Employment Contract for Employers

What Is an Employment Contract?

An employment contract is a specific type of contract whereby an employee agrees to spend time working for an employer in exchange for pecuniary retribution (“wage” or “salary”). This contract is endowed with a list of terms and conditions that are enforceable before a tribunal and constitute “laws between parties”.

Once a job offer is accepted, and you hire an employee, a contract of employment is created. This contract governs a great number of aspects of a working relationship and introduces several liabilities and rights for the parties involved, some of which can be tricky to interpret and satisfy.

At IAS Law, we assist employers with matters of employee contracts and other employment intricacies. For assistance, call us today on 0333 305 9375. We will walk you through all the complexities inherent to employment contract management and help you prepare contracts that best fit your particular interests in compliance with current regulations.

Terms and Conditions of an Employment Contract

The terms and conditions contained in an employment contract can vary depending on the type of job and the qualities of both the contractor and contractee.

They’re also more heavily scrutinised by government authorities and judicial bodies due to the uneven nature of the working relationship and the legal protections granted to employees by national and international employment laws.

The employer must lay out these terms and conditions in writing and hand the resulting document (also called a “written statement”) over to the employee. This written statement should not contain an exhaustive list of all the terms but only those relevant to the parties.

Keep in mind that you may still be liable even if there was no written contract, for the employee could prove by alternative means that there was, at least, an oral agreement. A written contract, nevertheless, will give more clarity as to the obligations and rights held by each party.

Examples of terms and conditions contained in a written statement include those pertaining to holiday pay, sick pay, redundancy terms, start and end date, payment method, procedures for dispute resolutions, redundancy terms, notice period, and so on.

According to common UK law, there are express and implied terms. Let’s go quickly over each one of these.

Express Terms and Implied Terms in Employment

Express Terms

Express terms are the terms that have been agreed to explicitly, either in writing or orally. These are usually contained in the written statement given to the employee.

Implied Terms

Implied terms, on the flip side, are terms that, while not expressly agreed upon, naturally stem from the contract in such a way that they’re essentially assumed.

Examples of these implied terms are the obligation by the employee to avoid situations that could pose conflicts of interest and damage trust or the employer’s commitment to maintain the employee’s confidence and not harm their reputation.

Note that the terms can cover statutory rights, the probationary period for a new employee, and incentives.

What Should Be Mentioned in a Written Statement for Employment?

The written statement must include the following mentions:

• Names of both employer and employee
• Start date (and end date when applicable)
• Wage and payment frequency (weekly, monthly, etc.).
• Work hours
• Holiday pay and/or entitlement (if any)
• Notice period in case of resignation and dismissal
• Job title
• Workplace address or whether the employee will have to work in multiple locations
• Dismissal and grievance procedures
• Sick pay entitlement
• The possibility of joining an occupational pension scheme, if there is one.

Incentives and the Employment Contract in the UK

Employers can offer benefits to employees as incentives to increase productivity. These incentives can range from bonuses to improved pensions, long-term incentive plans (LTIPs), commission schemes, or travel packages, among many others.

These incentives may operate outside of the employment contract as share-based incentives or be included within the terms and conditions of the employment contract itself.

Statutory Rights

Statutory rights do not derive from the contract but are enforceable by law. These include:

• Maternity leave
• Redundancy pay
• An itemised statement of pay
• No dismissal without a fair reason and procedure (after 2 years’ employment)
• Payment equal or superior to the National Minimum Wage

Probationary Period

A probationary period is a period established in the contract of employment during which the employee is withheld from certain contractual rights. As a rule of thumb, probationary periods are set to 3 months from the start of the working relationship, 6 months in the case of senior employees, and 1 month for contract workers.

This probationary period only applies to new employees who begin their contractual relationship with you. Upon expiration, you may either:

• confirm the employment
• extend the probationary period; or
• terminate the employment.

You can only extend the probationary period if it’s allowed by the employment contract and only when you feel that an employee needs to address certain areas and reach some unfulfilled goals.

