Employment contracts

Every employee has an employment contract, whether you have provided a written employment contract or not. The employment contract governs the relationship between you and the employee, setting out what each side can expect.

As an employer, a clear written employment agreement helps reduce the risk of any disputes. You also need to understand your legal obligation to provide a written statement of employment terms to your staff, and what would constitute a breach of employment contract.

Employment offers and employment contracts

A contract of employment exists for every employee, whether you have provided a written employment contract or not. The employment contract is created the moment an employee accepts your job offer. You should take legal advice if you are unsure whether an individual is an employee or not (for example a self-employed sub-contractor).

As well as any written offer of employment, the terms of the employment contract can be affected by any other employment documents (such as a job description or a written statement of employment terms) or spoken agreement. The terms of the employment contract can also be affected by employment practice: for example, if you provide a bonus every Christmas, it may become a contractual entitlement.

Any employment contract also includes implied terms although these are not generally written down. For example, the employer has a duty to treat employees with respect and provide a healthy and safe working environment, while employees must obey reasonable instructions and act honestly.

Regardless of any agreement, an employment contract cannot override employees’ statutory rights. For example, there are statutory entitlements to sick pay, maternity leave, and the minimum wage. A contract can offer more generous entitlements than the statutory minimum.

Written statement of employment terms

You are legally obliged to provide a written statement of employment terms within two months of taking on a new employee. The written statement must include specified basic details such as pay, working hours and holiday entitlement.

The written statement, or other documents made available to the employee, must also cover key issues such as disciplinary and grievance procedures and how much notice the employee is entitled to.

Key employment terms

In general, you cannot unilaterally change the terms of an employment contract without risking a claim of constructive dismissal. So you should aim for employment contracts to be as flexible as possible. For example, you should avoid narrow job descriptions and include the right to change the job description or the employee’s place of work. Make it clear when employment benefits are intended to be discretionary.

Your initial employment offer should state whether the offer is subject to any conditions such as satisfactory references. You can also include a probationary period of up to a year.

You may want to consider other contractual terms, particularly for senior employees. For example, you might want the employment contract to include clauses on confidentiality and restrictions on leaving to set up a competing business or poaching staff. You should take legal advice to ensure that any terms in the employment contract will be enforceable.