Fri, Jul

Put it in writing

A written contract of employment helps establish what you and your employees each expect of the other. Phil Thompson, head of BPIF business, runs through the drafting process.

Employers are required by law to provide employees with a document setting out the main terms of their employment within two months of their employment starting. In putting together a contract you, as an employer, need to think carefully about any special conditions (e.g. an employee’s promise not to work for someone in direct competition) and whether these should be in the actual contract. The contract itself can include express and implied terms). A good example of the latter is the implied term of mutual trust and confidence.

Bear in mind that documents like staff handbooks and letters may also be evidence of the employment agreement and indeed, over time the original contract may become outdated and superseded by other documentation on file.

Custom and practice in the workplace can also be taken as evidence of the agreement.

Key considerations

An employment contract can be terminated in a variety of ways, either with or without notice. Notice requirements should be written into contracts. If no notice is stated, the statutory minimum of one week per year served (after the first month) up to a maximum of 12 weeks will apply. However the courts are capable of implying longer notice periods if they consider it reasonable to do so ut this is only really relevant with senior employees.

Either party can find themselves in breach of contract if they do not abide by its terms. If the employer’s breach is fundamental (e.g. a reduction in pay), then the employee may be able to leave and claim constructive dismissal.

Payment in lieu of notice can be stated as a contractual term. This can be helpful to maintain contractual terms post termination.

Non-competition, non-solicitation clauses are useful, particularly for certain types of key employees. These are usually known as restrictive covenants. However, they need to be tailored to the specific business and specific employee, and the courts’ default position is that these terms are unenforceable (because they often restrict the individual’s ability to find work) unless reasonable in all the circumstances.

Specific clauses should be carefully considered for key employees, e.g. mobility clauses, variation clauses, garden leave, confidentiality.

Other documents can be appended to the contract; for instance, a staff handbook containing all company policies.

Some employers make this part of the contract, but that makes it more difficult to make any changes to the handbook.

A variation clause is useful for allowing minor changes in a contract. However, varying key terms (e.g. pay, hours, overtime etc.) can only be done by agreement.

Probationary periods can be useful if you want to restrict the benefits available to employees in the early months (e.g. extended notice periods). However a probationary period makes no difference to the employee’s basic contractual rights. Dismissal during the probationary period should be treated no differently to any other dismissal. Remember that employees with less than one year’s service (two years if they started after 6 April 2012) cannot claim Unfair Dismissal but may still be able to claim breach of contract.


Record any negotiations over contracts - they may be the best indicators of the intentions of the parties in any dispute.

Periodically carry out a review for outdated or unlawful contracts.

Ensure you have a comprehensive staff handbook and consider whether you require your policies and procedures to be contractual or merely guidelines. Be aware that employees may be able to claim breach of contract if contractual policies are not followed by the employer and it makes it much more difficult to make changes to the staff handbook if it is contractual.

Appoint someone within the company to take responsibility for personnel and related issues.

Consider changes in employment law and amend contracts as appropriate.

If amendments are to be made to existing contracts set up a vehicle for consultation and ensure changes are justifiable.

Consider the type of contract needed in specific circumstances – if you get it wrong you may be faced with tribunal claims so consider the following:?z Casual workers who are not employees are not protected by

employment legislation (although they will still have rights under e.g. Working Time Regulations and may also be covered under the Agency Workers Regulations.)

z Executives will need a fuller contract to cover specific issues Ensure consideration is given to the new obligation for auto- enrolment of pensions for new and existing employees including assessing any existing schemes against the new qualifying criteria.

Upcoming Events