Employment contracts are a confusing area and one that can have costly consequences. A contract is an agreement between you and your employee, which explains what work they do for you and what you will provide for them in return, that is their pay and any other benefits.
The contract may be written or it could be an oral agreement between you and your worker. It is agreed when you hire them. The terms of the contract may be explicit or implied. Be warned, though, an employee can still use an oral agreement as evidence against you in an employment tribunal.
Under the Employment Rights Act 1996, you must provide all your workers with a written statement of the terms and conditions of their job within two months of them starting work. This is not the same as an employment contract. If their employment is expected to last one month or less, terms and conditions are not needed. The terms and conditions must include:
your company’s name and the employee’s name,
the date the job started,
the rate of pay and how often it is paid,
hours of work,
holiday allowance and how you work it out,
place or places of work and your company’s address.
When you make a job offer to someone, you should include written terms and conditions so the potential worker can agree to them. Following this, an unconditional job offer can be made. An employment contract will exist only once this has occurred. The job offer should tell the employee how to respond, for example by signing the employment contract. Any time before this stage, you can withdraw this offer and a contract will never have existed between you and the potential employee.
If you decide you don’t want them to work for you once the contract expires, and you decide to withdraw the offer, you will have to pay for breach of contract. This will be a payment equivalent to the notice period you have given them, so it may be a week’s pay if the rules were one week’s notice.
If the employee decides to break the contract and not start work, this will still be a breach of the contract, but there is little you can do about this.
WHAT TO INCLUDE
Before drawing up a contract, you should think what you want from your worker. Consider:
the contribution the worker is expected to make,
how long the role is for (for example, it may just be for the Christmas period), whether the role is full- or part-time,
How much notice to give.
You should build into the contract the ability to vary the terms, so if a worker requests flexible working hours, you are not in breach of the contract if you change when and how long they work for. Above all, make sure the terms of the contract are written clearly and there is no room for confusion. All of your workers are entitled to statutory rights that include:
equal pay for like-for-like work,
an itemised payslip,
not to be discriminated against,
how much notice both you and the worker must give,
statutory sick pay,
maternity, paternity and adoption leave and pay,
the right to request flexible working,
a safe place of work,
not to be unfairly dismissed,
a written statement of the terms and conditions of employment,
20 days’ paid holiday leave,
to be paid at least the relevant rate of the national minimum wage.
Even if these are not written in the contract, the worker still has the right to them, and if you don’t provide them, you will be in breach of contract. Both you and your worker also have obligations under what is known as Common Law. For example, you must provide a safe and healthy work environment, and your employee must be faithful, loyal and confidential about your business. If either of you does not abide by these, this will also be breach of contract.
You should also be aware that the customs and practice of the workplace are taken into account in an employment contract, even if they are not written down. These imply a general understanding within your company. So, for example, staff may have to work on bank holidays. New workers should be aware of these customs and practices, and it should be made clear what they actually are, for both you and the employee.
DIFFERENT KINDS OF EMPLOYMENT
Short-term contracts can be drawn up for temporary workers, employed for any number of reasons. The only difference from contracts for permanent employees is that there must be an end date for the period of employment, or a likely duration of the work.
Casual or ad hoc workers may have a contract which states you are not obliged to offer them work, and they are not obliged to accept it. However, if a casual worker works continuously for several weeks or months, there may be further employment rights. You may hire workers for a fixed-term in order to carry out a particular task. In this case, their contract must state the maximum period of their employment, or state what the specific task is that they must carry out.
If you and your worker disagree on the details of the contract, the worker could go to an employment tribunal where other sources of evidence may be considered, such as the job advertisement and description, staff handbook and work rules. You must ensure all are consistent and clearly outlined.
Once the details of the contract are agreed, you cannot change them without getting the worker’s consent and signature. If you don’t get this, you may be in breach of the contract.
Employment tribunals are obliged to award compensation to an employee where breach of contract has occurred. A minimum of two week’s pay may be awarded or, in some cases, the tribunal may decide to award the higher amount of four weeks’ pay. A week’s pay is classed as £280 or less.