statement’), as section 1 of the Employment Rights Act 1996 requires this.
Before the 6 April 2020 the written statement could be provided to an employee after they had started their employment. But for all new employees (and workers) starting from 6 April 2020 the majority of particulars must be provided in a ‘written statement of employment particulars’ document on or before the employment start date.
There is no longer a one-month service requirement before an employee or worker qualifies for a written statement: for those employee’s and workers who started from 6 April 2020 onwards, they will qualify from day one.
What is the difference between a written statement of particulars and contract of employment?
A written statement of particulars is not necessarily a contract of employment. Written statements of particulars are generally quite brief and could just be a statement of what has already been agreed orally or in writing. It usually outlines the basic terms of the employment relationship, as required by law. Written statements must be provided to all employees and workers who started work from 6 April 2020.
If there is no separate written contract, the written statement will usually be the best evidence available of what the agreed terms between the employer and employee or worker are, but is not always the full picture. If there is a separate written contract, this will take priority over the terms in the written statement.
An employment contract is generally more detailed and provides more information about what has been agreed between the employer and employee and is usually signed by both parties to signify that both parties have read, understood and agreed the terms contained in the contract.
Unlike a contract of employment, the contents of a written statement are prescribed by law and so an employer must include the prescribed particulars to the employee as a written statement. Alternatively, the employer can include all the required terms, amongst other things in the employment contract, and dispense with the written statement.
Written statement of employment particulars - what do you need to include?
The written statement of employment particulars can be made up of more than one document but at the very least one of the documents (the ‘principal statement’) must be provided before the employee or worker starts working for you. It must include:
- The employer’s name and address.
- The employee or worker’s job title or job description.
- The employee’s place or places of work and any relocation provisions.
- If the employee or worker will be required to work abroad, as well as the terms that apply, such as the length of time the work abroad is expected to last.
- The employee’s start date, and if a previous job counts towards continuous employment, the original start date should also be stated.
- If there is a probation period, and how long the probation period lasts and what the conditions are. For example, can the probation period be extended and on what basis and for how long?
- How much, how often and when an employee will get paid.
- Hours of work including which days an employee or worker must work (and if employees will have to work out of usual office hours or overtime) and how usual working hours or days can change.
- Holiday entitlement and whether that is inclusive of public holidays and how it is calculated if the employee or worker leaves.
- Any other non-contractual employment benefits that an employee or worker will receive such as childcare vouchers or a company car.
- The notice period either side must give when employment ends.
- Whether the role is permanent or if not, how long the job is expected to last if it’s temporary or for a fixed term.
- Training that must be completed by the employee or worker, making clear which training you will fund and the basis of that funding and any training you will expect the employee or worker to fund themselves.
Whilst you can include the below information in the principal statement, this is not required, but you should tell the employee or worker where information can be found, and this must be a ‘reasonably accessible’ place:
- Information relating to incapacity and the amount of sick leave and pay.
- Any paid leave entitlement which is additional to annual leave and holiday pay, such as maternity and paternity leave or compassionate leave.
- Pension scheme documents and further details of the terms of pensions you offer to employees or workers.
- Full disciplinary and grievance procedure documents.
Can you provide some terms of employment to an employee or worker after they start working for you?
Some terms will still not need to be provided from day one and can be provided in supplementary documents within two months of your employer or worker starting work with you, such as:
- Information about collective agreements.
- Pension scheme information.
- Non-mandatory training requirements.
- Certain grievance information, such as who to go to with a grievance, how to complain about the handling of a grievance and how to complain about a disciplinary or dismissal decision.
It is important that you check that all of the information required, as set out above is provided to your employee or worker on time and that if you are unsure that you seek specialist employment advice.
What should be included in a contract of employment?
It can be helpful to include more detail in a full employment contract. It will depend on the nature of your business, the role to be performed by the employee and the employee’s seniority as to the terms it might be best for you to include. If you would like assistance with this our specialist employment solicitors can fully appraise your specific businesses needs and assist in reviewing and drafting a bespoke contract of employment for your business. Generally speaking though, it can be helpful to include the following additional clauses in an employment contract:
- Further detail on sick pay and procedures, or at least where these can be found.
- Further detail on disciplinary and dismissal procedures and grievance procedures, or at least where they can be found.
- How confidentiality will be dealt with and what is included in confidential information.
- How intellectual property will be dealt with.
- Detail on notice periods and how notice will be dealt with, for example will garden leave and/or payment in lieu of notice be an option at your discretion?
- Obligations for the employee on termination of employment, such as return of company property and continued confidentiality and intellectual property provisions.
- Post-termination restrictions which you would like the employee to be bound by for a reasonable and limited period after the termination of their employment, such as non-solicitation of particular clients in a particular geographical area for a limited and reasonable period of time.
- Governing law and jurisdiction of the contract.
- Specific clauses relating to the types of employment benefits that employees might receive, for example, bonuses, commission, company car or healthcare.
It is also helpful to go further and have a non-contractual staff handbook containing more detail as to company policies and procedures. That way, both you and your employees are clear on standards expected and the correct and consistent processes to be followed in specific situations in the workplace.
What if I do not provide a compliant written statement to my employee or worker?
Whilst employees and workers cannot bring a freestanding claim for a failure to provide a written statement, if they are successful in another claim in the employment tribunal, and they are able to show that they were not provided with a compliant written statement, they may be awarded an additional two to four weeks’ pay (subject to a statutory cap). Whilst this may not seem like much of a penalty, if this is multiplied over a larger workforce if your business grows, the total costs could become more significant. Also, if you are not clear as to what your contractual terms are, you are more likely to accidentally convert non-contractual benefits into contractual ones, which may be an even higher cost to your business. It is advisable, therefore, to take time and care from the outset and seek professional advice to avoid these pitfalls and fully comply with the legal requirements,
Is an employment contract legally binding?
Like with other commercial contracts, provided that there is an offer, acceptance, consideration, certainty of terms agreed and intention to create legal relations then an employment contract will be legally binding, provided that the terms are reasonable.
If the terms are not lawful they cannot bind on either party. But, regardless of whether they are in writing or signed, if agreed by both parties explicitly in writing, verbally or by way of conduct of the parties, the terms of an employment contract are binding.
There are differences to commercial contracts in terms of how the contract is enforced. For example, the employment tribunal will not generally order specific performance. It will instead allow for an employer to terminate a contract of employment, but the employee will be given the opportunity to sue if this was unfair, discriminatory, wrongful or otherwise a breach of contract. Also, if there is a repudiatory breach of contract by one of the parties to an employment contract, that does not automatically terminate the contract, as the innocent party can choose to waive the breach and affirm the contract.