Do you fully understand what a contract of employment / written terms of employment are ?

A contract of employment, also known as an employment agreement or written terms of employment is a legally binding document that establishes the terms and conditions of employment between an employer and employee.

Do I have to issue all employees with a contract of employment?

Yes as from 6 April 2020, both workers and employees must be issued with written particulars of employment (Written Statement of Employment) from day one of their contract/employment or before.

What is a contract of employment ?

A contract of employment, whether written or unwritten, contains both express terms and implied terms.

Express terms, are those explicitly agreed upon by both parties either in writing or verbally (like salary or working hours).

Implied terms, on the other hand, are not explicitly stated but are considered to be included in the employment contract.

In addition to expressed and implied terms a contract of employment will also consist of :

• Custom and practice:
• Incorporated terms
• Statutory terms

What are expressed terms in a contract of employment?

Expressed contract terms are terms that are specifically and explicitly stated in writing or verbally between the employer and the employee. They detail the promises and obligations each party is agreeing to.

Here are some key aspects of expressed contract terms:

Clear Statement: Expressed terms are clear and unambiguous, leaving no room for doubt about the intent or obligations of the parties.

Incorporation into the Contract: For a term to be considered an expressed term, it must be formally incorporated into the contract. This means it is recognized and accepted by both parties.

Examples: Some examples of expressed contract terms are salary rates, holiday entitlement hours of work.

Enforceability: Since expressed terms form the foundation of the agreement between the employee and the employer they are usually enforceable in a court of law.

What are implied contractual terms in a contract of employment?

Implied contractual terms are terms that are not expressly stated in a contract but are either assumed to exist due to the nature of the contract, are necessary to give efficacy to the contract, or are implied by law.  

They are either inferred from the circumstances or the nature of the contract, or they are legally imposed. Here are a few ways implied terms can come into play:

By Custom or Practice: see custom and practice

By Previous Dealings:

If employer and employee have a history of dealing with each other in a certain way, it can be implied that they intend to continue dealing with each other in the same way.

i.e. if an employee has always arrived 5 minutes late due to the local bus service

By Fact:

A term can be implied based on the facts of the situation. If both parties, based on their actions or circumstances, indicate that a term should be part of the contract, it can be implied by fact.

i.e. an employee is always picked up by his colleague in the works van to go to a fixed or variable place of work, the employee could argue by fact that transport to and from work is supplied by the employer as part of their contract of employment.

By Law:

Statutory requirements as specified by current employment & contract law.

By Necessity:

If a contract cannot function without a certain term, it might be implied out of necessity. For example, all employees must adhere to health and safety requirements and legislation.

Officious Bystander Test: A theoretical test used to identify implied terms. If an impartial bystander were to suggest a term and both parties would respond with “Of course!”, that term might be implied.

What are Custom or Practice terms and conditions in a employment contract ?

Custom and practice are unwritten practices that have become an accepted part of an employment relationship over time. Find out more

What are contract of employment statutory terms ?

Statutory terms fall under implied terms. They are terms that are implied by law into all employment contracts and provide a foundation of rights and obligations for both the employer and employee.

Essentially, these are minimum rights that are provided by legislation. An employer cannot provide less than the statutory minimum, but they can offer better terms.

Here are some common statutory terms implied into employment contracts:

• Minimum Wage:
• Working Hours:
• Holidays and Holiday Pay:
• Notice Period:
• Sick Pay:
• Maternity, Paternity, and Parental Rights:
• Discrimination:
• Health and Safety:
• Unfair Dismissal:
• Redundancy:
• Whistleblowing:
• Breaks:

It's crucial for employers familiarize themselves with the statutory required under current UK employment legislation .

Moreover, even though these are minimum rights, there can be exceptions based on the nature of specific jobs or industries.

Lastly, while statutory terms provide a foundation, many employment contracts also include additional rights and benefits that go beyond the statutory minimum.

What are incorporated terms in a contract of employment?

Incorporated terms in a contract of employment refer to terms that are not expressly stated within the written contract itself but are still considered to be part of the agreement.

These terms can be drawn from a variety of sources, and once incorporated, they are as binding as any expressly stated terms. It's worth noting that the process of incorporation can be complex, and the extent to which a term is deemed incorporated may depend on statutory provisions, and case law.

There are several sources from which terms can be incorporated into an employment contract:

Collective Agreements:

These are agreements made between employers and trade unions. If an employment contract refers to a collective agreement, terms of that agreement may become part of the individual's contract.

Staff Handbooks or Company Policies:

These might contain terms related to various employment aspects. If these handbooks or policies are referenced in the employment contract, they might be deemed incorporated.

Custom and Practice:

If there is a longstanding, consistent, and known practice within a workplace, this could become an incorporated term if both parties (employer and employee) treat it as a binding condition of employment.

Previous Correspondence:

Terms might be incorporated from previous negotiations or discussions, but this would typically require some clear evidence.

