Out-Law Guide 5 min. read
01 Mar 2019, 3:56 pm
The contract of employment is the agreement between employer and employee which governs the relationship between both parties.
It need not be in writing and can be implied from the surrounding circumstances. A written contract can comprise one short handwritten page or a lengthy document following detailed negotiations. Most contracts fall somewhere in between.
Failing to provide a written contact of employment results in a lack of clarity since neither party knows the precise extent of their respective rights, duties and obligations. There is also a legal obligation to provide a written contract to employees.
By taking the time to carefully prepare a contract of employment for each employee, disputes and ambiguity about the employment relationship can be minimised. As each business has different needs and outlooks, the style and content of the contract of employment will differ.
The content of each contract will depend on the nature of the business and the job which is on offer, although there are some standard terms and conditions.
The laws of the UK provide minimum rights and obligations, including the right to a safe system of work and minimum notice periods, the duty to obey reasonable and lawful orders and the requirement not to reveal trade secrets etc. These rights and obligations are implied into all employment contracts.
However, there are additional protections which a written contract can provide which are extremely valuable to a business, such as the ability to place a departing employee on garden leave during the notice period, the ability to make a payment in lieu of notice rather than require the individual to work out their notice etc.
Confidential information and intellectual property can be protected. There may also be legitimate business needs which require protection by way of restrictive covenants, such as customer connections, trade secrets and confidential information.
Covenants seek to prevent former employees from damaging the business following their departure. Legal advice should be taken to maximise the prospects of enforcement because such clauses are generally considered to be against public policy and invalid. For more information, please see our guide to restrictive covenants in employment contracts.
The contract of employment should be distinguished from the statutory written statement of employment particulars which should generally be provided to all staff not later than two months following their start date. The written statement is not conclusive evidence of the contract of employment. The statement must include the following:
If there are no terms relating to any of the items noted above, the statement should state that there are no such terms.
Also, any changes to the relevant terms must be given to the employee at the earliest opportunity and not less than one month following the change. An employee who has not received the statement may apply to an Employment Tribunal for a declaration as to the relevant terms.
Thought should also be given to the drafting of employment policies and handbooks which detail additional issues which affect the employment relationship. A handbook can be an online version held on an employer's intranet, and does not need to be a physical document. It must be made clear if the contents are intended to have contractual force or not, and if they are not, to have a clear statement included in the policy.
These can cover Equal Opportunities, Internet and Email use, Maternity and Shared Parental Leave etc. and other areas where the employer wishes to detail particular office procedures, such as IT policies. These documents are important because they result in policies being applied consistently throughout the organisation and remove any doubt as to the particular provisions which apply.
The contract of employment is accordingly an essential component of the employment relationship and careful consideration should be given to the drafting of a written contract which can be tailored to the individual business. In that way the business secures maximum protection and the employee knows precisely the terms governing the employment.
If you are an employee in need of advice: please note that our law firm does not tend to act for individual employees. We generally act for organisations only. You can contact the Law Society if you need help finding a solicitor or if you want additional guidance on your rights, you could try ACAS, which runs a helpline on 08457 47 47 47 to answer employment questions in confidence.