Being an employer comes with all kinds of tasks and responsibilities that likely never entered your head when you started your business.
Contracts and statements of employment are one of the first administrative hurdles you’ll encounter. Clarity on expectations, behaviours, and other important definitions protect all parties, keep you on the right side of the law, and define the terms of your relationship with your new employee.
Lots of small businesses will be tempted to use one of the many template contracts that can be found online. But this is a task where the devil really is in the detail – a contract is a legally binding document. It must account for the unique factors associated with your business, which the quick and easy template solution is unlikely to cover.
There are a ton of rules and regulations that must be adhered to and mistakes or omissions can leave you open to all kinds of headaches further down the line, so we would always recommend talking to an expert adviser like Citrus HR.
This can get complicated, so first let’s try and be clear on precisely what we’re talking about.
Employment contract or statement of employment?
If you’ve spent any time researching this, you’ll know that a statement of employment and an employment contract are not the same, although they do variously similar jobs and are often referred to interchangeably (and confusingly).
A statement of employment, also called a written statement of particulars, is a document that employers must provide to employees. There are clear rules on what must be included as a minimum to cover the basic terms and conditions of the relationship between employee and employer.
Do I need to issue a statement of employment?
In short, yes. Since 2020, you are required to give employees – that’s anyone who works for you for longer than one month, including agency workers – a principle written statement of employment by the end of their first day (it used to be within two months of their start date).
An employment contract is a legally binding agreement between an employer and an employee. It outlines in detail the terms and conditions of the employment relationship, including the rights, responsibilities, and obligations of both parties.
Do I need to issue an employment contract?
This is where it gets a bit confusing. There’s no legal requirement for you to issue a written employment contract, but if you’ve offered them a job and they’ve accepted it, you’ve already entered into an agreement. They’ll turn up and you’ll expect them to work. They’ll reasonably expect to be paid for this work. This may be a verbal agreement or even implied, but it’s legally binding all the same.
So, while it’s not legally required, we strongly recommended consulting an expert adviser to create a compliant, comprehensive, written contract to avoid any misunderstandings. Also, providing it’s issued before the end of their first day, this can serve as the written statement – ensuring your obligations are met and killing two birds with one stone.
The law is the law
Failure to provide a written statement on the first working day is a compliance breach. But it’s highly unlikely you’ll be fined for this on its own, so we advise that you take steps to correct the mistake ASAP. Otherwise, in the event that the employee takes you to a tribunal for any other reason – say, discrimination or unfair dismissal – the failure to issue a statement of employment will count against you and likely result in an increased compensation or a higher financial award against you the event that you lose.
It makes no difference to employee rights either way. They have the same protections. For instance, the law says they’ll accrue annual leave with or without a written contract. In fact, those rights remain even if the contract says otherwise. You can’t make an employee sign them away by, say, agreeing that they won’t be paid when they are off sick, because when it comes to a dispute, the contract will be non-compliant, the legal statutory minimums will always apply, and you’ll get short shrift from the authorities.
Top employment contract blunders:
Not protecting your business: The legally binding agreement of an employment contract protects both you and your employee. In the absence of written terms that specifically refer to the unique nature of your business, the conditions of your relationship may be open to interpretation, which is no help whatsoever in the event of a disagreement.
The obvious things, like not stealing from you, are covered by implication. But without clarity, you may find it difficult to enforce terms around less clear-cut issues like confidentiality, gardening leave, or post-employment restrictions. How will you stop former employees sneakily approaching your clients if you don’t have non-solicitation or non-dealership restrictions? Without clear definitions, enforcement becomes extremely difficult and your position will be weakened if it escalates to the point of legal dispute.
Different job offer and employment contract terms: You’d be shocked at how often the terms in a new starter’s offer letter are contradicted by what they subsequently read in their contract. This is a terrible way to start, confusing and disappointing your new hire, and can often destroy trust and sink the relationship before it ever gets going. Talent isn’t cheap or easy to find, so not many small businesses can afford to sully their reputation as an employer in this way.
Updating contracts without telling employees: Contracts will always need to be updated for legal compliance reasons, that’s fine. But sometimes it’s because the nature of your business shifts, or because in individual’s needs change. In this instance, changes must be fully understood and approved by both the employer and the employee before the contract is changed.
Non-compliance: Staying compliant on employment law – which is notorious for frequently changing – can feel like a full-time job, but it’s imperative that your employment contracts reflect current legislative rules on issues like minimum wage, notice periods, and other statutory entitlements. We would always advise our clients to seek out a specialist to help you stay on top of regular changes and avoid expensive tribunal claims by ensuring your contracts stay on the right side of the la