Employment Contract Guidance – What to Consider

Things to consider when using Solicitors and law firms to draft contracts

Firstly, we have no intention of being disrespectful of the legal profession. Although we do not operate as a law firm, we are all qualified legal professionals and have served our time in law firms.

The legal profession has a mix of some of the brightest and most competent individuals you could ever wish to meet. We would however ask you to be mindful when looking to engage a Solicitor or a law firm to prepare your contracts of employment. Whilst we do not doubt that the contracts will be prepared to your satisfaction, you may find that the cost of the exercise is significant. A contract of employment can take up to 10 hours to prepare and if you are paying by the hour, you may find that your costs are in the thousands rather than the hundreds. Before starting any work for you, we will always give you a fixed price for drafting your employment law contracts and documentation. We operate with complete transparency and we always provide a service which is both cost effective and to the standard you would expect to receive from a Solicitor or a law firm.

The problem with generic employment law contracts

The employment contract is a fundamental part of the employment relationship. Furthermore, the law requires all employers to issue contracts to their employees. You might wonder what is preventing you from buying a generic contract online and implementing it in your business. The short answer is absolutely nothing. We would encourage you to have some form of contract in place, even if it is a generic contract. You do however need to make certain considerations before implementing a ‘one size fits all’ generic contract.

If you are unfortunate enough to find yourself defending a claim in the Employment Tribunal, your contract of employment will be scrutinised.

A Tribunal will expect the employment law contract to accurately reflect the working arrangements within your workplace. If the employment contract fails to do this, you may find that the Tribunal will decide that you have failed to meet your statutory obligations to provide written terms of employment.

Every employer is unique

Although generic employment law contracts can provide suitable solutions to some employers, it is worth remembering that all employers are different. Many employers have different priorities where staffing issues are concerned. Some employers treat their employees like family members, others prefer to keep their relationship with employees strictly at arms length. Different approaches can require different ‘rules’ and these rules should be reflected in the employment law contract.

You may also consider how the seniority of staff needs to be addressed in the contract of employment. For instance, should an Apprentice or Trainee have the same terms and conditions of employment as a Senior Manager? Probably not. You may need to consider whether your senior staff should be subject to restrictions which come into effect at the end of the employment relationship and prevent your employees from stealing your customers or setting up a competing business. If this type of restriction is not in their contract, employees can virtually do as they please once their employment with you is terminated. We have seen a number of clients suffer significant financial loss to their business as a result of failing to take adequate steps to restrict the activities of their former employees. We can help you to put suitable and effective measures in place to protect your business.

A few considerations to make when formulating your employment law contract

By way of example, we have set out below a list of just a few of the different considerations you need to make when putting a contract of employment into place:

Employee’s job title and job description

An employee’s job title and job description should not be too difficult to identify. You may wish to consider setting out the job description in a separate document as this may make it easier for you to amend the job description at a later stage as the needs of your organisation change and the roles of your employees develop.

Length of probationary period

Most employers operate a probationary period for new employees. The probationary period can be anything from a few weeks to a few months. You should consider whether you need the ability to extend the probationary period if a new employee is not progressing as quickly as you would hope. It is also worth thinking about the length of notice that should be required to terminate the employment during the probationary period. Normally we would recommend that this should be 1 week.

Place of work

This will be obvious in many situations however you may need to consider whether your employee will be allowed to work from home, whether they will be on the road, or whether they will work across a number of different premises operated by your organisation. You will also need to contemplate whether it is appropriate to add a mobility clause into the contract which would come into force in situations where you require the employee to be permanentloy based at a different location.

Hours of work

Ideally, you will be able to specify out the exact times when the employee will be expected to work. Sometimes this is not possible to do. For instance, employees are sometimes engaged to work shifts and some are permitted to work with a degree of flexibility in terms of the time they start and finish their working day. You should also be mindful that the Working Time Regulations restrict most employees from working more than 48 hours each week.

