As an employer, you'll inevitably have to hire new staff. When this happens you need to have an agreement that clearly outlines the terms and conditions of employment.
It should explain employee rights and what is expected of both parties. Failure to stick to these terms can lead to claims being raised against you, with monetary and reputational damages.
In this guide, we'll discuss what an employment contract is, what you should include in them, and the different types you can provide.
What is a contract of employment?
An employment contract is a legally binding agreement between both employer and employee. They give both parties certain rights and obligations.
For example for temporary employees, it states the length of time an employee agrees to work for the company.
Employment contracts are made up of two parts, a principal written document that summarises the main terms and conditions of employment, as well as any other terms. Such as implied and express.
Why are written employment contracts important?
Providing a written contract is crucial as it gives both parties more certainty moving forward. Written statements explaining the terms of employment create a physical record if a claim is raised against you in the future.
Whether you've already verbally agreed to terms with a new recruit, it's good practice to provide a written contract.
What are the laws on employment contracts?
Employers must provide a written statement by day one of employment.
This statement should include information on the following:
However, you should still provide full employment contracts to new starters (including the information above). So, you need to understand the different types.
When should an employee receive their contract of employment?
As soon as an employee accepts the job offer, they have a contract with you. By law, you must have the written statement of main terms ready to be signed by them by day one of employment.
It's good practice to provide new employees with their employment contract as soon as possible. The follow criteria should be met:
- If the job offer was unconditional.
- The employee has met all the requirements for the job.
- You have provided specific conditions for the job.
You should also prepare their staff handbook, which includes any company policy documents. As well as the contract that should be signed by day one of employment.
Different types of employment contracts
As an employer, there are different types of employment contracts for the different types of people you can employ.
So, you need to become familiar with them to ensure you're providing the right ones.
Full-time or part-time contract over an indefinite period
A permanent employee contract is by far the most common type given to an employee in the UK.
This form of contract is provided when the employee has no end date to their employment. It should include details of their terms and conditions of work, working conditions, responsibilities, and duties.
Fixed-term contract
Employees on a fixed-term contract should be treated in the same way as permanent staff. In a fixed-term contract, the working relationship is created for a set amount of time and for example, ends when a specific task is finished.
If an employee has been on this form of contract for at least two years, they have the same rights to redundancy as someone who is permanent.
Zero-hours contracts
Zero-hours contracts are usually put in place for work that is required on an irregular basis. So any workers on this contract may be called in to come in on a certain day.
Zero-hours workers are entitled to statutory annual leave.
Internship
Interns can be considered a volunteer, employee, or worker.
If you consider them to be an employee, you must pay them the national minimum wage. However - volunteers don't get paid.
If the intern is a student in higher education where an internship is required, they're not entitled to receive the minimum wage. However, it can work wonders for your business reputation if you pay them.
What is included in an employment contract?
There is a range of terms that you need to include when creating employment contracts for your staff. Understanding them will go a long way to having the best contracts possible, and hopefully avoiding any breaches or conflicts in the future.
Express terms
Express terms are specific written terms that are either agreed upon in writing or verbally by both parties. They must be written or discussed. Such as sick pay, redundancy pay, and hours of work.
It’s important to note that it is down to the employer to decide how much notice/annual leave is given.
Implied terms
Implied terms are expected employee behaviour. For example, that an employee won't steal from you, or that they won't give away confidential information.
These terms can also be arrangements that haven't been agreed between both parties, but over time have become part of the terms and conditions of employment. For example, an early finish on a Friday or an annual Christmas bonus.
Statutory terms
Statutory terms outline the legal statutory rights under UK employment law. This includes the protection of employees against discrimination and bullying. As well as the following:
- An itemised pay statement, including any wage deductions for national insurance or pensions.
- The right to maternity leave.
- Compensation pay if they're being made redundant (if employed for over two year).
- The right to not be unfairly dismissed.
What other terms should be added to employment contracts?
As well as the above terms, you must also provide the following to your employees/workers within two months of their start date.
- Information on pensions and pension schemes.
- Details of any collective agreements.
- Details of disciplinary and grievance procedures. You should make both your disciplinary and grievance processes as clear as possible.
Do you have to include the probationary period in a contract?
Some employers can give new employees a probationary period – it has to be included within the contract.
However - you can include terms that only apply during the probationary period. For example, someone's salary may increase if they pass their probation. There must not be a reduction in someone's statutory rights during this period, for example statutory sick pay.
What happens if you breach an employment contract?
A breach of contract is when the legally binding agreement (the contract) isn't honoured by either the employer or the employee. For example, not providing the correct amount of wages.
You should always try and solve the issue informally by having a meeting with the employee in question.
Can you make changes to an employee's contract?
Yes, you can legally make changes to an employee's contract. However, there are requirements that need to be met to do so. Such as:
- Following discussions, the employee agrees to the changes.
- Following discussions, the employee's representative agrees to the changes.
- The employee has signed an agreement before confirming changes can be made.
Changing the terms of employment or working conditions without the employee agreeing to it, may leave them with no choice but to resign. This may lead to the employee making a claim of constructive dismissal against you.
Do you have the right to terminate a contract of employment?
Yes, both parties have the right to terminate the contract. This is done in a number of ways, either the employer giving notice or because of the
If you're looking to terminate an employment contract, you must follow a fair process and procedure. Failure to do so can lead to unfair dismissal claims being raised against you, with potentially heavy fines to pay and reputational damages.
Do self-employed people have employment rights?
If someone who is self-employed is working with you for a certain task, they have no legal right to any employment rights.
However, you may need to negotiate with someone who is self-employed to work for you. They would typically invoice you for the work completed.
Get expert advice on employment contracts from Peninsula
Hiring new staff is inevitable for all business owners, and you need to have an agreement in place with them before starting employment.
This written agreement explains employee rights, along with day-to-day responsibilities and duties expected of both parties. Failure to adhere to this agreement can lead to claims being raised against you.
Peninsula offers 24/7 HR advice which is available 365 days a year. Want to find out more? Book a free consultation with one of our HR consultants. Call 0800 028 2420.
