Employment contracts

Not only is it a legal requirement to issue a written statement of terms to employees, but the benefit of investing in a well drafted employment contract can’t be underestimated.

Employers are required to set out certain things governing an employee’s employment in writing, and there are a host of other items you will want to cover off if you want the best protection for your business.

For example, what happens when your employee commits an act of gross misconduct and you want to suspend them while you carry out your fair process… this needs to be in the contract.

Then you want to dismiss them without notice after following a fair process… this should also be written into the contract.

The list of areas where you could find yourself in a tricky position later down the line is long.

What are the different types of employment contract?

There is no legal definition of an ‘employment contract’. The name of the document will have no bearing on its status or legal effect – it’s the content which is important. That said, some common types of documents that may be issued to employees include:

• Statement of terms and conditions of employment – this is usually a basic document covering the minimum legal requirements (see below)
• Contract of employment/employment contract – most commonly issued to employees and is usually more comprehensive than a basic statement of terms
• Service Agreement – this is just another name for an employment contract. Often a service agreement will be issued to senior employees and will be more comprehensive than basic employment contracts. For example, it may contain duties applicable to directors who are also employees.
• Fixed term contract – this can be in any of the above forms, but is simply for a fixed period rather than being permanent/indefinite.
• Maternity cover contract – this is just another name for a fixed term contract
• Casual/zero hours/bank contract – these usually do not guarantee any work to the individual, but set out the terms which will apply if and when the business does offer, and the individual performs, work (see below)

What needs to be in an employment contract?

From day 1 of employment, all employees must be issued with a written statement of terms and conditions of employment. This is often referred to as a ‘Section 1 Statement’ because the obligations are set out in Section 1 of the Employment Rights Act 1996.

The minimum items which an employment contract must set out were updated in 2020 by the Good Work Plan. The items which must be detailed in a written statement are:

• Names of the parties
• Dates both when employment and when continuous employment began
• Details about the amount and timing of pay
• Job title or description of role
• Place of work
• The days of the week the employee is required to work and their normal working hours
• Information about holiday entitlement and holiday pay
• Any other paid leave the employee is entitled to (for example, including statutory paid family related leave)
• Terms relating to sick pay, including SSP
• Any training provided by the employer
• Terms relating to pension and any other benefits the employer provides
• Notice provisions
• Information about any probationary period
• If the employment is for a fixed term, details about the length of the term
• Details of any applicable collective agreements
• Certain information where the employee is required to work outside the UK for periods of more than one month
• Confirmation of any disciplinary and grievance procedures applicable to the employee includes information about appeal

What is a zero hours contract and is it legal?

A zero hours contract is essentially a casual one, in which the employer does not guarantee any work to the individual.

It is possible to issue zero hours contracts, but these have been heavily criticised by organisations who advocate for employee rights. This is on the basis that such contracts abuse the most vulnerable in the labour market – low paid, low skilled and provide no job security.

There have been a number of consultations, recommendations and even regulations introduced to tackle some of these issues. For example, the Good Work Plan introduced the requirement that all workers (not just employees) must be provided with a written statement of terms, and that must be from day 1 (employers used to have to provide a written statement to employees only, and within a month of them starting employment).

The use of exclusivity clauses in zero hours contracts has also been banned – which means an employer cannot issue someone with a contract which does not guarantee them work and at the same time prevent them from working for another employer.