Salary or hourly rate of pay

This can become complicated when you have different categories of employees with some being salaried and the others paid by the hour. You should however set out in the employment contract the rate of pay and the frequency with which the employees will be paid.

Frequency of pay reviews

Employers generally review salaries and pay on an annual basis. Other than ensuring that employees are paid the minimum wage applicable to their age group, there is no statutory obligation for an employer to increase an employee’s pay each year. Pay rises can of course be a great motivating factor amongst your workforce and well defined targets and objectives can help you to get the best from your employees.

Bonus arrangements

You may operate bonus schemes in your workplace. If you do the scheme may need to be included in the contract of employment. We would suggest that you are careful about incorporating a bonus scheme in your employees’ contracts of employment. If the terms of a bonus scheme are included in the contract, you may find that it is very difficult to change the terms of the scheme should the need arise. Please consider putting the details of the bonus scheme on a separate document.

Deductions from pay

If you accidently overpay an employee you may be prevented from simply deducting the overpayment from further wage payments due to that employee. This may leave you in a situation whereby you have to recover the overpayment through the normal Courts. This process is costly and often complicated. A simple solution would be to insert a clause into the contract of employment which would permit you to deduct any overpayments straight from the employee’s salary.

Expenses

A clause within the contract of employment can set out what the employee is entitled to claim by way of expenses and set out the procedures for reclaiming them.

Holidays

The law currently states that you have to provide to your full-time employees a minium of 28 days annual paid leave inclusive of statutory and bank holidays. Employers frequently use additional holiday days to reward long serving and particularly valued employees. The holiday clause within a contract of employment makes stipulates the number of days holiday the employee is entitled to take. It can also set out specific rules in relation to annual leave. Examples include whether or not the employee can carry forward untaken annual leave into the following year, how much annual leave the employee can take at any one time and how requests for annual leave should be made.

Sickness arrangements

Every contract of employment should be clear on sickness arrangements. This should include details of whether the employee can expect to receive occupational sick pay and if so, how long it is to be paid for. Alternatively, the employee may only be entitled to receive Stuatuory Sick Pay. This clause should also include sickness reporting procedures, self-certification requirements and the circumstances in which a doctor’s ‘fit for work’ note should be provided.

Pensions

The law on pensions relating to employment changed significantly in 2012. Soon all employers will be obligated to offer their employees a workplace pension. The exact date by which you will need to implement the changes depends on how many people you employ and for the largest employers, this process has already begun. It is important therefore that your contract of employment is compliant with current pension provision requirements and that the contract is flexible enough to be amended once changes affecting your organisation come into force.

Notice

You can set out within the contract of employment the notice periods which are required from both the employer and the employee if either wishes to terminate the employment relationship. There are statutory requirements in place regarding notice which give employees the right to receive up to 12 weeks notice. The notice requirements in the employment contract should not be less than the statutory minimum.

Garden Leave

There are circumstances in which an employer needs to exclude an employee from its business. For instance, if an employee is moving to a competitor the employer may not want to give that employee the opportunity to work within the business during the notice period. In such circumstances, the employer may wish to put the employee on garden leave in order to prevent the employee from accessing confidential information which they can then take with them to their new employer. This means that the employee continues to be employed and available for work although they are not permitted to attend the employer’s premises or contact its customers.

Restrictive Covenants

The term restrictive covenant is usually applied to parts of an employment contract that prevent an employee from doing certain things after the employment relationship has been terminated. Restrictive covenants normally last between 3 and 12 months The more common types of restrictions are on who the employee may work for, restrictions on the employee setting up a competing business. Each restriction needs to be very carefully considered and drafted to ensure that is a fully enforceable.

Grievance and disciplinary procedures

No employer likes to deal with disciplinaries or grievances but ensuring that procedures are in place can provide you with clear steps on how they should be handled. If a clear policy is not in place then you could end up in the employment tribunal defending a claim for unfair or constructive dismissal.