Don’t Cut Corners on Employment Contracts: The DIY Employment Contract Costs Employers Big!
To save costs, employers may be lured to download free employment contract templates or copy and paste them from online contracts. However, this risky approach often leads to crucial omissions and non-compliance with legal requirements, leaving employers vulnerable.
Sloppy drafting and vague language can also result in misunderstandings and disputes, potentially leading to costly legal action. Well-drafted employment contracts are crucial in defining employer-employee relationships and safeguarding business interests.
In this guide, we look at what an employment contract should include, why it is necessary, and what happens if either party breaches the contract.
What Is an Employment Contract?
A contract is an agreement specifying legally enforceable entitlements and obligations. In the context of employment law, the contract (or statement of particulars) contains the main terms and conditions someone is employed under.
Are employment contracts a legal requirement?
All employees, irrespective of the duration of their contract, are entitled to receive a written statement of particulars. This also includes those who may be classed as workers i.e., zero-hours workers, agency workers, and freelance workers.
This must be provided on or before the first day of employment.
What should an employment contract include?
A statement of particulars should set out the key terms and conditions of employment, such as:
- Job title
- Work location– this should also include if the employee is required to work anywhere other than their main work location. For example, if they are required to work from other sites or if any travelling may be involved.
- Working hours – if there are no set hours of work, this should also be clearly stated. If the employee is contracted to carry out overtime, this should also be stated.
- Who the employee reports to
- The rate of pay– the contract must not specify a rate of pay that is below the minimum/living wage rates. The contract should also set out when and how often the employee is paid.
- Any other contractual benefits that may be applicable such as company vehicle, private medical insurance and so on.
- Annual leave entitlement. The contract should not specify an annual leave entitlement that is below the statutory minimum (5.6 weeks). The statutory minimum is also applicable to those working under zero hours and term-time-only contracts. Where the employee is part-time, their contract should set out the pro rata annual leave entitlement.
- Sick pay entitlement– whether this is a company sick pay entitlement or statutory sick pay (SSP) it must be stated in the contract.
- Pension arrangements – the contract may refer the employee to the specifics of the relevant pension scheme but due to auto-enrolment requirements, the entitlement to be enrolled in a pension scheme should be stated.
- Notice requirements– the contract should set out the notice the employee needs to give if they wish to leave and the notice the employer would need to give. Please note, the statutory notice provided by the employer is one week’s notice per complete year of service up to a maximum of 12.
- Probation period– if the employee is subject to a probation period, this should be stated in the contract, along with the duration of the probation period.
- Duration of the contract– if the contract is for a fixed term, for example, to cover maternity leave or for the duration of a particular project, this should be stated in the contract.
The written statement of particulars sets out the main terms and conditions of employment. It does not need to refer to every piece of employment legislation, otherwise, it would run into thousands of pages.
Rules and procedures, such as disciplinary and grievance procedures, absence reporting, and procedures specific to a particular sector such as safeguarding, child protection policies, and care standards, can be issued separately- usually in the employee handbook.
What are the penalties for failing to provide a contract?
If an employee is bringing a claim against their employer, unfair dismissal for example, they may be entitled to an additional 2-4 weeks’ pay if the employer has failed to provide a statement of particulars.
What if an employee refuses to sign their contract?
It is important to get a signed copy of the contract on file. This is not only to show the contract has been issued but also to show that the employee has read and understood the terms under which they have been appointed.
If an employee refuses to sign their contract it’s important to meet with them and ask them to outline why they do not wish to sign it.
If there is a misunderstanding regarding a particular term, then you should try and clarify this. If there is a dispute regarding a term within the contract, such as their rate of pay, you must ensure that you seek to resolve this dispute. This can be done informally or via the employee raising a formal grievance.
If the employee is just being awkward, perhaps they think if they don’t sign it, they are not bound by the terms. This is not the case, if an employee continues to work under their contract without raising a dispute, they will be deemed to have accepted those terms. It may be that despite repeated reminders to return a signed copy of the contract, the employee has failed to do so.
In either instance you should write to the employee to state that the contract has been provided, the terms are as contained within the document and a copy will be placed on their file.
What happens if an employment contract is breached?
Both parties are required to adhere to the terms specified in the statement of particulars.
This means that the employee is expected to attend work on the days and times specified and the employer is required to offer work according to the contract and pay the employee accordingly.
If an employee breaches their contract or fails to follow rules and procedures contained within the employee handbook, there are steps the employer can take to redress this, such as taking disciplinary action for example.
If the employee fails to show up for work, the employee has breached their contract and the employer may be entitled to withhold payment.
The employer is not entitled to breach the employees’ contract as ‘punishment’ for rule-breaking, such as demotion or slashed wages in retaliation for repeated lateness for example.
Where the employer commits a significant breach of an employee’s contract, whether that is an express written term or a breach of the implied term of mutual trust and confidence (i.e., failing to protect the employee from acts of discrimination) the employee may be able to bring a claim for breach of contract and may deem the breach sufficiently serious enough to resign and claim constructive dismissal.
Employers may be able to pursue civil action against employees if they fail to provide the notice specified under the contract or breach other agreements such as restrictive covenants which contain post-termination restrictions aimed at preventing employees from setting up in direct competition in the same locality, poaching staff and clients, etc.
Can employees request to change their contracts?
Yes, they can. Also known as making a ‘statutory application’, employees can make a flexible working request to change their contract, usually, it is a request to change their working hours, shift patterns or working location.
The right to make a statutory application for flexible working applies to all employees with at least 26 weeks of service.
Employees can make only one request in a 12-month period and their application should set out how they think their flexible working request might affect the business and how the business could overcome any obstacles in agreeing to their request.
Important notice: Day one right to request flexible working confirmed
Following the government proposal to introduce The Employment Relations (Flexible Working) Bill, the rules regarding flexible working are set to change. The changes are expected to include:
- Granting all employees the right to request flexible working from day one of their employment (26 weeks currently)
- Allowing employees to make more than one flexible working request in a year- currently, employees are only able to make one request in a 12-month period.
- Employees will no longer have to set out the impact of their request on the company when their request is submitted.
- Employees will be entitled to be fully consulted before their request for flexible working is rejected.
- Currently, employers must make their decision regarding a flexible working request within 3 months, it is expected that this time period will reduce to 2 months.
Please note, the right to request flexible working is a legal entitlement, and any attempt by the employer to prevent an employee from asserting a statutory right could result in an Employment Tribunal claim.
Can the employer change an employment contract?
Yes but only where those changes are for a genuine and essential business need.
It is essential that employers do not unilaterally impose changes to employment contracts, instead, they are required to follow a period of consultation with their staff (including representatives such as Trade Unions where applicable).
If following a fair process of consultation, the employer cannot reach a mutual agreement and the employees refuse to accept the changes, the contract is terminated and a new contract with the revised terms and conditions is imposed.
In that situation, the employee will either accept the new contract and carry on working, or their employment will end for the reason of some other substantial reason (SOSR).
Need support? Speak to your designated advisor
Avensure’s experts can advise on preparing contracts of employment. It is also vital that employers seek our advice before making any changes to an employment contract, withholding pay, or taking action against an employee for breaching the contract of employment.
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