What should be included in a contract of employment?

The contract begins as soon as the employee starts work, it may commence earlier where the offer of employment is unconditional for example.

Both the employer and the employee are bound by the contract until it ends. This can be brought about by the employee giving notice to leave or the employer dismissing them.

An employment contract can be either written or verbal.

A contract to provide services may exist in a case where someone has been hired to carry out a specific task.

For example, if a gas engineer agrees to fit a new boiler for an individual, the engineer is not employed by that person. Instead, a contract to provide services exists between them.

It is a legal requirement that anyone classed as an employee or worker has the right to a written statement of employment particulars. A written statement is different to an employment contract; an employment contract as is broader and goes beyond covering merely the main terms of employment that an employer is required to cover by law.

Broadly speaking, a contract of employment sets out four elements (known as the terms of the contract) of the employment relationship. The terms of the contract relate to:

• employment conditions
• rights
• responsibilities
• duties

The terms are a crucial part of the contract of employment as they are legally binding on the employer and employee. The employer should ensure that the employee is aware of the importance of the terms.

The terms of the contract may be set out in a number of different ways. These include:

• in a written contract or written statement of employment
• in a verbal agreement between the employer and employee (usually at the time an offer of employment is made and accepted)
• in a letter offering employment sent by the employer to the employee (even if the employee does not agree in writing, by turning up to work on their first day they could be deemed to have accepted the terms of the contract)
• in an employee handbook
• on the employer’s noticeboard
• through conduct

Collective agreements

Many employers have arrangements with staff representatives (e.g. trade unions) over certain aspects of working conditions such as pay and working hours.

Employees should be made aware if such agreements are in place, what areas are covered and how the negotiations are carried out.

Implied terms

An employer may feel that some terms do not need to be formally set down in writing or form part of a verbal agreement because it is so clear that they will apply. These are known as implied terms and may include:

• The employee agrees that they will not commit violence against or steal from colleagues or customers.
• The employer will not require the employee to work out of normal hours at short notice.
• The employee will have the essential qualifications for the job (e.g. an individual who will be operating equipment on a construction site has the appropriate licence or certification to do so).

Legal terms

It is not necessary to specify issues that are already covered by legislation. For example, the employer is legally obliged to pay the National Minimum Wage/National Living Wage even if it is not specified in the terms of the contract (it would still be illegal not to do so even if the contract terms set out a lower rate).

We have seen how a contract of employment can exist even if nothing has been written down. By law, however, there are certain aspects of the employment relationship which the employer must provide in writing and within a specific timeframe.

These are the principal statement and the wider document. Though these documents are not part of the contract of employment, it is vital that employers are aware of their obligation to provide them.

Employees must be provided with the principal statement on or before the date on which employment starts.

The principal statement must include details of:

• the name of the employer
• the name of the employee, their role, and their start date
• when and how much the employee will get paid
• working hours and days, and details of if they may have to work out of
• hours
• the amount of holiday entitlement
• the location where the employee will be working
• when the job will end, if it’s a fixed-term contract
• the length and conditions of any probationary period
• any additional benefits that the employee will receive (e.g. gym membership)
• any required training the employee must undertake, and who will pay for it
• the starting date of a previous job should this be part of continuous employment

Additional information must be provided in the principal statement in the case of employees who will be required to work abroad. This includes the length of time they will be overseas and what currency they will be paid in.

As well as the above details, there are other aspects of the employment relationship which the employer must outline to the employer on their first day. These must either be included in the principal statement or provided by another medium to which the employee has access – for example, a staff handbook or company intranet.

Examples of such information include:

• sick pay
• maternity/ paternity pay
• period of notice the employee must give to terminate employment

The wider written statement must be provided within two months of the employee starting work.

The wider written statement must contain details about:

• pension schemes that the employee is entitled to join
• any collective agreements that are in place with bodies such as trade unions
• additional training to which the employee is entitled
• how to report a grievance

Sometimes an employee may believe they have not been provided with all the information to which they are entitled. Alternatively, they may feel that the employer has not abided by all of the terms of the employment contract.

In such cases, they should initially try to resolve the problem by talking to their manager.

Should this not be successful the employee should follow the employer’s grievance procedure.

If the employee is still unable to obtain a satisfactory resolution, they can take their complaint to an employment tribunal.

We have seen previously how an employment contract normally remains in force until the employee either gives notice to terminate their employment or is dismissed by the employer.

It is possible, however, for the employment contract to be changed provided that the employer and employee both agree.

There are a number of reasons why either party might request such a change.

New legislation

An employer may seek to change the terms of the employment contract to comply with new legislation – for example, maternity / paternity pay.

Changing nature of the role

It is possible that over time the responsibilities that come with a particular job will change (for example, due to the introduction of new technology) and either the employer or the employee may feel it appropriate that the terms of the contract are changed to take this into account.

Introduction of new employee benefits

Should an employer introduce new benefits for their staff (such as a health insurance scheme, for example), it might be appropriate for this to be reflected in the terms of the contract.

Changes to the way the business operates

From time to time many businesses undergo restructuring in an effort to ensure they are operating as effectively and efficiently as possible. This could result, for example, in an employee now being part of a different division of the company and reporting to a new manager, or being required to work at a new location.

The employer or employee may wish the terms of the contract to be altered as a result of this change.

Employers should be extremely careful when seeking to make changes to the terms of an employment contract. Such a move has the potential to damage relations between the employer and employees which in turn can lead to decreased productivity and quality of work; increased absenteeism; legal cases and industrial tribunals; and staff retention issues.

As well as having an immediate negative impact on the company’s operations, such issues can cause long-term reputational damage, making it more difficult to recruit staff and attract clients.

Before attempting to make any contractual changes, therefore, the employer should consider whether there is any alternative. If they do decide to go ahead, they should do so in close consultation with employees and trade unions – explaining why the changes are essential to the future wellbeing of the company and its workers.

It is highly recommended that an employer seeks legal advice over any changes they are contemplating to contracts of employment.

Wilson Browne’s employment solicitors have a wealth of experience in this area and can offer expert guidance on how to avoid any potential employee disputes.

We have seen how important it is for employers to be aware of their legal responsibilities towards employees. Any problems that result from procedures not being followed can be costly in terms of employee relations, legal expenses, and reputational damage.