At its core, the employment relationship is a legal one and it is critical that it is properly defined. While legislation specifies certain requirements, each company will have requirements which need to be codified in a contract of employment whether it is protecting intellectual property, health and safety, management of commercial information at the end of an employment relationship, the terms of a trial/ probation period etc.
A basic contract of employment is the legal foundation of the relationship that forms between you as an employer and the employees you hire.
If an employer neglects to create one at all, or develops a badly worded contract, then employees may have grounds to make legal claims against their employer under various pieces of employment legislation. In fact, if an employment contract doesn’t comply with the law, employees can claim up to four weeks wages. That is because there are rules and obligations in place about how you structure the relationship between employer and employee.
But while it is crucial to get this stage right, a basic employee contract is nothing to fear.
At HR Duo we have created this guide to creating a basic employment contract, including the main terms and conditions you must include within it.
Main Terms and Conditions of a Contract of Employment
Section 3 Terms of Employment (Information) Act 1994 states that all your employees are entitled to a written statement containing their terms and conditions of employment. You must give them this within two months of their employment starting with you.
As minimum terms, you must include the following in this statement:
- Your full name as the employer.
- The employee’s full name.
- Your address as the employer (which can be either the address of the local/regional office the employee is based at, or the registered central office of the business. The term registered office is that meant by the Companies Act 1963 if you want to check this).
- The place of work (where the employee will be based). If there isn’t a specific location, then create a statement that sets out the required places, or places the employee is permitted to work at.
- The employee’s job title or the nature of the work they will be doing.
- The date that their employment will start (known as the commencement date).
- If the employment contract is temporary then state the expected duration, including an end date when the contract will expire.
- The method used, or rate, for calculating the employee’s salary. You must also include the pay reference period for the purposes of the National Minimum Wage Act 2000.
- State that the employee can request a written statement of the average hourly rate of pay for any reference period from the employer. This is under Section 23 of the National Minimum Wage Act 2000.
- The intervals set out for when the salary / wages are paid (e.g. weekly, monthyl, etc.)
- Explain any terms and conditions that relate to their hours of work, including overtime.
- Then state the terms and conditions for paid leave that isn’t sick leave. This should include holidays also.
- Provide any terms and conditions relating to incapacity for work. This will include sickness, injury and any paid sick leave.
- The particulars of any pension scheme you have in place for your employees.
- State the period of notice an employee is required to give you if they wish to end their contract of employment. Also state the period of notice they are entitled to receive should you wish to terminate the contract.
- If there is any collective agreement which would affect the terms and conditions of the employee’s employment then reference those.
- The statement must be signed and dated for, or on behalf of, the employer. The employee must receive it within two months of the commencement date on the contract (their employment start date).
As a minimum, we would recommend that you should include the following in all your basic employment agreements:
- A probation period and a policy to allow for extension to the contract.
- Disciplinary Procedure.
- Grievance Procedure.
- Sexual Harassment Policy
- Conditions for the use of the internet and mobile phones.
- Social Media Policy.
- Bullying and Harassment Policy.
- A retirement age (although you must be able to justify setting the age).
- Provisions for deducting pay to include issues such as damage caused to property owned by the employer.
- Flexible working policies around flexibility in duties, job location or start and finish times.
- A policy around layoffs and short time that includes non-payment of salaries during lay off and short time periods, except wages paid for time the employee actually works.
- A policy to review performance and review pay.
- A post-termination non-compete clause.
- A clause stating non-solicitation of your clients/customers after the employee’s contract ends.
- A confidentiality clause that covers both during the term of employment and post-termination of the contract.
- Data Protection.
- The right to alter or amend the contract.
- Provision for Garden Leave, particularly during the employee’s notice period, allowing you to require that they don’t attend work during that time.
- A clause that confirms the Employee Handbook forms part of the contract of employment or employee agreement and will be amended from time to time.
- Include a clause excluding the Unfair Dismissal Acts for any Fixed Term employees.
We would always advise that you have an Employee Handbook in place when hiring staff and providing a contract of employment to an employee.
This means that the contract covers the basic terms of employment and the handbook can cover matters such as grievance and disciplinary policies, sick leave, holiday leave and other special leave, and others.
To see our dedicated guide to creating an Employee Handbook see here.
You will see that many of the terms and conditions to include in a staff handbook are pretty standard, however there can be the need to tailor the procedures individually to each employer (for example, what suits a large corporate may not suit a small business, and vice versa).
Designing both your handbook and your contracts of employment require a combination of HR, Legal and Industrial Relations expertise and information. Our guide here is just that – a guide – so before acting or refraining from anything described above, we recommend you obtain specialist advice.
Still not sure where to start?
There is support and guidance available for even the smallest of start-ups and businesses with services like HR Duo. We have devised industry standard HR Documents for SMEs and update them regularly to ensure your business is always in good hands. We also provide software for time and attendance management and support you through employee resolution issues, as well as more general on demand HR support.