The employment contract is the most critical document linking the employer and employee in a binding relationship. Oliver Dale of Safety Revolution covers some essential points when issuing a contract.
The most important point is to always issue a contract of employment. The Arbitration and Conciliation Service (Acas) states that all employees must receive a contract of employment after 12 weeks of employment. However we recommend that an employee is issued with a contract before taking up employment.
The contract sets out the terms and conditions, often linked to company policies and procedures, leaving little or no room for assumption or misinterpretation.
The two key components of a contract of employment are offer and acceptance. The employer must make an offer, which the employee must accept and agree to. Without the employee’s signed acceptance, it is difficult to enforce the contract.
Contracts must be in writing, must be clear and their content should not conflict in any way.
It is important to remember that daily tasks, specific performance indicators and key responsibilities usually sit within the job description and not the contract.
The contract can be kept simple, ensuring that the terms and conditions of employment are clear to both parties.
Contracts of employment – the essentials
A contract of employment should always include the following:
- Probationary period – three months is the recommended minimum, with best practice suggesting a 12-month maximum.
- Salary and bonuses – basic salary, alongside any entitlement to overtime, contractual bonuses or financial incentives, should be clearly stated. Employers can also have discretionary bonus schemes, which in some cases would be agreed outside the employment contract, in a letter or document.
- Working hours and pattern – include start and finish times, any clauses around flexibility, shift working, weekend working, working time regulations, rest breaks.
- Statutory holidays and bank holidays – 28 days’ annual leave is the legal minimum, inclusive of bank holidays and this should be stated. The contract should state how annual leave is allocated (including any periods when leave may not be taken), whether bank holidays are to be worked or taken, with any enhanced entitlements documented.
- Place of work, relocation and mobility – always include the normal place of work. Within farming, relocation of the place of work and the employee’s ability to travel (known as mobility clause) should be included when applicable.
- Deductions – the Employment Rights Act 1996 provides protection against unlawful deductions. Therefore contracts should contain written consent where deductions are to be made for items such as relocation or training and to cover other possible sums.
- Disciplinary rules and other company policies – disciplinary rules and company policies can be specified within the contract. Including such policies within the contract makes them legally binding and difficult to deviate from or change, so we would normally advise against this practice. It is always good to have a non-contractual company handbook that gives you flexibility to change policies and procedures where there is a business need to do so.
- Confidentiality – important when people are working with business data, which may include supplier information or client databases. These clauses can often continue after the contract has ended and an employee has moved on.
- Termination – length of notice period, and any clauses detailing how notice is to be served and payment in lieu of notice. It is prudent to seek advice on such matters, as these are common areas of dispute when the employment relationship comes to an end.
It is also always important to offer a contract of employment subject to conditions. We would recommend that these include:
- Receipt of satisfactory references
- Proof of right to work within the UK
- Validation of academic and professional qualifications
- Criminal records check
- Satisfactory medical examination where applicable
- Satisfactory completion of probationary period
It is essential that any offer letters and contracts state that the above conditions must be met before the contract comes into force. The contract of employment can therefore only be considered legally binding once all conditions have been met.
The consequences of not providing a contract of employment, or of providing one which lacks clarity, vary depending on the circumstances.
Many employment tribunal cases are for breach of contract claims, where both parties argue over the terms and conditions and what legal obligations are attached to them. In addition, contracts are always referred to when considering awards for unfair dismissal, discrimination and other employee claims.
The clearer the contract, the less it is open to misinterpretation, misunderstanding and ultimately confusion in the eyes of the law. All of these can be costly to employers in terms of coming to an amicable resolution when a dispute occurs. But more importantly, the clearer the contract, the less likely a dispute is to occur in the first place.