Employment Contracts - the ins and outs

29 February 2016

Why do you need employment contracts?

Some employers feel that employment contracts will in some way restrict them and therefore think it is much better to not give employees contracts at all. This is perhaps the biggest HR myth and it is simply not true. There are no advantages to not having employment contracts in place. In fact, in absence of a contract the statutory employment laws will apply and these are quite heavily weighed in the favour of the employee, not the employer. Having a contract in place protects the employer more than anything else.

Apart from the benefits, providing the statements of the main terms and conditions of employment to the employee is also a legal requirement outlined in section 1 of the Employment Rights Act 1996 and it must be done within the first 2 months of employment. There is really no case for delaying this and the sooner the terms are made clear, the better.

How can a contract help the employer?

An example of how a contract can help the employer is the notice periods. If an employee wants to leave and they haven’t had a contract, they are only obliged to give the employer 1 week’s notice. This can cause significant problems to the business as the timeframe might not even be enough for a comprehensive handover let alone replacing the employee. An employment contract can specify a longer notice period, commonly 1 month or 6 weeks or even 3 months for more senior positions. This puts the business in a much stronger position by allowing more time to find a replacement and smoothly transfer the workload. Another example could be payment in lieu of notice or garden leave, both of which would be considered a breach of contract if the clauses are not included.

Can the contract also help the employees?

Absolutely! It is important for the employees to understand the specific terms and conditions of their employment and know what benefits they are entitled to. In absence of the terms being made known in a contract, employees might be unclear about their entitlements and feel confused about the rumours going around the office about what other employees received, fuelling the feeling of unfair treatment and potentially reducing the morale.

What should an employment contract include?

The written statement of the main terms and conditions of employment must include at least:

  • the business’s and employee’s name
  • job title or a description of work
  • employment start date and, if a previous job counts towards a period of continuous employment, the date the period started
  • how much and how often an employee will get paid
  • hours of work (and if employees will have to work Sundays, nights or overtime) 
  • holiday entitlement (and if that includes public holidays)
  • where an employee will be working and whether they might have to relocate 
  • if an employee works in different places, where these will be and what the employer’s address is
  • how long a temporary job is expected to last and the end date if a fixed-term contract
  • notice periods
  • collective agreements
  • pensions
  • who to go to with a grievance
  • how to complain about how a grievance is handled
  • how to complain about a disciplinary or dismissal decision

The written statement doesn’t need to cover the following, however, it must say where the information can be found. We always recommend employers to include these in separate policies:

  • sick pay and procedures
  • disciplinary and dismissal procedures
  • grievance procedures


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HR Solutions can help you produce comprehensive up-to-date and fully legally compliant contracts, policies and procedures for you - please contact a member of our HR Solutions team or email your enquiry to us.

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