Verbal Agreements:

Even if a term is not in the written contract, if it has been verbally agreed upon, it can potentially be incorporated. However, proving the existence and content of verbal agreements can be challenging.

It's important to clarify that not all terms from the above sources would automatically become part of an individual's contract. The specific nature of the term, the way it's been referenced or relied upon, and the intention of the parties are all relevant in determining incorporation.

Lastly, if there is any doubt about whether a term has been incorporated into an employment contract, legal advice should be sought. This is especially crucial as the implications of a term being incorporated can be significant for both the employer and the employee.

Does a contract of employment have to be in writing?

While many people associate contracts primarily with written documents, they can also be:, Verbally communicated, implied or come about through custom and practice. However, it's always advisable to have contracts, especially important or complex ones, in written form to ensure clarity and prevent misunderstandings.

Having the correct contract of employment in place will help protect your business future claims

Can I issue the same standard contract to all my employees ?

Whilst you could issue the same contract to all your employees in reality this is a false economy. As whilst you will save a little money, in the long term this will be detrimental as it has several draw backs including:

Not Reflective of Individual Roles:

Different employees have different roles and responsibilities. A standard contract may not adequately address the specific expectations and requirements of each position.

Legal Implications:

Some positions may require specific legal clauses that aren't applicable to others. For example, positions

involving access to sensitive company information might need stricter confidentiality clauses.

Salary and Benefits:

Employees in different roles and with different experiences and skill sets will likely be compensated differently. A standard contract could cause confusion or disputes over salaries and benefits.

Career Progression:

An employee's contract might need adjustments as they progress in their career, reflecting their growth in the company.

Inadequate Protection:

Without tailoring contracts to specific roles, you might leave your company exposed. For example, not including a non-compete clause in a high-ranking managers contract could have more severe implications than not including it in an entry-level employee's contract.

Negotiation and Flexibility:

Some employees may have special circumstances or may bring unique skills or experiences to the table that warrant a different contractual arrangement. A one-size-fits-all approach reduces your flexibility in hiring and retaining talent.

Performance and Bonuses:

Employees in different roles will have different performance indicators. A standard contract might not adequately address performance, incentives, or bonuses that are unique to specific roles.

Training and Development:

Contracts must include clauses about training and development. A blanket contract will not cater to the specific training needs of different roles.

What should I do as employer to ensure my contracts of employment protect my business ?

Have custom bespoke contracts for each role in your business as this will help protect the business against future claims.

Regularly review and update employment contracts. ( legislation changes, a contract issued in 2020 could not be issued today as it would not be legally compliant).

In addition your business and the needs of the business is constantly changing, make sure your contracts of employment reflect where you are now and where you want to be in the future.

Be clear in communications, ensuring employees know which benefits are discretionary and which are contractual.

Take legal advice before making changes to any contracts or any established customs or practice.

Consequences of getting a contract of employment wrong ?

Failing to put in place the correct contract of employment can have several consequences for the employer including:

Legal Disputes:

If an employment contract is not clear or contains ambiguous terms, it can lead to disputes between the employer and the employee. Such disputes may result in legal actions, which can be time-consuming and costly.

Financial Consequences:

Misunderstandings or errors in terms related to salary, benefits, bonuses, or other compensation can lead to unexpected financial obligations for the employer.

Lack of Clarity on Job Role and Expectations:

If the contract doesn't clearly define the role, responsibilities, and expectations of the employee, it can lead to misunderstandings and conflicts in the workplace.

Confidentiality and Non-compete Clauses:

If the contract fails to address issues related to confidentiality or non-compete clauses, an employer might be at risk of having sensitive company information taken, employees leaving to work for competitors or employees leaving to setup in direct competition.

Termination Issues:

Without a well-defined termination clause, letting go of an employee can become a complex and legally risky process with possible claims for unfair dismissal or unlawful deduction of wages.

Lack of Protection Against Discrimination:

Proper employment contracts should contain clauses that protect employees against discrimination and uphold equal opportunity standards. Without these clauses, employers may be exposed to legal actions based on discrimination claims.

Reputational Damage:

For companies, mishandling employment contracts can lead to reputational damage, especially if legal disputes become public via tribunal. This can deter potential employees from wanting to work with the company or even clients wanting to deal with the company again.

Operational Issues:

Without clear stipulations on working hours, overtime, holidays, and other operational aspects, the day-to-day running of the business might face disruptions, employees working the system for personal gain or having to pay out when there is not actual legal obligation to do so.

Issues with Statutory Compliance:

There might be mandatory statutory requirements that need to be included in employment contracts and as a result of not including them you face legal action and tribunal awards.

Demoralization:

If employees feel that their contract is not fair or does not protect their interests, it can lead to low morale, decreased motivation, and reduced productivity.

To avoid these consequences, it's crucial for both employers and employees to understand their rights and responsibilities and to ensure that employment contracts meet the current and future needs of the business.