Employment Contracts - What should be included in an employment contract?
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Why have an employment contract?
An employer must provide an employee with their employment terms, (known as a "statement of terms") within 2 months of the employee's start date.
However, a statement of terms is the bare minimum required by law, and does not protect employers properly. That is why an employment contract is much better for both employers and employees.
A comprehensive contract of employment allows an employer to specify an employee's duties and responsibilities - so an employee knows exactly what is expected of them. See below for what should be included in an employment contract template.
Contract of Employment - Contents
The following provides a brief outline of what is included within a CompactLaw Contract of Employment, this applies for all UK employment contracts.
Names of the Parties
The employer's organisation details and the employee's full name and address.
Employment Contract Start Date
This is important as it also includes a brief statement to say that employment with a previous employer does not count towards the various rights that are gained by employees after one and two years of service. In other words the employee starts again from zero with the new employer. (Exceptions to this are where an employer has taken over an organisation with existing employees - their employment rights are maintained.)
Employee's Job Title and Description
This usually follows the job title and description specified in any recruitment advertisement and subsequent offer letter. To suit the employer it also allows for flexibility in the employee's role.
Place of Work
The employment contract allows the employer to specify the location where the employee will work.
However, it also allows for the employer to specify any other location in the future. This gives the employer much greater flexibility.
Hours of Work
The employee's hours are specified within the employment contract, however the employee also agrees to work additional hours if the employer reasonably requests it.
However, the hours cannot exceed the 48-hour per week as specified by the Working Time Regulations, (unless the employee has signed a voluntary opt-out from the Regulations).
Probationary Period
The employer can specify a trial period for the employee with the option of a short notice period at the end of the trial, if the employee does not fulfil expectations. The employer can also extend the trial period.
Salary
This details the employee's gross salary before tax, national insurance and any deductions. It also specifies when payment is made.
Assessments
The employer can state when the employee will receive their first work assessment and the timing of all subsequent regular assessments, for example every 12 months.
Deductions
This clause details all the circumstances in which the employer can make deductions from the employee's salary.
Expenses
The employer can agree with the employee, which work-related expenses the employer will cover and when the employee will be reimbursed.
However to prevent errors and possible fraud the clause makes it clear that proof of payment is required.
Holidays
This clause specifies when the holiday year will run from.
This is important as the employer may wish to prevent employees taking busy work periods off, for example Christmas time for hospitality, retail or entertainment industries.
This clause also allows the employer to specify the number of days per year that an employee can take, (subject to a statutory minimum of 28 days) and whether bank and public holidays are
included or excluded from this. The clause also includes further details regarding rolling-over holidays into the next year, restrictions on holidays where the employee has already given notice and
on termination the pro rata payment in lieu of any unused holiday entitlement.
Sickness & Disability
Absence through sickness is a major cost burden on employers.
This clause states by what time the employee must inform the employer that they will be unable to attend work, (it does allow for a third party to contact the employer on the employee's behalf). The clause also states when a doctor's certificate is required and whether the employee will receive statutory or contractual sick pay.
Pension
This clause within the employment contract allows the employer to state whether the employee will be included within the employer's company pension scheme, a stakeholder pension scheme or
whether the employment comes without a pension provision.
Notice
The notice period to be given by either the employer or the employee. However, this clause also provides a detailed list of actions that constitute gross misconduct allowing the employer to dismiss
without giving notice.
Restrictive Covenants
This is only included within the CompactLaw Long Employment Contracts. It protects all confidential and commercial information belonging to the employer.
Prevents an employee from setting up a competing business whilst still employed. Also prevents an employee from competing for a set period of time and within a defined geographical area once
they have left the employer. Other restrictions include attempts to encourage other employees to leave and work in a competing business.
Finally, the clause states that any breaches will entitle the employer to seek legal redress, including damages for any loss.
Grievance and Disciplinary Procedure
This refers to the detailed separate Grievance and Disciplinary Policy that comes free with each CompactLaw Employment Contract.
Retirement
States the employee's contractual retirement age and also refers to a Retirement Policy; which every organisation should have in place. This clause and the retirement policy ensure compliance with the The Employment Equality (Age) Regulations 2006 - age discrimination legislation.
Severability
This standard paragraph states that each paragraph, sub-paragraph or clause is independent of each other, so if one is invalid or does not apply to the employee the rest of the contract remains valid.
Prior Agreements
Another standard paragraph, stating that the employment contract contains all the terms agreed between the employer and the employee and that no previous agreement (written or verbal) counts.
Jurisdiction
Confirms the contract of employment comes under the jurisdiction of the English courts; however, it can also be changed to specify the Scotland, (if required).
Particulars of Employment
Under Section 1 of the Employment Rights Act 1996 all employee contracts must set out the main terms of the contract in a separate schedule.
This is so that the employee (and the employer) can easily refer to this schedule when they wish to remind themselves of the main terms.
Further Information
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