Which type of employment contract do you need?
All employees and workers are legally entitled to be provided with a statement of their employment terms and conditions on or before their first day at work. Many people think this is a contract but a contract of employment is much more detailed and sets out the full terms and conditions, rights and responsibilities in detail. This provides better protection for the employer.
The most important part is to decide on the employment status of the individual. Are they an employee, a worker, or are they truly self employed. The correct terms must be applied.
Employment contracts are complex, to say the least, but you’re in safe hands with The HR Dept.
Simplistically, with an employee they have to perform the work you want them to do personally and they can only be absent from work for occasions such as sickness absence, maternity or adoption leave. The employee has full employment rights.
A worker is offered work which they can refuse but having accepted it they again have to perform the work personally. A worker has more limited employment rights. Both accrue statutory holiday and must be paid National Minimum wage or Living wage.
A self employed contractor on the other hand has no employment rights so does not benefit from holiday pay or statutory sick pay and is responsible for their own tax and national insurance. An important element to deciding self employed status is that they can provide a substitute to do the work for them.
Types of Employment
Employees could have a permanent contract either full or part time which will detail the hours and days they work. They could also be given a fixed term contract which is usual for maternity cover situations or where the role will be subject to external funding. This contract will have a start and end date which can be for a short period, or longer, and the employee would be entitled to redundancy pay if terminated after two years.
Types of employment contracts include: permanent both full and part time, fixed-term.
Casual or zero hour employment contracts, meanwhile, are designed to allow businesses to meet fluctuating needs. They should not be issued for people working set hours.
Does your Employee Contract do the job?
Written contracts for employees may seem like burdensome paperwork. Yet another admin step prolonging your recruitment process. That is, until the full extent of their importance becomes clear to you when something goes wrong later on. Failure to issue one can result in a tribunal fine.
You may feel that a verbal agreement with an employee saves time. However, it can also cause all sorts of problems for you should conflict arise later in the employment. An apparently trifling misunderstanding has been known to develop into a full-blown tribunal.
Therefore, it is wise to prepare a contract prior to an employee’s start date to reduce any misunderstanding before work begins.
What should be included in your Employment Contract?
Employment and worker contracts must detail all the items listed in the Employment Rights Act 1996 which was updated in April 2020.
Employment contracts typically include: business name, start date, details of the work, conditions of pay, hours of work, holiday entitlement, sick pay, notice period, pension and collective agreements, Disciplinary and Grievance details may be given within two months but it is better to have everything provided at the same time
An important area to think about are notice periods. If the employee is key to your business or hard to replace you may wish to give a longer notice period.
You may wish to discuss things that can protect your business from harm such as IT, data security, privacy and social media use, as well as policies that detail your company’s approach to family commitments and employee well-being, which can form part of your recruitment and retention strategy. Could the employee leave to go to a competitor taking with them all your client lists and prices? A well drafted Restrictive Covenant in the contract can afford you protection.
It is critically important to remember that employment contracts need to be compliant with UK law. Because of the serious legal risks, it is advisable you don’t attempt to create these yourself.
Contracts of employment during the coronavirus pandemic
The coronavirus outbreak has disrupted the vast majority of workplaces, resulting in employers and employees having to adopt new ways of working to meet the duties and obligations of their employment contracts.
As a result, some employers may need to agree changes to terms and conditions, in writing, with their employees to incorporate flexible or hybrid working arrangements. It is important to do this in order to protect the rights of both employers and employees.
Staff furloughed will have signed a furlough agreement reflecting altered working arrangements, changes to hours, salary or contract. These must be kept in case HMRC wishes to check up on payments made. If the changes are to continue, they will need to be put into a contract amendment.
Employers may also wish to consider new contractual provisions that include a lay off clause as well as considering the need to renegotiate contracts if their place of work is changing permanently as a result of Covid-19.
A DIY employment contract can do more harm than good
Cutting corners with contracts holds as much risk as staffing your business with no contracts at all.
An employment contract is legally binding, but only if it has been drafted correctly. So, whilst an employment contract template downloaded from the internet might look professional, it won’t necessarily tick all the boxes for your business or provide you with the relevant legal protection.
Add to the mix a variety of working hours and shift patterns, which is commonplace with today’s approach to flexible working, and you potentially have an entire workforce without the right contracts. Dodging that minor paperwork pain can quickly become a major paperwork nightmare.
It is also important to note that template contracts can be out of date and not reflect the most recent legislative changes or case law. But how would you know? Are you confident about the employment status of your new recruit, are they a worker or an employee? Their rights are different.
At The HR Dept, we can put together all your employment contracts, so you can make sure they are legally compliant and your company isn’t exposed to unnecessary risks, as you grow your workforce.
A staff handbook to reflect your culture
As your business grows it becomes more important to have a staff handbook that sets out “how things are done around here”. We write handbooks in plain English, which reflects the culture and style of each business. The handbook helps new staff learn the correct way to do things and reminds existing employees of the rules.
Getting peace of mind on HR paperwork
Seeking expert advice will provide clarity on which policies work well for your business. If you’re about to hire your first employee or would like to review your current employee contracts, we can help. Contact us today for peace of mind, knowing that your HR paperwork is on the right side of employment law.
Up next read about payroll & pensions
Employment Contract FAQ
Who is involved in an Employment Contract?
There are two parties involved in an employment contract: the employer and employee. The contract is a legally-binding agreement between those two parties where each party will agree to a set of conditions, duties, rights and responsibilities. If either party breaches the contract and cannot resolve this directly, it may lead to mediation or legal action. Given the complexity of employment contracts – and costly repercussions if they are breached – the importance of involving HR professionals from the outset cannot be underestimated.
What is the difference between Statutory and Contractual notice periods?
There are two types of notice period: statutory and contractual. A statutory notice period is the minimum legal notice that can be given depending on how long an employee has worked for you. A contractual notice is decided by the employer and can be longer than the statutory notice period. This will be detailed in the employment contract.
How quickly should an employment contract be issued?
A written statement of employment particulars, such as pay, working hours and responsibilities must be provided on or before the employee or workers’ first day of work. It is also a good idea to have the full employment contract prepared before they start.
Am I allowed to retract a signed contract?
If an offer is unconditional, the contract becomes legally-binding as soon as that offer is accepted and it is not possible to retract the contract without breaching the terms, which could result in legal action. However, a conditional offer can be withdrawn if an employee does not meet the conditions of employment. For example they do not have the correct qualifications or immigration status or the employer receives bad references from past employers.
Why are employment contracts important?
Employment contracts are important for both employers and employees because they ensure both parties are fulfilling their conditions and duties and they protect the rights of everyone involved. For employees, contracts state the benefits they are entitled to under employment including pay, sick pay and other forms of paid leave. They also ensure job security. For employers, contracts are an essential part of protecting business interests and confidential company information.
Is it a legal requirement to have a contract of employment?
There is no legal requirement to have a written contract of employment. However, employers are legally required to provide all employees with a written Statement of Particulars, which details the terms and conditions of employment.
Are employees required to sign a contract of employment?
Contracts of employment should be signed by the employee, however where the employee has failed to sign it but continues to work under the terms and conditions laid out, a tribunal is likely to find that they have accepted the terms.
Are your employment contracts legal?
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