The pitfalls of not having Contracts of Employment in place
We work with small business owners and as I write this we will undoubtedly receive enquiries in relation to HR matters, as part of what we call our initial fact find we ask a series of questions and one of these is “does your employee have a Written Statement or Contract of Employment”, unfortunately we find approximately 46% of small business owners do not have either of these in place.
In addition to a Written Statement or a Contract of Employment being in place they should be legally compliant and watertight.
In this section we will take a look at the pitfalls of not having either one of these in your business for your employees.
The all-important documents are written agreements that are set by you, they set out rights, responsibilities and duties, these are between both parties, there is an assumption that a verbal agreement is suffice, it can be argued that once an employee has accepted payment from you (earnings) then they are accepting their terms, our experience tells us it is still unwise not to issue one of the above documents as it is safe to say it would alleviate headaches where a relationship breaks down in the future, by making an assumption that a verbal agreement makes the relationship more user friendly or flexible can lead to costly claims and be brand damaging.
What exactly is the difference between a Written Statement and a Contract of Employment
A Written Statement is the bare minimum that is required for all UK employees and is a legal requirement under Section 1 of The Employment Rights Act 1998, this document would contain the basic details in relation to your employee’s employment with you and would typically include:
- Name and addresses of both parties
- When the employment began
- Any continuity of employment
- Job title
- Pay details
- Holiday entitlement
- Sick pay
- Pension information
- Hours of work
- Place of work
- Discipline, appeal and grievance
- Collective agreements
- Notice periods
You can find more information about the provision of this document, under The Employment Rights Act 1996 Section 1 https://www.legislation.gov.uk/ukpga/1996/18/section/1
It is safe to say that, Contracts of Employment are the most preferred agreement but not a legal requirement, they contain comprehensive information in addition to what is set out in the Written Statement see an example of what you may chose to include:
- Family Friendly
- Intellectual Property
- Company and Cars
- Mobiles and telephones
- Social Media
- Email, IT and Communications
- Health and Wellbeing
- Equal Opportunities
This agreement clearly defines the business expectations, with references to Handbook policies for further guidance and support. They are a tool to add a layer of protection for your business and adds control over the entire agreement, this ultimately limits the possibility of claims brought to tribunal.
What can be the cost at tribunal
Whereby an agreement (Written Statement or Contract of Employment) has not been provided to an employee a minimum of 4 weeks’ pay would normally be added to any claim brought to tribunal, the cost can also be felt by businesses where a claim is not brought as it can be brand damaging and cause undue stress.
Who exactly needs them and when by
All UK employees have a legal right to a Written Statement with more than one months service and this must be provided within 2 months of their employment with you.
You must provide to each of your employees:
- Full/ part time
- Fixed term
- Zero hours
We advise providing your document within this time, you are within your rights to wait the full 2 months however if your employee leaves or you terminate and you have not provided be aware that your employee has the right to request this from you.
After 2 months your employees are entitled to further particulars, so be wary if you have provided after this time frame your employees including leavers start to accrue this as a legal right.
What do we suggest
It is always our advice to provide a Contract of Employment over Written Statements due to their content and the added protection, we do not charge any extra for these and they are a standard document for us.
Can I write or download my own Written Statements or Contracts of Employment
We strongly advise against writing or downloading your own documents and advise this due to the legal implications that this may cause you in the long run, the documents and information they contain should be carefully worded, you should always seek the help of a professional. We always request copies of your original documentation prior to making any amendments, it is also imperative your existing employees are not left at detriment where you are providing new documents.
All of our Contracts of Employment are bespoke to your needs, we ensure you are completely happy with the wording of each document and the details.
Author: Fran Crossland
29 November 2019