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If you employ staff, you will have employment contracts in place. Employment contracts are an essential business tool, as they enable you to manage your staff legally. It is crucial that you understand the importance of employment contracts. Where problems arise, an employment contract can protect both your interests and the interests of your staff. This is because an employment contract states the terms and conditions you and your employee have agreed to, which can save the potential for legal disputes in the future.
However, employment contracts should contain specific information and be clear and carefully put together to ensure they are legally effective. This article will demonstrate the importance of employment contracts by providing:
- an explanation of what you need to provide your staff with;
- some tips on what to include in your employment contracts; and
- some tips for drafting an employment contract.
What is an Employment Contract?
An employment contract is a legal relationship between you and your employee. For example, it states the employees:
- rights;
- responsibilities;
- duties; and
- conditions of employment.
What is a Written Statement of Particulars?
A written statement of particulars is not the primary or whole employment contract. Instead, it is a written statement that you must give your employee or worker when they start work. It will state the main terms and conditions of the employment, such as the hours of work and the pay.
A written statement of particulars consists of:
- a principal statement, which details the name, job description and pay rate; and
- a wider statement, which details information such as the pension scheme, for which you must notify your staff member within one month if any changes to this occur.
You must give your employee the principal and broader statement within two months of working for you.
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What Should an Employment Contract Include?
The terms of an employment contract are legally binding between you and your employee or worker. Most employment contracts will have written terms that both parties agree to, such as the pay and hours of work. These are called ‘express terms’.
However, it may also contain ‘implied terms’. These are terms of the employment contract, which may seem obvious. In fact, you may not ordinarily include them in your contract. However, it is good practice to write them into the employment contract to avoid confusion. These could be, for example, what standards of behaviour you expect from your staff and the consequences if these are not met.
Other terms you may choose to include are detailed in the table below.
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‘Custom and practice’ terms | Whilst these do not need to be written in as they are usually standard, you should include them for clarity. For example, the amount of a holiday bonus. |
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‘Incorporate Terms’ |
These are those terms that affect most of your employees or workers but will be written in detail in other sources which your employee or workers can refer to. For example, a staff handbook. |
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‘Statutory terms’ | The written employment contract does not contain all terms of employment. There are many areas of employment law that are automatically part of an employment contract but will not necessarily all be detailed in the contract. However, there may be some parts of employment law that you are required to write into the contract’s express terms, such as stating the national minimum wage as the pay per hour. |
Important Points to Remember
There are many points to consider when writing an employment contract. The table below outlines some important points to remember.
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The Start Date |
The start date of an employment contract is the day the person begins to work for you, even if you have not drawn up a written contract. It could start before this where:
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Legality | What you include in an employment contract must be legal. Therefore, you cannot include a term that is against the law. For example, you cannot include a clause stating the pay per hour is below the national minimum wage. |
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Restrictive Covenants | You may wish to include further details in an employment contract, such as restrictive covenants. These are terms that affect the employee or worker when they leave the job. In effect, it will prevent them from carrying out specific actions, such as contacting your customers for a specific length of time after they have left. |
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Binding |
Remember, your employment contract terms are binding between you and your employee. However, you may agree to change these. Furthermore, one of you may bring the employee relationship to an end, such as through dismissal or an employee handing in their notice. |
Key Takeaways
As an employer, your employment contracts are of great importance. A well-drafted employment contract will help your employee understand what is expected of them whilst establishing the terms and conditions of their employment. It is, therefore, essential that you understand what is expected within an employment contract. Importantly, having a clearly drafted employment contract may help to prevent a future legal dispute between you and your employee.
If you need help understanding the importance of employment contracts for your business, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
It is essential to have an employment contract with your staff as it allows you to set out the terms and conditions of their employment and their rights and responsibilities. Making this clear to your staff should reduce the risk of disputes in the future.
An employment contract will likely consist of both express terms and implied terms. Express terms are specific to the employment contract and need to be written in – such as the pay and hours of work. Implied terms apply more broadly to most employment contracts, such as elements of employment law.
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