What is a contract of employment?
Every employee has a contract of employment. It is formed when the parties reach the stage where terms of employment have been offered and unconditionally accepted with the intention of entering an employment relationship. The law expects that the terms of employment are set out in a written statement, with the document setting out the principal terms provided to the employee by no later than the first day of employment.
What is in the written statement of employment terms?
The principal terms that must be provided in writing by no later than the first day of employment need to include, among other matters, the following:
- The employer’s name
- Job title
- Details of pay
- Hours of work
- Place of work
- Holiday entitlement
- Length of contract
- Details of probation
- Benefit entitlement
- Training requirements
- Length of continuous service.
Information must also be provided about sick pay entitlement, paid leave (other than holiday) and notice, but this written information need not be in the principal statement.
In addition, the employer must also provide in writing details of the disciplinary and grievance process and pension entitlement, as well as whether any collective agreement affects the employment.
When should a written statement of employment terms be provided?
It is best to provide the written statement of employment terms when employment is offered. The statement will cover the obligatory content, but also cover other issues important to the employment relationship. Providing this written statement when the offer is made results in the content forming part of the employment contract ultimately agreed.
Ensuring that content in the written statement forms part of the legal contract can be important to both the employee and employer alike. For an employee, this may be important when agreeing bonus or commission provisions. For an employer, this may be important when seeking to agree post-termination restrictions or confidentiality provisions.
What are post-termination restrictions?
Employers wishing to protect their business against unfair competition from former employees use post-termination restrictions. These primarily apply after the employment ends and they supplement and extend basic restrictions that the law implies.
Typically, such measures include provisions to prevent:
- Soliciting business from former client/customers
- Dealing with former customers/clients
- Operating competing business either generally or in a restricted area
- The misuse of categories of confidential information
- Poaching staff.
To be enforceable, the restrictions must only go so far as is reasonably necessary to protect legitimate business interests and must be in line with what the law permits.
Is it easy to change employment contracts?
The starting point is to check the relevant contract for terms reserving the right to make the desired change. If found, the employer can seek to rely upon this, but must still exercise the provision in a reasonable manner. This includes consulting with the employee to identify potential issues and solutions, as well as ensuring sufficient advance notification of the change.
Even if the change is permitted, care must be taken if the employee faces difficulties owing to their personal circumstances. The employer must act reasonably to avoid breaching the implied duty of mutual trust and confidence and must also take care if the employee raises an issue linked to a protected characteristic since making the change could be discriminatory. For example, problems with childcare could involve indirect sex discrimination, whilst issues managing a medical condition could involve disability discrimination.
Where the employment contract does not provide the required flexibility, the employer will need to vary the terms using the correct formal process.
What is the formal process to change contracts?
The employer starts by consulting with each employee (assuming a trade union is not recognised), discussing the proposed change and the reasons. The employer needs to identify any issues for the employee, including any that may be linked to a protected characteristic covered by the Equality Act 2010.
The employee may agree the variation, but if not, the employer either needs to revise the proposal to win agreement or look to impose the change.
An ACAS Code of Practice is being introduced, mirroring much of the existing process, and the ACAS guidance should be followed.
However, in overview, the process involves the employer seeking agreement from as many employees as possible and exhausting consultation with the others. Following this, notice of dismissal is served on those who fail to agree without appropriate reason. Additionally, employees given notice of dismissal are offered a final opportunity to accept the varied contract and remain in employment.
Employers must also proceed with caution because the dismissed employees could claim unfair dismissal if they have two or more years of continuous employment. To successfully defend this claim, the employer must be able to evidence compelling reasons necessitating the contractual change and show that it followed a reasonable procedure.
In addition, when proposing contract changes and envisaging dismissal if agreement is not secured, every employee in the process is considered to be a ‘proposed dismissal’. Collective consultation must be conducted, in addition to consulting with individual employees, if the number of proposed dismissals at an establishment (which can mean part of a business) in any 90-day period totals 20 or more. Collective consultation is conducted with a recognised trade union or elected employee representatives and requires that prescribed information is provided and discussed. The collective consultation process must last for at least 30 days, rising to 45 days if there are 100 or more proposed dismissals. Failing to collectively consult potentially renders dismissals unfair, with the remedy that involves, plus it can also result in a protective award of up to 90 days' pay per affected employee.
Do I need policies and procedures to accompany the employment contract?
All employers should have a disciplinary and grievance procedure since these form part of the information that an employer must provide under the Employment Rights Act 1996. Employers also need to have in place suitable measures to deal with health and safety and data protection obligations.
Regardless of an employer’s size, it is prudent to have several other policies and procedures to outline to employees what your expectations are and what procedures should be followed. Examples include a Discrimination, Harassment and Bullying Policy; an Information Technology Policy (including social media); and an Absence Notification Procedure and Capability Procedure.
As employers become larger, the number of policies and procedures required will increase and they may be consolidated in an employee handbook. At this stage, additional content is usually developed, for example, an Alcohol and Drugs Policy; a Home-working Policy; a Time Off Rights Policy; and a Whistleblowing Policy – a handbook will typically cover a wide array of further topics to set standards for the workplace.
An employer’s policies and procedures are generally reserved as non-contractual to enable the content to be evolved as the business changes. The same position is adopted in employee handbooks, but handbooks may also contain a small contractual section that supplements the content of each employee’s own written statement of employment terms.