What is a Contract of Employment?
A contract of employment is a contract of service as opposed to a contract for service . A person operating under a contract for service is not an employee of the company and is better (and normally) described as an independent contractor.
There are several different types of employment contract, including, for example:
Fixed-term/specified-purpose contracts; Contracts for Independent Contractors; Contracts for hourly-paid Employees; Contracts for part-time Employees; Contracts for Managerial/Clerical Staff.
As an employer you can form a contract of employment in three different ways
- written agreement
- oral agreement
- conduct of the parties: terms of the contract though not expressed can be held to exist because of the conduct of the parties and custom and practice
What if I haven’t issued a Contract of employment to my Employees?
All employees work under a Contract of Employment. This is also called a Contract of Service. Many employees have no written contract and it is often said that such an employee ‘has no contract’ but this is not the case. The Law of Contract provides that once an offer is made by one party and accepted by another, a valid contract exists.
A contract may be in writing or agreed orally between the parties and one is just as enforceable as the other. The parties may not have formalised their relationship in writing but a contract is nevertheless in existence. It is sometimes argued by employers that an employee did not sign their contract and therefore there is no contract. This is not necessarily the case.
A contract can be accepted by actions as well as by words or in writing. Therefore if an offer of employment is made and the employee turns up and does the work, the employee has implicitly accepted the offer notwithstanding the fact that he/she may not have signed anything. However, it is always advisable to have a written contract since, in the event of a dispute and in the absence of a written document, a court will have to make a decision based on conflicting oral evidence.
Why is a contract of employment important to SMEs?
The contract of employment is critical to the relationship that exists between you the employer and the employee.
The contract clearly sets out the person’s role and their rights, their rate of pay, the person to whom he or she reports and the obligations under the contract.
From the company’s perspective, it sets out where Employees fit in the organisation, what’s expected of them and what is given in exchange.
If a difficulty arises between the employer and the employee, then both parties revert to the contract in the first instance.
Typically, if there’s a problem with a contract, the Company suffers and typically, the problems are self-inflicted. Most commonly we see missing clauses, changes in legislation not accounted for (typically because a contract has been reused) and unintended clauses introduced due to cutting and pasting from another contract.
Can Employees be on different contracts of Employment?
It is sometimes believed that an employer must treat all employees equally or they can be accused of ‘discrimination’. This is not correct. An employer is free to treat employees differently as long as the different treatment is not based on one of the grounds prohibited by legislation e.g. gender, race, religion, age, marital status, family status, sexual orientation, disability or membership of the Travelling Community.
Employers should have further policies and procedures, such as a bullying and harassment policy, in place. Such policies also form part of the employment contract and all employees will be obliged to abide by the terms therein.
What is a Written Statement of Terms and Conditions of Employment?
The law now requires that every employee be provided with a written statement of key terms and conditions of employment. This is required by the Terms of Employment (Information) Act, 1994. This is usually provided for by employers in the form of a contract document but it is possible to simply provide a document containing a ‘statement’ of terms and conditions which will be sufficient to comply with the law.
An employer must give this information in writing to an employee within two months of commencement of employment. This only applies to employees recruited after the commencement of the Act unless the information is specifically requested by an employee who commenced before that date. Then it must be provided within two months of the request.
What should be included in a written Statement of Terms and Conditions of Employment?
- The full names of the employer and employee.
- The address of the employer in the State or, where appropriate, the address of the principle place of business in the State or the registered office.
- The place of work or, where there is no specific place, a statement that the employee is required or permitted to work at various places.
- The title of the job or the nature of the work for which the employee is employed.
- The date of commencement of the contract of employment.
- In the case of temporary contracts, the expected duration thereof. If the contract is for a fixed term, the date on which the contract expires.
- The rate or method of calculation of the employee’s remuneration.
- The length of intervals between times at which remuneration is paid.
- Any term or conditions relating to hours of work.
- Terms or conditions relating to paid leave.
- Terms or conditions relating to incapacity due to sickness or injury, paid sick leave and pensions.
- The period of notice which the employee is required to give and entitled to receive.
- A reference to any collective agreements which directly affect terms and conditions of employment.
Normally, much of the detail around these points is covered in a comprehensive set of Policies and Procedures. The contract document can refer to, for example, the sick leave policy and provide that full details will be provided separately.