Employment contracts: FAQs

Employment contracts are an important part of any job, for both employers and employees. Drafting a legally binding employment contract can be tricky. Equally, if you are asked to sign one, you may have questions. This article aims to answer some of the most frequently asked questions about the world of employment contracts so that you can be better informed.

What is an employment contract?

An employment contract is generally a written agreement between an employer and employee that sets out the employee’s role and responsibilities and the employer’s obligations towards the employee.

When does an employment contract become legally binding?

For a legal contract to be formed, an offer of employment must be made by an employer and accepted by the employee. The terms of the employment need to be certain, agreed upon, and the employer must offer legal consideration (which is usually a salary). Once all of these elements are in place, a legal contract is binding. This can take place before an employee commences work.

What are the different types of employment contracts?

There are different types of employment contracts. These include full time, part-time, permanent and temporary (such as fixed-term or zero-hour) contracts. You can also employ individuals as agency workers, apprentices, or on a self-employed freelance basis as a consultant or contractor.

Can you leave a job after signing an employment contract?

Yes. However, if an employment contract has already become binding, you will need to provide notice in order not to breach the contract. Your employment contract should state how much notice you must provide before you can leave.

Why is an employment contract important?

Having a clear written record, including what an employer expects from an employee and what an employee is to gain, in a well-drafted contract can save an employer time and money in the longer term. If an employer follows the terms set out in correctly-drafted documents, they will stay on the right side of the law. The documents can be particularly beneficial to an employer if they have been specifically drafted for a business and explained by a solicitor.

Employment contracts can help a business to protect its future position. They can do this with clauses relating to IP (intellectual property), confidentiality and post-termination restrictions or non-disclosure agreements (NDA) to make it clear what information constitutes trade secrets. A good contract can set this out from the start of an employee’s employment. Spending a little time and money getting the right advice on contracts can be a good investment when considering the importance of future protection of business information.

Employment contracts are also important to employees. If, as an employee, you are clear on the terms of your employment and have agreed to them in a written document, you are less likely to raise a grievance or bring about an Employment Tribunal Claim. This is because misunderstandings are less likely to arise when a clear written contract is agreed upon from the start.

What is the difference between a written statement of particulars and an employment contract?

A written statement (sometimes called a section 1 statement) tends to be a short document where the employer outlines the basic terms of the employment relationship, as required by law. A contract of employment generally goes further than this. It provides more detail about what the employer and employee have agreed and is usually signed by both parties. As a contract of employment is more detailed and both parties have signed their agreement, it takes precedence over the terms of the written statement if there are inconsistencies between the two documents.

The contents of a written statement are prescribed by law, so an employer must include those pieces of information to the employee. The employer may instead choose to have all the required terms, amongst others, in an employment contract so that a written statement is not required.

What should a written statement include?

The written statement can be made up of more than one document, but one of the documents (the ‘principal statement’) must include:

• The employer’s name and address;
• The employee’s name, job title and job description;
• The employee’s place or places of work and any relocation provisions;
• Employee’s start date and, if a previous job counts towards continuous employment, the original start date as well;
• How much and how often an employee will get paid;
• Hours of work (and if employees will have to work out of usual office hours or overtime; and
• Holiday entitlement and whether that is inclusive of public holidays.

A written statement altogether must also contain information about:

• How long a temporary job is expected to last;
• The end date of a fixed-term contract;
• Notice periods;
• Collective agreements;
• Pensions;
• Non-mandatory training; and
• Who to go to with a grievance, how to complain about the handling of a grievance, and how to complain about a disciplinary or dismissal decision.

What else should I include in an employment contract?

As well as all the required information as per the written statement, you may also want to include the following additional clauses in an employment contract:

• Further detail on sick pay and procedures, or at least where these can be found;
• Further detail on disciplinary and dismissal procedures and grievance procedures, or at least where they can be found;
• How confidentiality will be dealt with and what is included in confidential information;
• How intellectual property will be dealt with;
• Social media usage both inside and outside of work;
• Detail on notice periods and how notice will be dealt with. For example, will the employer have discretion over placing an employee on garden leave and/or making a payment instead of notice?
• Obligations for the employee on termination of employment, such as the return of company property and continued confidentiality and intellectual property provisions;
• Post-termination restrictions that the employer would like the employee to remain bound by for a reasonable and limited period and scope after the termination of employment;
• Governing law and jurisdiction of the contract;
• Specific clauses relating to the types of employment benefits that employees might receive, for example, bonuses, commission, company car or healthcare;

It is also helpful to go further and have a non-contractual staff handbook containing more detail about company policies and procedures. The purpose of this is so that employers and employees are clear on standards expected and the correct and consistent processes to be followed in specific situations in the workplace. If you would like assistance in drafting or updating an employment contract or staff handbook, we would be happy to help.

When does an employee need to be provided with a written statement?

Since 6 April 2020, employers have been required to give employees and workers a written statement from their first day of employment. Workers and employees hired before 6 April 2020 can request a written statement. This must comply with the new rules, as set out in this article, and be provided within one month of the request. Any changes to the written statement will need to be provided to all workers and employees, no matter when they commenced work or whether they requested it or not.

What happens if an employee does not sign their employment contract?

If:

• An employee does not object to the terms of an employment contract;
• The terms have been agreed verbally, and
• The employer and employee continue to work to the terms of the contract as if both parties had signed it,

then it is implied that the employee has agreed to the terms of the contract and it is binding. However, it is preferable to have the agreement signed.

If the employee does not agree to the terms, and this is why they have not signed the contract, there should ideally be a discussion before work commences about what they do not agree with and whether you can rectify this. If the employee has already started work, this may become more problematic. And, if the terms cannot be agreed upon, you may wish to seek legal advice on your options.

Can I change the terms of an employment contract?

Whilst it is important to draft a comprehensive and clear employment contract before the employment relationship starts, it is possible to make changes if something is missing or there is an adjustment you wish to make. Changes to terms and conditions of employment are best made by agreement between the employer and employee and recorded in writing.

Suppose a change to the employment contract means an improvement to the terms and conditions of an employee, such as a pay rise or improved benefits, or basic administrative changes. In that case, it is unlikely that an employee will challenge these. So, these changes can generally be easily made by agreement. It is more challenging to make changes where an employee disagrees.

If an employee does not agree to the changes an employer wishes to make to a contract of employment, the employer can:

• Dismiss the employee and offer re-engagement on the new proposed terms; or
• Dismiss without offering new terms because the employee does not agree to the changes.

In both cases, this could lead to an employee bringing about a claim for unfair dismissal and possibly a breach of contract. If agreement can be sought, this is less risky for an employer.

An employer could also try to impose the changes unilaterally. Here, the employee must decide whether to object or continue working under the new terms until their compliance means their acceptance of them is implied. However, this may lead to various claims, including breach of contract and constructive unfair dismissal if the employee objects to the terms and chooses to resign as a result.

If an employee does not agree to the changes and a compromise cannot be reached, an employer may want to carefully consider whether the proposed changes are necessary to the business and require a change to be made to an employee’s employment contract. It may be that the contract is silent, the specific change is allowed by the contract, or it has otherwise been agreed so that a change is not required to the terms.

Drafting employment contracts that are beneficial for both employers and employees can be complicated. Working with a solicitor gives you your best chance of success. To get in touch with a solicitor who specialises in this area, please contact us using the form below: