Last reviewed 7 June 2016
The contract of employment sets out the relationship between you and your employees. Get it wrong and you invite serious time-consuming legal and employee relations difficulties. However, take time to get it right and you will avoid many of the disputes encountered by managers, says Bob Patchett.
Strictly speaking, a contract of employment need not be in writing. If you offer someone a paid job and he or she accepts, you have a legally binding contract. However, it may subsequently be difficult to prove that a contract was made, or you and the employee may argue about issues such as holidays that were not mentioned when you formed the contract. So, for this reason, the law requires that you give every employee who has worked for you for a month a written statement setting out details of specified terms. A full list of these may be found in Croner’s Reference Book for Employers or in Acas guides.
These details may be minimal, and many employers take advantage of this by specifying as little as possible in order to save time and to keep the relationship flexible. However, flexibility can work against the employer. Better to take time and specify, in detail, the relationship you wish to have with your employees. In the long term, this will save you a lot of headaches.
The contract you produce should contain three groups of topics. First, those required by law and mentioned above. Second, conditions that you wish to apply to all employees or to broad groups. Third, those that you wish to apply to individuals or small groups. Think carefully about the legally required topics; for example, is a job title or brief description of the job sufficient, or should you refer to a written job description? Whichever, mention that the employee will be required at times to carry out other reasonable duties. When assessing reasonableness, courts generally consider what the man or woman in the street would consider is reasonable in that particular circumstance. Stated hours of work should be the normal ones, but make clear if weekend work is required for annual stocktaking. Take care also when stating the amount of notice you will give the employee. Is it important that it be longer than the legal minimum? If you feel that a senior employee should be given 12 months’ notice, should you build it from, say, three months in year one and six months in year two? Also consider that, the longer the length of notice you require from the employee, the less the likelihood that he or she will give it, because his or her new employer may not be prepared to wait for a long time while your employee serves due notice. Look carefully at each of these required topics, think about it, discuss it with colleagues, and determine what you really want.
The second group of topics includes additional conditions applicable to your whole workforce, or to large groupings, such as production, office or field staff. You may, for example, have strict dress rules for product hygiene reasons or for customer interface. You may indicate to what extent employees may make private use of company computers or telephones. Maybe explain the degree to which employees with company vehicles may use them for private journeys and to what extent they are responsible for having them serviced or repaired. As an alternative to writing conditions in a contract of employment, you may publish many of them in an employee handbook or in easily accessible documents such as a health and safety policy.
You may have individuals or small groups who, because of their particular work, need specific terms in their contracts. This third group may include research scientists or engineers whom you employ to find new drugs or to come up with new products. Their results belong to you, their employer, though they may be entitled to some benefit. The law surrounding this issue is complex, but, nevertheless, you should make clear where they stand in relation to their inventions. Some employees may be in a position whereby their experience with you stands them in good stead to set up in business themselves in competition with you. Therefore, you should protect yourself by inserting a restrictive covenant in their contract of employment. Again, this has to be reasonable and not too restrictive; there needs to be a balance between protection of your organisation’s interests and the employee’s freedom to exercise his or her skills. Take care, however, that you do not restrict your employees unnecessarily or you will destroy the trust that they should have in you. If you do have serious concerns about inventions, restrictive covenants or other areas where you feel the organisation is vulnerable, take advice from an employment law solicitor, though ensure that anything that is put into contracts as a result is expressed in clear English. You may find it prudent to ask advice, write it out yourself in plain English, and then return to the solicitor to check that what you have written is legally sound.
Whatever you write in contracts must be understandable to the employees concerned, otherwise the exercise is pointless. When you and your colleagues are satisfied with what you have written, have it checked by an HR expert and by someone who can write good English, and consider the recipient of the contract. Is he or she capable of reading and understanding it? If not, you need to have someone explain it patiently or have it produced in some alternative form, such as Braille.
A sound way of using these contracts is to produce them in the form of an offer letter. You offer a job “subject to the following terms and conditions” and away you go. Finish with “We hope that you will accept this offer. To do so, please sign your acceptance at the foot of the copy letter and return it to us within 10 days.” If you get back a signed copy, you have a clear deal with a new employee that both of you understand. If, however, you have a high turnover in certain sections, or recruitment for simple jobs is carried out by supervisors of small branches, prepare a standard contract that includes all necessary terms and leaves space for the supervisor to handwrite the person’s name, date of joining, job title, and the supervisor’s signature. A small print size may get this onto two sides of one sheet of paper. If the person wishes to take the job, he or she signs acceptance at the end. The supervisor then makes two photocopies, keeps one, gives one to the employee and sends the original to head office.
Finally, be aware that either party may terminate a contract by giving due notice, but both parties are required to make changes. If, therefore, you make use of an employee handbook, be sure to keep in separate sections topic that are contractual and those that are rules and regulations that you may change unilaterally.
Creating a sound set of standard contracts will take a little time, but the exercise will give you security and greater trust and understanding with your employees.