August 1, 2018
Whether you’re a first-time employer or you’ve been managing teams of workers for years, the question of the necessity of providing a contract is a valid one to ask. Depending on the size and complexity of the role in question, official employment documents can take a long time to draft and make watertight, and it can sometimes feel that a lot of the information that is required to be included is somewhat self-explanatory. So are employment contracts actually mandatory, and can you be prosecuted for failing to provide one? Prosperity Law, a team of highly experienced commercial solicitors based in the north of England, is well-versed in navigating the sometimes rocky terrain of manager/worker relationships, contract law and employment tribunals. Here is their advice regarding contract law. Read on to discover your legal requirements and inform yourself further about how having an official legal employment contract might benefit you, your company and its employees.
Contracts: The Basics
The question of whether or not you need to supply a contract becomes somewhat obsolete when you discover that an “implied contract” exists from the moment you verbally agree to take an individual on as a paid employee. Because this is the case, it may be in your best interests to demarcate the parameters and specifics of their duties and the rules to which they are required to adhere in order to avoid any confusion or lack of clarity that may leave you exposed. The moment at which you have officially agreed to take on an employee can sometimes seem rather fuzzy, so that is one element of their employment that needs to be recorded straight away, whether you are providing them with a full written contract or not, as it is possible that future disputes may arise regarding the date from which they should be paid.
Basic legal rights exist for employees within their implied contract from the moment their position is officially agreed, even before any official, explicit written contract comes into play. For example, employees have the right to be paid to the level of the national minimum wage for any and all work they undertake. These rights are enforceable by law, and any employers that fail to adhere to these regulations are liable to be prosecuted. In the worst case scenario, companies failing to uphold and support these rights may be forced to cease trading. A detailed written contract can be extremely useful as a means to legally prove that you are following the rules and taking your employees requirements seriously.
What Does the Law Dictate?
While you do not have to issue a formal, legally binding contract, you are required by law to provide all workers with a statement, in writing, delineating particular terms and conditions regarding their employment. This is known as a “statement of employment particulars”, and the information this contains is known as the “principle statement”. Enclosed within this document, which should be readily available for any team member to view, employees should be able to find the names of both their employers and themselves, the title and description of their job, the date of the official start of their employment, information about payment – i.e. what their hourly rate or monthly salary will be, and when they should expect to receive each paycheck, the hours they will be expected to work, the amount of holiday they will be entitled to per year, the location of their work, arrangements for sick leave and other types of leave including information about notice required, information about disciplinary or grievance procedures, any other factors that may affect the terms and conditions of their employment, any pension scheme provisions and, if they are not permanent employees, notification of the length of their employment.
What Should a Legally Binding Employment Contract Contain?
A full official contract is not technically required by law as long as you have provided a basic statement of employment particulars covering all of the necessary details listed above. However, you may be harming yourself and your business if you decide against issuing a contract. Within any unwritten employment agreement, there are implied contractual terms, as opposed to the express terms that can be found within a complete written statement. If you decide that you’d prefer to rely on the basic parameters of employment law that are invoked by settling on an implied contract, you won’t have the right to control the specifics within the job, as the employee will not have been notified of your intention to do so and so will not be legally obliged to adhere to your instructions or decisions in these cases.
Implied contractual terms include the understanding that the employee will exercise an element of loyalty to their current company and will not sell on any trade secrets or unique methods of practice to competitors. They also include the demand for employers to ensure that all of their workers undertake their duties within a safe working environment and receive comprehensive relevant training if they are required to operate any advanced equipment or machinery. Within an implied contract, it is also expected that you, as the employer, should give clear and reasonable instruction to your employees. This means you should not expect them to undertake any work they are not trained for, or that may be illegal. As the employer, any type of agreement will include the clause that your employees must be paid for their work, and must always be given the amount of work that you have agreed upon. All of these matters are fair, of course, and cannot be negotiated or overruled by other documentation you may later decide to produce. However, relying entirely on an implied contract can result in some grey areas rearing their heads. If any specific problems arise while you and your employees are bound only by an implied contract, they can often be resolved by researching other similar instances experienced by the employees and managers of other companies and taking note of their outcomes. This approach can sometimes prove problematic for the management of your company, as even if the only precedent that has been set for these matters has seen the result dramatically favouring the employee and disadvantaging the employer, you may be left with no choice but to do the same – since there has been no written specification otherwise on your part. Another problematic issue inherent in working without a firm written contract is that of the “Chinese whispers” effect – if the factors affecting your employees’ work or the level of workplace benefits they can receive is not written down in one clear and universally accessible document, it’s always possible for rumours to begin to circulate surrounding what team members can or can’t do and what they are or are not entitled to. The easiest way to avoid confusion and avoid conflicting information being spread by different groups of employees is simply to record all the hard facts and figures surrounding their work within in a legally binding document that has been agreed to and can be accessed by all the individuals it may affect.
