Employment Contracts
What is an employment contract?
An employment contract governs the relationship between employer and employee.
In order to be legally complaint, the employment contract must comply with the specific requirements set out within section 1 of the Employment Right Act 1996, including:
- Duties
- Rights
- Responsibilities
- Conditions
Why employment contracts are important?
To comply with the law
It is a legal requirement to provide employees with a written statement of terms as evidence of the main terms that will exist during the employment relationship. A written statement of terms must be issued to the employee by ‘not later than the beginning of their employment.’ This is known as a day 1 right.
To remove ambiguity
A clear, well-drafted employment contract is essential for a business. It sets out the specific terms and conditions which govern the employment relationship, which the employee and employer must follow. This avoids ambiguity to what each party must do and in the event of a dispute, either party can refer to the terms set out within the contract. Having an employment contract can avoid disputes occurring about terms of employment.
To reduce risk
It is inevitable that disputes arise during the employment relationship.
Often, disputes can be avoided by having a well-drafted employment contract setting out the terms and conditions clearly.
The contract should be signed by both parties at the commencement of the employment relationship. Therefore, it is difficult to deter from this as it is a mutually agreed document.
It helps reduce the risk of disputes and avoid the risk of having an adverse Employment Tribunal award of up to 4 weeks’ pay where you as the employer have failed to issue written terms and conditions of employment on day one. Where there is a failure to issue written terms and conditions in accordance with Section 1 Employment Rights Act 1996, the Employment Tribunal must make an award. This can be in excess of £2,500 for each employee.
To protect business interests
If you have legitimate business interests that you want to protect, such as trade secrets, customer lists, pricing information and confidential information, restrictive covenants can be inserted into an employment contract. Restrictive covenants seek to prevent an employee from taking advantage of confidential information, customer and client details or other sensitive information about their employer’s business after the termination of their employment. Tailored restrictive covenants specific to your business could protect your business interests when an employee leaves. However, where they are not tailored or drafted correctly for your specific needs this can result in them being unenforceable.
How we can help with employment contracts
We can assist with drafting, reviewing and updating employment contracts and handbooks.
Employment contracts are important documents, and it is essential that they are kept up to date with legislative requirements which change regularly.
