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 these include the following but there is also other specific information which must also be included:

  • 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 an essential requirement for a business because it sets out the specific terms and conditions which govern the employment relationship and which both the employee and employer must follow. This avoids ambiguity in relation to what each party must do and in the event of a dispute, either party can refer back to the terms set out within the employment contract. This is why it is seen as so important in the Employment Tribunal because 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, usually between an employee and their employer.

Often, disputes can be avoided by having a well-drafted employment contract that sets out the terms and conditions of employment clearly as set out above.

An employment contract is usually signed by both parties at the commencement of the employment relationship as is required by law, therefore it is often difficult to deter from this as it is a mutually agreed document.

It helps to reduce the risk of disputes but also to 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 in relevant cases. This can be in excess of £2,000 for each employee without terms in relevant cases.

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, there are clauses called restrictive covenants that 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. Having tailored restrictive covenants specific to your business can legitimately protect your business interests when an employee leaves. It is important however to take advice because where they are not tailored or drafted for you specific needs this can result in them being unenforceable.

How we can help with Employment Contracts

We can assist you 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 in line with legislative requirements which change regularly.  

It is also important to protect your business interests and to reduce risk, especially when disputes arise.