Employment Contracts and Handbooks - Frequently Asked Questions

PLEASE NOTE: The information below is for general guidance and information only. We recommend you take specific advice on what is required for your business. 

What is a contract of employment?

A contract of employment is an agreement between the employer and the employee as to the terms on which the employee will work for the employer. 

A contract can be based on oral terms, written terms, implied terms and the law. 

What is a written statement of terms? 

By law, all employees are entitled to a written statement setting out the particulars of employment. The Employment Rights Act 1996 specifies what is to be covered in the written statement of terms. The statement must be supplied within 2 months of the start of employment.

If an employer fails to provide the written statement, the employee is entitled to make an application to an Employment Tribunal.  The Tribunal will then make a declaration as to what those particulars are. Clearly it is better for the employer to make that decision and to retain control rather than allow the Tribunal to determine the terms of employment.

There is no financial penalty for failing to supply the written statement unless the employee brings and succeeds on a separate claim, for example a claim for unfair dismissal or discrimination. If (during the trial of the separate claim) the Tribunal discovers that a written statement was not supplied, it will award the employee compensation of between 2 and 4 weeks' pay. 

The written statement must contain details of the following:-

  • The names of the employer and employee
  • The date when the employment began
  • The date on which the period of continuous employment began (this is relevant if the employer’s business has been acquired or merged with another business)
  • The rate of pay
  • The intervals at which payment is made
  • Hours of work
  • Holiday entitlement, including setting out how accrued holiday pay on termination is calculated
  • Sickness and sick pay
  • Pensions and pension schemes (including whether there is any “contracting out? certificate in force)
  • Notice period – or, if the employment is for a fixed term, the start and end dates
  • Job title/description
  • Place of work
  • Whether any collective agreements with trade unions apply
  • Provisions if the employee is required to work outside the UK for more than one month
  • Any disciplinary and grievance procedures

Should I have a written contract of employment? 

There is no legal requirement to have a contract of employment as long as you have provided the employee with a written statement of terms. However in most cases, it is sensible for businesses to provide contracts of employment before the employee starts work which will contain additional clauses necessary to protect the business.  The following is an example of some of the clauses necessary to protect some businesses:- 

  • A confidential information clause 
  • A "company property? clause 
  • Training fees clause, for example requiring the employee to stay with your company for a set period of time after you have put them through training or if they leave within that period of time they have to re-imburse you for those fees or a proportion of those fees. 
  • An Intellectual property clause 
  • Post-termination restrictive covenants designed to protect the business after a key employee leaves 
  • A clause to set out circumstances in which deductions may be made from pay

Can I get a written contract off the internet?

Some businesses may be tempted to download contracts off the internet; however, this is risky because organisations who offer cheap standard template employment contracts will most likely fail to consider what is required to protect the employer and may not have considered changes in employment law.

Some employers who download contracts may find that they have a contract based on US law which could present them with extreme difficulties as US employment law is fundamentally different to UK employment law. 

Do I need a staff handbook? 

In addition to all of the above, it is sensible for businesses to have various policies and procedures in place.  For example, a policy relating to disciplinary and grievance procedures is strongly recommended. Depending on the size and nature of the business, other policies/procedures might also be appropriate, including:

  • Equal opportunities 
  • Anti-harassment and bullying 
  • Capability (unless addressed in your disciplinary procedure) 
  • Whistleblowing 
  • Sickness absence 
  • Family rights (including maternity, paternity, parental leave, etc.) 
  • Health and safety 
  • No smoking 
  • Electronic information and communications systems 
  • Data protection 
  • Social media 
  • Redundancy 

Are employment contracts the same for part-time employees?

Yes. Part-time employees have the same rights as and are entitled to be treated no less favourably than full-time employees. For example, they have rights to the same benefits and terms of employment (pro rata if necessary) as similar full-time employees, unless the failure to provide this benefit can be objectively justified.

Can I change the terms of an employment contract?

Changing employee’s contracts can be fraught with problems and pitfalls. If the change is unlikely to be welcome by the employee you should consider taking advice. 

Firstly it will be necessary to identify whether the change is a change in the contract, or the statement of terms and conditions which has been supplied to the employee,  or a policy that is not a contractual term. This will depend on how the contract and/or staff handbook has been drafted.

If it is a contract then it is necessary to look at whether the contract entitles you to make changes. However caution must be taken when relying on the right to make changes or flexible clauses contained within the contract as problems may exist if the contract or clause is void or the changes are considered to be arbitrary or unreasonable. 

If you have not reserved the right to amend the terms, the answer strictly speaking is no, unless you have obtained the employee's agreement or consent. The outcome, however, will depend partly on how serious the change is. For example, a cut in pay rates would normally justify an employee resigning and claiming constructive dismissal - although they would probably raise a grievance first because, unreasonably failing to do so, would risk a reduction of up to 25% in any award made by the Employment Tribunal.

On the other hand, an increase in minimum paid holiday entitlement would not justify anyone resigning (although it is certainly a material change in the terms of the contract) and can be done without bothering to amend it, because it is to the benefit of those employees affected. (It does require a letter to inform the employees in question of their new entitlement.)

If a change is introduced and the employees do not object, even if there is no formal agreement to the change, they may be taken to have agreed to it by carrying on working, particularly where the change has an immediate impact. But if they carry on working 'under protest', take advice because this can be problematic.

There may be circumstances where you can dismiss them and re-engage on new terms. However this may give rise to breach of contract and unfair dismissal if specialist advice is not taken. 


 
 

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Who can I talk to about Employment Contracts and Handbooks - Frequently Asked Questions?

Partner Edmund Coxhead:

edmund.coxhead@pcblaw.co.uk

Tel: 01743 237106

Solicitor Ryan Bickham:

ryan.bickham@pcblaw.co.uk

Tel: 01743 237107 

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