Types of Employment Contracts

Overview

The responsibilities you acquire when hiring an employee hinge upon the type of employment contract signed. These contracts can be:

• Full-time contract
• Part-time contract
• Fixed-term contract
• Temporary contract
• Zero-hours contact
• Agency staff
• Freelancers, contractors, and consultants.

1. Full-Time Contracts

Full-time contracts are typically offered for permanent jobs that require roughly 35+ work hours.

Some of the details included in a full-time contract are parental leave, pension benefits, holiday entitlements, and those linked to SSP (Statutory Sick Pay).

2. Part-Time Contracts

Part-time employees work fewer hours and are regularly not bound to any exclusivity clause, so they may arrange their schedule to work in other jobs. These can also be for permanent jobs, albeit permanent full-time contracts are more common.

The details contained in a part-time contract are virtually the same as those mentioned in full-time contracts, with some exceptions.

3. Fixed-Term Contracts

Fixed-term contracts have a specific duration agreed to in advance or are signed for a limited-time task.

Many of the details included in full-time and part-time agreements also apply to fixed-term contracts, depending on their purpose. For example, holiday entitlements would not be included in short-term contracts.

Fixed-term employees who have been in continuous employment (as in, who have worked for the same employer without a break via contract extensions) earn certain employment rights such as maternity pay, redundancy pay, and the right to request flexible working conditions.

4. Temporary Contracts

Temporary contracts may get confused with fixed-term ones, though in this specific case, the contract’s period or end date is not defined. These contracts are mostly for reinforcements due to excess workload. In the absence of a clear expiry date or period, a notice period is inserted instead.

5. Zero-hours Contracts

Zero-hours contracts (also known as “casual contracts”) are those whereby a hirer only summons an employee when required. Employers are not compelled to set a specific number of hours. Likewise, employees are not obliged to accept every assignment.

Employees under zero-hours contracts are entitled to statutory annual leave and the National Minimum Wage (at least), just like regular employees. They’re likewise not bound by exclusivity clauses of any kind.

6. Agency Staff

Agency contracts are managed by a recruitment agency that is responsible for ensuring that the employee’s rights are preserved during their tenure under the hirer. Statutory Sick Pay (SSP) and National Insurance contributions are still paid for by the hiring organisation.

Agency staff members have the rights proper to permanent company employees after 12 weeks of fulfilling the same role.

7. Freelancers, Contractors, and Consultants.

Freelancers, contractors, and consultants fall under the self-employed category; hence, there is no proper working relationship with them.

The term “freelancer” describes individuals who normally utilise their tools and premises, handle multiple clients simultaneously, and are free to choose which projects to accept. Freelancers are generally found in the creative and media sectors.

“Consultants” are qualified individuals who provide expert advice on very advanced topics. They hand out the necessary tools and information that a company needs to move forward with a proposal or strategy, and they do so without direct involvement in the company’s daily operations.

Finally, “contractors” function as external workers, mainly in the construction and IT sectors. They can be found in contracting agencies or self-employed circles, and their work is completed on a project-by-project basis.

This umbrella category is not entitled to the same rights and privileges proper to regular company employees, but, as a trade-off, they get to negotiate their terms and administer their work hours.

Why Is It Important to Choose the Right Employment Contract?

As an employer, you could get into trouble if the contract signed by the employees does not match their role within the company’s workforce.

Some types of contracts carry distinct annual leave rights and tax or national insurance specifications that, when omitted, could lead to severe penalties and even prosecutions.

To be sure you are on the right side of the UK employment laws, it is recommended that you reach out to employment solicitors to help you navigate contracting employees or even independent contractors. Call us today on 0333 305 9375 for assistance.

What to Consider Before Hiring an Employee

These are some of the most important things to consider before hiring an employee:

Discarding Any Unusual Arrangements

You ought to ensure that the agreement reached with the employees is not “unusual” unless the job type allows for it (e.g., commercial agents, employee shareholders, apprentices, etc.).

