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What goes into an employment contract?

The employment contract provides the basis of your employment relationships and is governed by employment legislation.  You don’t want to get this one wrong and end up in an employment tribunal.  We set out some of the basic requirements around employment contracts.

What is an employment contract?

An employment contract is an agreement between two parties. For a contract to be legally binding it doesn’t have to be written, verbal agreements can be binding too. However good practice would dictate a written document is best to avoid any misunderstandings. 

For a contract to be binding there needs to be intent by both parties for it to form a legally binding contract. There needs to be an offer and something in return for that offer – for example, labour in return for pay.  The contract then sets out all the terms and conditions governing that agreement.

What should an employment contract include?

Here are some guidelines about the basic elements of an employment contract. Depending on the nature of your organisation there may be additional more complex clauses that you would need to speak to a lawyer about including the following:

  • Names and addresses

    It’s important that it is very clear who the parties are that the agreement is between.  It sounds simple but you need to avoid any ambiguity. You should therefore have the name and address of both parties stated clearly in the contract. 

  • Job title

    You don’t want to include too much information about the actual role itself.  Some organisations like to make their role profiles or job descriptions part of the contract. This might work for large businesses that have very clearly defined roles, but for small businesses where you expect your staff to take on additional duties from time to time you need an element of flexibility. So you can just stick to the job title rather than any specific description.

  • Salary

    Make sure it is clear whether the salary quoted is an annual, monthly or hourly salary. Make sure you proof read it and don’t put the decimal point in the wrong place!  You should also set out when they will be paid i.e. weekly or monthly. Make sure you have systems in place to support whatever you put in the contract. Don’t promise weekly payments if your payroll system cannot deliver on it.

  • Location

    You should put in the location of work, however it doesn’t have to be as specific as the actual address of the premises at which you work.  If your business is likely to grow and you may have to move premises at some point in the next few years then you don’t want to fix the location too precisely in the contract.  You can refer to a local area rather such as Wimbledon, or London.

  • Hours of work

    This is an interesting one, you have to think very carefully about the nature of the work and what is required. If it is shift work, then you need to set that out very clearly in the contract what the shift pattern will be.  For some jobs you may want to stipulate the days of the week and the start and finish times on those days.  For others you may prefer to stipulate a number of hours rather than times if you want some flexibility.  But remember the contract works two ways and is an agreement. You also need to ensure you are compliant with the working time regulations.

  • Benefits

    Any benefits that form part of the contract should be set out clearly, this includes both statutory benefits required by law and any enhancements you make to those benefits.  This would include annual leave, sick pay and pensions, other statutory benefits can be listed and details provided on request.

     

  • Disciplinary and grievance procedures

    You are required to advise your staff of the disciplinary and grievance procedures.  You don’t have to put the full procedure in the contract itself but you need to let the member of staff know where they can find the details and who to contact if they have a grievance or which to appeal a decision.

When do I need to issue an employment contract?

Once you have made an offer of employment you should follow it up with an offer letter. This offer letter forms part of the employment contract so it’s important it is accurate. The contract can accompany the offer letter or follow shortly afterwards. 

You may want to get the letter out first so that the new employee has something in writing so that they can resign from their existing job.  Ideally they need to have it before they start so any contract negotiations are done and dusted before day one.

2:04

Video: Can I change an employment contract?

by ACAS

The short answer is yes. But to avoid any risk of a legal case against you, it needs to be done with the agreement of the employee. Remember that a contract is an agreement, therefore no part of the contract should be changed by either party without the agreement of the other. This is why it is important to consider any future changes to the organisation when writing the terms and conditions of the contract to ensure that there is some element of flexibility without being so flexible the term is unenforceable by law for being too unreasonable.

Watch the following video by advisers from the Acas helpline to find out more. 

What is a written statement of particulars?

A written statement of particulars outlines the main terms and conditions of employmnent. It does not need to necessarily cover all the employment terms, but it should include the main conditions of employment.

Any member of staff whose employment contract lasts for than one month must be given a written statement of particulars. As an employer, you will need to provide this document within the first two months of the start of employment. 

This table lists items that must be included in the statement of particulars and what doesn’t need to be included in this particular document:

Must includeMust includeDoesn’t need to include
The business’s nameThe employee’s name, job title and start dateDetails of sick pay policy
Date of continuous employmentLength of jobFull disciplinary and dismissal procedures
End Date for Fixed TermWhat the period of notice for both partiesFull grievance procedure
PensionAny collective agreementsWho the manager is
The salaryWhen the salary will be paidManager’s contact details
Hours of workAnnual leave entitlementMaternity and Paternity rights
Location of employmentRelocation requirements 
Employer’s addressAny additional places of work  
Who to go to with a grievanceHow to complain about the way a grievance has been managed 
How to complain about a disciplinary or dismissal decision  

 

Visit the ACAS website at www.acas.org.uk for more information.

Quiz: When do I need to issue a written statement of particulars?

Do you how long an employer has to provide a member of staff with a written statement of particulars? Select one answer from the list below.

What are the different types of employment contract?

Continuous / Permanent  This is a contract with no fixed end date.  This person is your employee and works either full or part time hours.

Fixed Term  This is a contract for a specific length of time.  It has a clear start and end date.  There is a limit to how long you can keep someone on a fixed term contract before they automatically become permanent.

Zero Hours There is much controversy around these contracts.  They might be best described as an agreement for one party to make themselves available for work from time to time and the other party to offer work if any is available from time to time.  They seem to work best in industries impacted by significant seasonal fluctuations in demand.

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