Back to Basics – Employment Contracts!

You’re a small employer and have a few employees but they don’t have contracts, this is OK, isn’t it?

Technically not! An employee with over a month’s service is entitled to a written statement of main terms within 2 months of commencing work, this is the law.

In reality though, there will be a contract between you and the employee in a verbal form; at some point you will have discussed the available position, offered it to the individual who in turn accepted and this would have been evidenced when that person attended for work.

As a small employer you need to consider which type of contract will suit your business best, issuing the wrong type may create more legally binding obligations on you than you wish and as such make managing your employees less efficient and more time consuming.

There are various types of contract available to use, some of these being:

  • Permanent (full or part time)
  • Temporary
  • Fixed term
  • Zero hours
  • (There are variations on these such as term time only, job sharing & annualised hours)
  • Employee Shareholder
  • Apprenticeship Agreement – if in the correct prescribed form under s.32 (Apprentices, Skills, Children and Learning Act 2009) this will amount to a contract of service and allow for management of the apprentice as an employee. Note: Incorrect wording of this Apprenticeship Agreement will render it to be a traditional contract of apprenticeship and afford extra protection to the apprentice.
    Casual Agreement

There has been lots of publicity about zero hour contracts and they are topical with the current election, however what they mean essentially is that there is no obligation for an employer to provide work to an individual but there will be an obligation for that individual to accept and perform the work. The individual may be a worker or an employee dependent on how the contract is written.

A casual agreement is based on ‘no mutuality of obligation’ so the worker (who has less employment rights than an employee) has no obligation to accept any work which you may offer and neither do you have any obligation to offer work. This may be most useful for use within the catering industry or for employers with seasonal peaks and troughs.

There is no legal definition for zero hours or casual agreements.

There are certain elements which you may choose to make contractual in addition to those prescribed in law to help you manage the employee in a way to suit your business requirements. As an employer you will benefit from identifying the rules in the employment relationship, make clear what you expect from your employee and what is unacceptable and the consequences that are attached to such behaviours and actions, this goes towards identifying how you as an employer, have acted reasonably when managing employees.

Even though you can issue a contract which may have clauses to suit your business such as requiring the employee to work additional hours and to work at different locations, you still have an obligation to act reasonably when enforcing such clauses.

Consideration is also required around your disciplinary, grievance and appeal procedure, do you wish to make this contractual or not, by not having this as a contractual agreement it allows for easier management of the employee and generally serves to save you time as an employer.

So what does the legislation state should be in a statement?

  • Names of the employee & employer
  • Job title or brief description of the work
  • Any collective agreements
  • The requirement to work abroad for more than one month
  • The period which the job is meant to last
  • The date employment commenced
  • The date of any continuous employment
  • The scale, rate and method of calculating remuneration
  • The place of wok
  • The pay intervals
  • Hours of work
  • Holiday entitlement
  • Sickness and incapacity details
  • Pension scheme details
  • Notice entitlement
  • A note specifying the discipline, grievance and appeal procedure

The employment contract will be the foundation of the relationship between you and your employee, if there is a dispute it will come back to what is in the contract, not having one in writing does not mean you avoid your obligations as an employer, quite the opposite.

Any claim to an employment tribunal will always identify what the content of the contract was, what was agreed and in the absence of this, then what has happened in practice. In the absence of a contract and employee can make an application to the employment tribunal who can determine what the terms of a contract (written particulars) are likely to be from surrounding facts and if the claim is on the back of another such as unfair dismissal the tribunal have the power to award of 2 or 4 weeks’ pay (there is a statutory maximum) to the employee.

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