Employment Status

Next, you must ascertain whether they would become full-fledged staff members or, rather, if they should remain self-employed.

In this regard, the following questions should be asked:

• Do you need to exert exhaustive control over this individual’s work?
• Do you require them to work at specific times or periods during the day?
• Are the tasks assigned to said individual nuclear to the day-to-day undertakings of the company?
• Can these tasks be handled in-house, and would the person assigned be comfortable with that situation?

If the answer to the above questions is yes, you’ll have no choice but to consider the contract as an employee contract.

For example, in the case of consultants, they perform highly-skilled tasks that do not concern the business’ everyday operations; hence they are not generally classified as employees proper, as disclosed earlier.

Workers vs Employees

“Workers” are legally in a middle place between employees and freelancers and have always been vaguely defined, with case law frequently trying to fill this gap.

Workers have many rights shared with regular employees, such as minimum wage, paid annual leaves, capped working hours, and even TUPE (Transfer of Undertakings) regulations, but the problem is that many of these workers are usually construed as freelancers, with the usual controversies that this interpretation entails.

The Individual’s Condition

If you hire a freelancer, you ought to discern whether or not that person operates through a limited company, as well as the type of consultancy agreement to draft in consequence.

On the contrary, if you decide to draft an employment contract, you should see whether the employee is suitable for senior status, with all the responsibilities that may flow from it.

Senior employees can expose you and your company to serious risks in terms of market performance and legal liabilities, so you should shield your company’s interests by placing some fail-safes on the contract, such as restrictive covenants.

Can I Change a Contract of Employment after it Has Been Signed?

Certain terms in an employment contract can be changed but only insofar as the employee agrees. These changes cannot be imposed unilaterally by the employer or employee. At times, these changes may require a trade union’s assent in addition to the employee’s.

Accidental changes made under “flexibility” clauses or that create more favourable conditions for the employee can be done without any input from the employee. Changes of this nature include a pay rise or the bestowal of additional benefits (such as the incentives mentioned earlier) insofar as they don’t affect other benefits.

Employers are sometimes tempted to “fire and re-hire” employees to enforce new terms, though this is a very risky practice that could provoke unfair dismissal claims.

Employment Contracts Vs. Staff Handbooks

The contents included in an employment contract may frequently overlap with those found in staff handbooks, but there is a stark distinction between the two instruments.

An employment contract contains general terms and conditions that are typically fixed and may not be changed by the employer at will.

The staff handbook, on the other hand, encompasses a series of guidelines and codes of conduct that the workforce as a whole should abide by when fulfilling their duties.

This handbook should also provide information about the various inner processes of the company, its different departments, its mission and vision, and other assorted bits of data that may be of interest to employees so that they may perform their jobs more efficiently. For this reason, these handbooks are ordinarily much more exhaustive than employment contracts.

Many of the terms in a staff handbook may coincide with an employee’s contract terms. To give a few examples: Policies on family leave procedures, petitions for flexible working hours, disciplinary and grievance procedures, etc.

By contrast with employment contracts, staff handbooks may be changed according to the present needs of the employer, provided that these changes don’t affect the employees’ acquired rights and/or do not infringe statutory rights.

Moreover, employees cannot make claims before an employment tribunal that involve terms laid out in a staff handbook, as this document does not grant employees any legal rights that can be enforceable in the same way as those recognised in a contract of employment.

How Can We Help?

Employment contracts are an incredibly tricky subject to tackle, especially if you don’t have the proper expertise on how to draft and manage them in compliance with UK employment regulations.

Our expert solicitors at IAS Law have been dealing with cases from both sides of the relationship for a considerable length of time and can therefore offer impartial advice that may benefit you when hiring employees and dealing with legal and contractual obligations or possible claims of contractual breach.

Call us at 0333 305 9375 to find out about our services and schedule a consultation with us or reach out online.