Why Not Just Stick to an Implied Contract?
If you draft a full written contract, you will be able to control many more factors of your employee’s work. You can specify notice periods, for example – something that does not come under the terms of an implied or verbal agreement. The minimum legal notice required by law is just one week, so if you haven’t specified a greater amount of time within a written statement, you may end up being left high and dry if an employee without a full official contract decides to resign their position.
While you are bound to pay at least the national minimum wage when working on the basis of an implied contract, with a firm written document you are able to specify exact wages or salaries including overtime rates, bonuses and other benefits. You can also tie down the number of hours your employees will be expected to work so that there is no potential for them to exceed their allotted time and incur more costs for you in terms of the wages you are legally obliged to pay for the extra hours. Employers are usually required to adhere to the legal limit that is applied to the time their team spends working, though employees are able to sign a waiver allowing them to work beyond this limit. You can also firm up rules surrounding holiday entitlement and holiday pay, sick leave, maternity leave, garden leave, redundancy pay and notice for both dismissal and resignation – factors that can often prove to be a point of contention within employment if there is no clarity.
While it is particularly helpful to have all of this information to hand in an easy-to-locate document, such as a contract of employment, the individual elements of an express contract may be discovered by an employee by searching through other employment documents such as the original job advertisement, letters or emails exchanged between yourself or your management team and the employee prior to them starting work, any documents the employee has been required to sign in the early stages of their work or during the phase running up to that time, any instructions or notices you have sent to them or displayed in the workplace, their payslips, any manuals or handbooks referring to the role or the general rules of the workplace, or any other written statement that features information about employment terms and conditions within that particular role. For this reason, you need to ensure that you are careful with the wording of the communications you send to any prospective or new employees if you have not provided them with an official contract, as any number of them could be used as legally binding documentation instead.
What is Best for Me and My Company?
Within the professional experience of the team at Prosperity Law, it is always better to have a carefully constructed contract, approved by all affected parties and both shared with employees and kept close to hand as a hard copy and in electronic form. Failure to provide a contract is very likely to set you apart from other employers in a negative sense, as most businesses provide full and comprehensive employment documentation and, in refusing to do so, you may give the impression that your organisation has something to hide or that you are likely to try and take advantage of your employees in some way. You may find that it’s more difficult to gain the trust of more discerning employees for this reason as well. Creating a contract also makes setting rules, regulations and parameters that much easier for you as an employer, and it is a great deal more difficult for those rules to be questioned, disregarded or forgotten about if they are written down within a document to which all members of staff have access. In providing a contract of employment, you are also covering yourself legally in case of any dispute – as you can provide evidence of your employees’ official rights and job specifications and prove that all workers at within your team have had access to these facts since the beginning of their time with the company. Overall, creating a contract seems to be the most safe, sensible and secure route to take for the benefit of yourself, your company and your employees – whether or not it is a mandatory legal requirement to do so.
I’ve Never Drawn up an Employment Contract Before – How Do I Get Started?
If this is your first time looking into creating an employment contract, it’s always highly advisable to go through everything with a legal advisor first. You may be confident of the elements you would like the document to cover, but an experienced lawyer or solicitor will be able to detect any loopholes or problematic wording and tweak everything to ensure it is watertight. They will also be able to advise you on factors you may not have thought of, and suggest additional clauses or points that will cover you in situations you might not be able to predict on your own, as well as clarifying things further for employees. If you decide to work with a legal advisor on creating your company’s official employment contract, it’s also highly advisable that you contact them whenever you consider making any changes to the document just to ensure that you are taking the right steps in doing so and that the edits you make do not compromise you or change the meaning of any other clauses within the contract.
So What Do I Do Next?
If you’d like to get started in creating a contract of employment for your company, all you need to do is get in touch with Prosperity Law today. Their team of experts all have very lengthy and comprehensive experience in practising commercial and corporate law, so they always take the time to understand their client’s needs and work hard to achieve all expectations in the most effective way possible. All of the company’s partners are proud of Prosperity Law’s achievements to date, and constantly strive to achieve the highest standards of performance across all their commercial legal specialities. They work with businesses, the public sector and individuals, using a straightforward and friendly approach. In terms of business based law practices, the company deals with issues such as commercial litigation, sales and acquisitions of businesses and properties and employment tribunals, dispute resolution, mediation and intellectual property. They can provide the expert help and advice you require to achieve your objectives.
Prosperity Law’s realistic charge-out rates and efficient, cost-effective handling of cases ensures that matters are concluded to their clients’ complete satisfaction. Their clients include blue-chip organisations, household name companies, and the public sector. They also pride themselves on their experience working on behalf of high net worth individuals and businesses, you can rest assured that you’ll be in very safe hands from beginning to end.
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