In a nutshell, yes, it is a legal requirement to have employment contracts. A contract of employment is a legally binding agreement between an employer and employee and is the basis of the employment relationship.
It sets out the employees right to be paid for the work that they do and the employers right to give reasonable instructions.
From 6 April 2020 as laid out in the Good Work Plan, contracts of employment for employees and workers must be issued on or before the first day of work (overriding previous rule of within 2 months).
What are the risks of not providing a Contract of Employment?
- It’s the law! Should an employee take out a claim against the company, for example, unfair dismissal or discrimination claim and the employee does not have a contract of employment this could result in the company paying up to 4 weeks’ pay in compensation.
- You are leaving yourself at risk should you wish to place someone on gardening leave, pay them in lieu of notice or in a lay off situation. If you do not have explicit clauses you would not be able to invoke practices that would protect your business. When drafting a contract, you must take time to consider if it meets the business requirements and minimises risk.
- It makes it more difficult to defend an employment tribunal if you have not clearly laid out the Good Work Plan requirements including reference to disciplinary and grievance procedures and could result in a further compensatory uplift.
- If there is not a contract in place terms will revert to statutory terms. For example, notice periods …. If an employee does not have a contract of employment, they can give you very little notice in terms of them leaving the company. This could mean that somebody with valued skills could leave your company with as little as one
- You can add specificity. Some things become next to impossible to rectify if you haven’t specified them already in your contract. For example, making employees pay for damages is extremely difficult if it is not stated in the contract that will recoup costs if company property is damaged.
We have established that it is a legal requirement to issue a written contract by the end of the first day of employment, but…
What should be in this document?
- Job title and pay
- Place of work
- Whether there is a requirement to work outside of the UK
- Details of all remunerations including salary and non-contractual bonuses and benefits
- Terms relating to sickness, sick pay entitlement and injury
- Hours of Work including days of the week, whether the hours are variable and if so, how the variation will be determined
- Holiday Entitlement and any other paid leave that the employee may be entitled to e.g. maternity, paternity and bereavement leave
- Termination and Notice Periods
- Any collective agreements, e.g., Trade Union and Work Agreements
- Terms relating to Disciplinary and Grievance Procedures
- Probationary period
- Training anticipated to be provided and any mandatory training that the employee/worker must complete.
At Wurkplace we are asked many questions about contracts, here are some of the most frequent:
- Can a contract exist without being in writing? A contract can exist verbally from the
moment a job offer is made, and certain rights start at recruitment stage. This
includes protection from discrimination.
- Can we agree a contractual term outside of the law i.e., a wage lower than National
Minimum Wage? An employee can’t agree to a contractual term that gives them
fewer rights than under law. For example, an employee/worker cannot be paid less
than the legal national minimum wage whether it is included in the contract or not.
- What are ‘express’ and ‘implied’ terms?
- Express terms are explicitly agreed between the employer and employee. They can include things like pay, hours, holidays etc.
- Implied terms include for example, duty of trust for each other, duty of care towards each other and other employees and a duty to obey reasonable instructions. Not expressly agreed but are terms none the less.
It is a legal requirement to have employment contracts, providing employees/workers with a written contract on or before day one of employment.
It is important to have written contracts that comply with the legal obligations set out in the Good Work Plan and that also protect the business.
With over 20 years HR generalist experience across all disciplines, Sarah has worked across a number of business sectors and understands the importance of robust and practical HR processes and trained, motivated and engaged people in delivering business success.
As Wurkplace’s Head of HR, she is passionate about both providing the best HR service to our Clients as well as recruiting, developing and retaining the best team.