Contract of Employment
The importance of contracts of employment for employers and employees
Content
- Contracts Of Employment
- How does your business deal with employment contracts?
- The importance of employment contracts
- Forms of employment contracts
- How to adapt an employment contract
- Key Aspects of employment contracts
- Why Contract are Crucial for Both Employers and Employees
- Importance of contracts of employment for employers
- Importance of contracts of employment for employees
- What should be included in a contract of employment?
- How to create a contract of employment
- Legal requirements for contracts of employment
- Common mistakes to avoid in contracts of employment
- What happens if a contract of employment is breached?
- Key takeaways
Contracts of Employment
How does your business deal with employment contracts? This essential part of employment law is often neglected or underused – particularly by busy, cash-strapped businesses. But the right employment contracts, drafted in a way that’s specific to your company, can save you thousands.
The importance of contracts for employers and employees
For employees, contracts are very important. They will state many of the benefits to which
they will be entitled, as well as the money that they can expect to earn. In the event of an
employment tribunal, if a business is found to have not issued a complete contract then it
could be fined up to a month’s pay.
And while contracts are certainly valuable for individuals, they can be just as essential to
businesses. There are a number of clauses that can be inserted into a contract in order to
protect a business’s interests – such as stopping employees from setting up rival
organisations, poaching your staff, stealing valuable trade secrets or even reclaiming
accidental overpayments.
There are plenty of employment contract templates to be found online. However, it’s
essential to create a contract that’s personalised and adapted to suit your business and its
goals.
How to adapt an employee’s contract
Many employers in Northern Ireland, Scotland and further afield ask us for advice on how
they can adapt an employee’s contract. Generally, in the first two years of employment, an
employee will only have limited ability to claim unfair treatment if their contract is amended.
However, if an employee has been working for a business for longer than two years, it
becomes much harder to change a contract without risking legal action. We would
recommend seeking the advice of the employee in question in a consultation
How does your business deal with employment contracts?
This essential part of employment law is often neglected or underused – particularly by busy, cash-strapped businesses. But having the right employment contract, drafted in a way that’s specific to your company, can save you thousands.
The importance of employment contracts
For employees, contracts are very important. They will state many of the benefits to which they will be entitled, as well as the money that they can expect to earn. In the case of an employment tribunal, if a business has not issued a complete employment contract, it could be fined up to a month’s pay. This applies in both Great Britain and Northern Ireland
Furthermore, the Court may feel the company is not meeting its obligations for employment law, leading to the company having a ‘black mark’ against them. By not issuing an employment contract the penalty can range from 100s to thousands of pounds and losing the case.
From April 2020, the issuing and signing of employee contracts changed from 8 weeks to by the end of the first working day – this currently only applies in Great Britain, in Northern Ireland laws still state 8 weeks.
Download our free guide on Employment Law in the UK looking at the differences between Great Britain and Northern Ireland.
And while employment contracts are certainly valuable for individuals, they can be just as essential to businesses. Several clauses can be inserted into an employment contract to protect a business’s interests – such as stopping employees from setting up rival organisations, poaching your staff, stealing valuable trade secrets, or even reclaiming accidental overpayments.
There are plenty of employment contract templates to be found online. However, it’s essential to create a contract that’s personalised and adapted to suit your business and its goals.
Forms of employment contracts
- Full-time contracts
- Part-time contracts
- Fixed-term contracts i.e., maternity cover (including full-time and part-time)
- Apprenticeship contracts
- Zero-hour contracts
- Contractor/Freelancer contracts
How to adapt an employee contract
Many employers in Northern Ireland, Scotland and further afield ask our HR consultants for advice on how they can adapt an employee’s contract after the employee has signed it. Generally, in the first two years of employment, an employee will only have limited ability to claim unfair treatment if their contract is amended.
However, if an employee has been working for a business for longer than two years, it becomes much harder to change a contract without risking legal action. We recommend seeking advice from our HR consultants and consulting with the employee in question.
If your business is going through a TUPE process, employee contracts cannot change for the employees of the company you are merging/taking over. The only incident they can change is to improve the terms and conditions of their employment contracts. Holiday and salary entitlements cannot be reduced to match your company.
Key Aspects of Employment Contracts
- Job Title
- Date the employee commenced employment
- Place of work
- Contracted hours and days, outlining if the requirement for working unsociable hours or expected to work overtime
- Salary
- Conditions along the probationary period, including the length of probation
- Holiday allowance and pay – including bank holiday entitlements
- Notice periods
- Disciplinary procedures
- Restrictive covenants
Why Contracts are Crucial for Both Employers and Employees
Contracts of employment are a vital component of any working relationship. They provide a clear outline of the terms and conditions of employment for both the employer and employee, ensuring that everyone is on the same page.
For employers, contracts provide a legal framework that helps protect their interests, while for employees, they offer a degree of security and certainty about their role and responsibilities. As the job market has changed dramatically over the last few years, contracts of employment provide a safety net for employers, especially following the great reshuffle and notice periods.
