The Ins and Outs of Employment Contracts

Are you launching a start-up and looking to get your employment contracts in order? Maybe you’re a worker about to sign a contract for a new full-time job? Whatever the case, employment contracts play a crucial role in the employer-employee relationship, and have to be considered carefully in order to get absolutely right. Keep reading for everything you need to know about employment contracts within the UK.

Introduction to Employment Contracts: Definition and Importance

What is a Contract of Employment?

Simply put, a contract of employment is a legally binding agreement made between an employer and employee. It contains all the terms and conditions of their working relationship, with details of job responsibilities, working hours, compensation, and benefits, ensuring clarity on both sides of the agreement.

Overview of Different Types of Employment Contracts in the UK

Permanent Employment

A permanent employment contract will be used to define and agree on the working conditions of an employee in permanent work. THis may be either a full time or part time position (there is no ‘set’ amount of hours required to work that determines a role as full-time).

Permanent employees can usually expect to receive a set salary, paid holiday days, pension benefits, and statutory sick pay, the terms of which will all be found in their employment contract.

A part time employee contract will look very similar to a full-time employment contract but terms of conditions and perks are offered on a pro rata basis. They can be a great option for both employees who have other work or life commitments, as the exact amount of hours worked will be agreed upon between the employee and employer and employers who may need a flexible workforce or not require full time employees.

Fixed Term or Temporary Employment

The conditions of these contracts should look similar to those of permanent employees, but will mean the employee is only expected to work for a limited amount of time. They will often be used to fill roles with short-term gaps, such as if someone in the company goes on maternity leave.

Zero Contract Hours

A zero hour contract essentially means that there are no hours obligated to work – instead, the employer will request the employee to work as and when they need it. Entitlements, benefits, and pay should be similar to that of a full-time worker at the company on a pro rata basis.

Freelance / Contractors / Self Employed

These types of contract will differ entirely depending on the freelancer, contractor, and company in question. The freelancer or contractor can set their own terms with the company – they can provide a start and end date similar to a fixed term contract, or they can simply agree to work on the specific project until it’s complete.

Often self-employed workers, freelancers and contractors won’t receive the same benefits or rights as full-time workers. They will also need to take care of their own taxes independently.

Agency Staff

These contracts are managed entirely by an external company of recruitment agents. Workers sign up to an agency, and the agent finds them work with a business or organisation, but it’s the agency company that takes care of things such as tax contributions and sick pay.

Legal Requirements and Obligations in Employment Contracts

What Should Be Included in an Employment Contract?

An employment contract should include each and every term of employment set out by the employer. The key elements typically include:

• Job role. The title, responsibilities, and other information related to the nature of the work expected.
• Work hours. The standard amount of hours an employee will work each week.
• Pay. A clear outline of the salary and payment frequency.
• Benefits. Everything from health insurance to pension plans.
• Leave policies. This includes holiday pay, sick leave, and other time-off policies.
• Probationary period. If applicable, this will outline the terms of the probationary period, a specific duration at the beginning of a new job during which time the employer assesses the performance of the employee to see if they’re suitable for the role.
• Termination terms. These are the conditions that must be followed if either the employer or employee decides to end the employment, such as notice period.
• Non-compete clauses. If necessary, this will define any restrictions on the employee working for competitors of the company.

When Should a Contract of Employment be Issued?

A contract of employment should always be issued by the first day of employment at the latest, ideally before they even start working so as to guarantee complete clarity between both parties prior to any work completed.

How Employment Contracts Affect Employer-Employee Relations

The job contract between employer and employee plays a crucial role in shaping positive relations between both parties. A clear contract helps to establish expectations, fostering a mutual understanding and providing an essential framework for resolving disputes and preventing misunderstandings, which helps to build trust and security.

Common Pitfalls and Best Practices in Drafting Employment Contracts

Whether you’re an employer or employee, you should always look to avoid these factors when it comes to drafting employment contracts:

• Vague language. This includes insufficient detail on job responsibilities, as this could cause issues down the line.
• Neglecting to address important issues. A good contract will always outline specific terms of clauses such as sick leave or holiday pay.
• Compliance with local employment laws. Whatever the type of employment contract, it should always be in line with current legal aspects of employment.

The Role of HR in Managing Employment Contracts

HR will usually be in charge of managing employment contracts, which includes drafting, reviewing, and updating them to stay aligned with changes in law and company policy. They ensure clarity and fair treatment of employees, fostering a positive employer-employee relationship while also protecting the company from any organisational disputes.

These responsibilities can take up a lot of time, energy, and resources, especially for SMEs, start-ups, or businesses without an internal HR department. That’s where we come in. We provide expert employment contract management services to bring you the peace of mind you’ve been looking for, helping to keep your staff safe and happy while keeping you on the right side of employment laws and regulations.

If you’re looking for someone to lend a helping hand with your employment contracts, feel free to get in touch today to find out more about how one of our expert team can support you.