When should I get an Employment Contract?

The vast majority of companies recruit staff and manage employees and will therefore need comprehensive engagement contracts to govern these relationships.

Why is it Important?

Where employers and employees fail to set out their respective rights and obligations in a contractual document, terms may be implicitly incorporated into the working relationship (for example by custom and practice in a particular industry). Relying on these non-express terms, many of which will favour employees, will not always have the desired outcome or practical effect. For example, employers may be subject to an implied duty to provide work, which won’t always be the intention if work is not available to give. Potential allegations of discrimination and other employment-related claims are also more of a risk without robust employment contracts in place.

What it is / what should be included?

Employment laws require employees to be given a statement of certain basic terms of employment within two months of commencing their new role. As well as setting out these particulars in writing, it is also strongly advisable to expressly establish the other rights and responsibilities of the parties, to avoid disputes further down the line. The following issues should form the basis of all employment contracts:
  • Start date, job title and place/hours of work.
  • Employee duties and responsibilities. These are often set out in a separate schedule.
  • Compensation and pension. This should address not only salary but also whether there is any discretionary bonus/pension entitlement.
  • Holiday. Bear in mind that the minimum entitlement is 5.6 weeks per year. What are the notification requirements? Can untaken holiday entitlement be carried forward to the following year? Will employees be paid in lieu of untaken holiday?
  • Sickness absence. Any requirements for evidencing incapacity should be included.
  • Termination and Notice period. Statutory minimum notice periods apply and will depend on the length of employment.
  • Intellectual property. Employers will want to ensure they retain all intellectual property rights in anything created by employees in the course of their employment.
  • Company property and confidential information. The complexity of this provision may depend on the seniority of the employee and their access to valuable material.
  • Restrictive covenants. Non-solicitation, non-competition and non-dealing clauses may be desirable if the employee has influence over your clients. These should never go wider than necessary to protect your legitimate business interests.
  • Disciplinary and grievance procedures.
Given the wide variety of employee types, a one-size-fits-all contract approach won’t work in this context. Consideration must be given to how your employment agreements should be tailored and adapted to the circumstances, distinguishing between junior and senior employees, fixed-term, part-time or casual employees. Staff handbooks and supplementary policies and procedures must also be consistent with the contractual rights granted.

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