They provide a solid foundation for a successful working relationship helping to prevent misunderstandings and disputes down the line. Contracts should be kept up to date, as part of our outsourced HR service we will review your contracts of employment and employee handbooks to have them in line with current employment laws in the UK.
Importance of contracts of employment for employers
By having a contract of employment in place, employers can ensure that their employees are aware of their responsibilities and obligations and can take appropriate action if these are not met. Contracts of employment provide a clear outline helping to protect businesses from tribunal claims.
One of the main benefits of having a contract of employment is that it provides clarity and certainty for both parties. By clearly outlining the terms of the employment relationship, including the job description, hours of work, salary, and benefits, employers can avoid misunderstandings and disputes down the line. Reducing the likelihood of legal action being taken against the employer, which may save financial and time resources in the long run.
Having the correct and necessary processes in place from the beginning will also reduce time and money for employers. As you set a precedent at the get-go.
Secondly, contracts of employment are crucial for employers is that they can help to protect confidential information and trade secrets. By including a confidentiality clause in the contract of employment, if employees breach this, employers hold the right to begin an investigation and disciplinary procedures.
Employers must ensure that their employees are aware of the importance of keeping certain information confidential. This can help to prevent sensitive information from being shared with competitors or the general public and can reduce the risk of damage to the business.
Importance of contracts of employment for employees
Contracts of employment are equally important for employees as they offer a degree of security and certainty about their roles and responsibilities. By having contracts in place, employees can be confident that they are being treated fairly and that their rights are being protected. Creating the foundation for job satisfaction and starting the working relationship off correctly.
One of the main benefits of having a contract of employment is that it provides employees with a clear outline of their job description, duties, and responsibilities. This may help to reduce the likelihood of misunderstandings and disputes arising between the employer and employee. By having a clear understanding of their role and responsibilities, employees can feel more confident and secure in their job, leading to a more productive and motivated employee.
Another important reason why contracts of employment are crucial for employees is that they provide a degree of job security. By including a notice period in the contracts, employees can be confident that they will be given a reasonable amount of time to find a new job if their employment is terminated. This may help to reduce the stress and anxiety associated with losing a job and can help employees to plan for the future.
What should be included in a contract of employment?
A contract of employment should include a range of information to ensure that both parties are aware of their rights and responsibilities, elements to include;
- Job description
- Hours of work
- Salary and benefits
- Notice period
- Confidentiality clause
For example within a GP Practice, a confidentially clause is extremely important in the protection for patient medical information.
How to create a contract of employment
Creating a contract of employment can be a daunting task, but it is essential for both employers and employees. Here are some tips to help you create a contract of employment:
- Seek professional guidance, such as an HR consultant.
- Use clear language that can be understood by employees.
- Be specific about the job details.
- Be fair, conditions within the contract should not be unfair or unreasonable.
Legal requirements for contracts of employment
There are a number of legal requirements that must be met when creating a contract of employment. These include:
Minimum wage: must comply with minimum wage laws and regulations.
Working hours: must comply with working hours laws and regulations, including any overtime or shift work that may be required.
Health and Safety: must comply with health and safety laws and regulations to ensure that employees are protected from harm.
Discrimination: must not contain any clauses that discriminate against employees based on their race, gender, age, religion, or sexual orientation.
Common mistakes to avoid in contracts of employment
When creating a contract of employment, there are a number of common mistakes that should be avoided, these include;
- Using vague language
- Failing to include essential information
- Including unfair or unreasonable clauses
- Failing to update the contract of employment
What happens if a contract of employment is breached?
If a contract of employment is breached, this can lead to legal action being taken against the party that breached the contract. This can include a claim for damages or an injunction to prevent further breaches of the contract.
Key Takeaways
Essential Role of Employment Contracts: Employment contracts are foundational to the employer-employee relationship, offering clarity and protection to both parties. For employees, these contracts set out benefits, salary expectations, and provide a sense of security. Employers, on the other hand, can safeguard their interests, including protection against employees starting rival businesses or disclosing trade secrets. Importantly, a well-drafted contract can prevent legal disputes and financial penalties.
Key Components and Varieties: Employment contracts come in various forms, including full-time, part-time, fixed-term, apprenticeship, zero-hour, and contractor/freelancer contracts. Regardless of the type, key elements should be outlined clearly: job title, start date, workplace location, working hours, salary, probationary conditions, holiday allowances, notice periods, disciplinary procedures, and restrictive covenants. Each contract should be personalised to reflect the specific needs and goals of your business.
Creation, Adaptation, and Legal Compliance: Creating or amending contracts of employment requires careful consideration and, often, professional advice, especially if the employee has been with the company for over two years.
Any changes should be consensual and documented. Legal requirements, such as compliance with minimum wage, working hours, health and safety, and anti-discrimination laws, must be meticulously observed to avoid common mistakes and potential legal breaches.
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