What Should be Included in an Employment Contract?
Must Employers Use Them?
Firstly, by law, an employer is obliged to provide every employee with a written contract setting out the basic agreement between the parties. This should be provided within two months of the employee’s start date.
If an employee brings another employment claim (such as unfair dismissal or unpaid holiday pay for example), then this is added to any damages awarded. An Employment Tribunal must make an award of between two and four weeks’ (actual) pay as compensation for not providing a written statement.
Secondly, and more importantly, if there is a dispute about terms without a contract to refer to, the position is unclear. When in dispute, an Employment Tribunal will most often seek to protect the employee’s position because they come from a weaker bargaining position.
What the Contract Should Include
The “contract” could be just a letter or could be a more formal contract document. At a minimum it must include:
- the employer’s name;
- a job title or a brief job description;
- place of work;
- start date for work;
- date on which the continuous employment began (this may be different from the start date if the employee had a different role historically);
- how much the employee will earn (this may be a monthly salary or hourly rate); and
- when and how the employee will be paid.
It should also include information about:
- hours of work;
- holiday entitlement (and whether this includes public holidays);
- the length of notice that the parties have to give if the employee leaves or is dismissed;
- how long the job is expected to continue (is it continuous or is it temporary, maternity cover, for a fixed duration etc.);
- entitlement to sick leave and sick pay; and
- pension entitlement.
It may also be appropriate to include a specific flexibility clause. These can include the automatic consent of the employee when, in the future, an employer wants to vary the contract. This can cover issues such as increasing contractual hours, agreement to travel on business, to consent to any change of location within a specific mile radius. If this is realistically envisaged by a company, it always makes sense setting out the right of variation in the contract. This is because later down the road the employee may be less agreeable, and such a variation to his/her contract would involve a lengthy consultation process if the relevant clause is not included.
Post Termination Restrictions
For sales staff or employees with particularly customer-focused roles, it is often useful to include post termination restrictions into the employment contract to protect the Company’s position. These can be included so that if an employee leaves (either by resignation or dismissal) the Company has a reasonable period in which the ex-employee can’t contact historic customers, they cannot accept work from competitors and they cannot seek to solicit work from the Company’s customers. Clauses may also be included to ensure that an ex-employee cannot poach staff. These clauses need to be carefully drafted but can prove invaluable as they provide the employee’s replacement some time to forge and cement the relationship with the Company’s customers before the ex-employee might seek to disrupt the relationship and re-enter the market in the same capacity on behalf of himself or for a competitor.
Disclaimer: This article does not contain a full statement of the law and it does not constitute legal advice. Please contact the Employment Law Team on 020 3743 0600 if you have any questions about the information set out above.