Contracts of Employment - A Guide for Employers & Managers

The Contract

A contract of employment is a legally binding agreement between an employee and an employer.

The terms of a contract may be oral, in writing, implied or a mixture of all three. An oral agreement is just as binding as a written contract, although it may be harder to prove what was stated in an oral arrangement.

Section 1 of the Employment Rights Act states that a written statement of particulars should be given to the employee within two calendar months of starting work. The written statement must legally include:

Employee name
Employer name
Employer address
Job title or a brief job description
Date when employment (and the period of continuous employment) began
If temporary, state the period for which employment is expected to continue or, if it is a fixed term, the date it will end
Address of the place or place(s) of work if employment is in more than one location
Remuneration including pay scale or rate information, pay intervals and the method of payment
Hours of work
Holiday entitlement including bank holidays
Entitlement to sick leave, including any entitlement to sick pay (including statutory or company sick pay)
Pensions and pension scheme, including whether or not a pensions contracting out certificate is in force
Period of notice required to terminate employment by employer or employee
Details of any collective agreements which directly affect the employee
Grievance and disciplinary procedures (see disciplinary and grievance guides for further information)

Many employers include the statement of particulars or the main terms and conditions of employment into a single document, regarded as the Contract of Employment. The Contract of Employment incorporates other specific company benefits and conditions of employment.

Working outside UK

Where an employee is required to work outside the UK for more than one month, details must be provided of:

The length of time
What current salary will be paid in
Additional remuneration and benefits relating to the posting outside the UK, eg flights home, accommodation etc
Terms and conditions on returning to work in the UK

Offer of Employment

The offer of employment may be made in several ways:
Verbal offer, normally made by telephone, detailing the key terms of employment
Followed up normally by a written offer either detailing the written statement (key terms of employment as above), or
There may be a brief covering letter, which includes a separate contract of employment

The Acceptance

The acceptance to the offer of employment may be verbal, but it is usual practice for companies to request confirmation in writing. This is normally carried out by requesting the return of a signed and dated copy of the employer’s offer of employment letter

Legal Considerations

If a written statement of terms is not provided within the first two months of employment the employee can make a complaint to a Tribunal within three months of the employer’s failing to provide the written statement. If there is no statement or it is found to be incomplete or inaccurate the Tribunal is required to award compensation. The compensation will however only be payable if there is another successful claim for something else, eg unfair dismissal.

Existing employees are also entitled to request a written statement of terms and conditions of employment:

When drafting a contract it is essential to ensure that none of the terms are discriminatory in any way. From 1 October 2006 age discrimination came into force and it is good practice to incorporate a retirement procedure into the contract (see retirement guide)
As employment law is constantly changing it is important to ensure that the written statement or contract complies with legal requirements and it is good practice to re-issue statements or contracts on a regular basis to ensure they are up to date
Alternatively copy documents of any separate changes to the terms and conditions of employment should be placed on the employee’s personnel file

It is good practice to provide the employee with a contract which includes more information that the legal minimum. This will avoid confusion and both parties will better understand the basis of employment (see terms and conditions for other additional clauses that may be included)

Varying a Contract of Employment

Where new terms and conditions arise, alterations to the contract of employment require the agreement of both employer and employee and cannot be imposed unilaterally. All alterations should be recorded in writing and held on the employee’s personnel file.
Where mutual agreement to changes in terms and conditions cannot be reached it is recommended that employers seek independent legal advice.