Employment Contracts and Written Statements

Employment Contracts and Written Statements are often confused. There is no legal obligation on an employer to give an employee a written contract of employment unless the employee is an apprentice (an apprenticeship is a distinct and protected status in law). There is however a legal obligation to give all employees a written statement within 2 months of the employee starting employment. This legal obligation arises when the employee has been employed for one month.

The employment contract is created when your employee agrees to work for you, even though there may be nothing in writing.

What does an employment contract consist of?

An employment contract is comprised of both ‘express’ and ‘implied’ terms.

  • An express term is something you have agreed with your employee, for example, an hourly rate of pay. Some may be agreed verbally and others may be agreed and then confirmed in writing.
  • An implied term is something you and your employee have not discussed or agreed or even thought about but is implied by law to exist as a term in the employment contract. For example, in every employment contract there is an implied term which is called ‘mutual trust and confidence’. This just means that it is implied in the employment contract that the employer and employee will act behave fairly towards each other.

An employment contract will usually have a combination of express and implied terms.

How should the contract be worded?

An employment contract is like any other contract between two parties; once agreed, the contract can only be changed if both parties agree to the change. Otherwise, the party changing the contract will be in breach of contract.

If an employer is in breach of an employment contract the employee could claim compensation, or, assuming they qualify to claim unfair dismissal, resign and claim ‘constructive’ dismissal.

Because an employment contract can only be changed if an employee agrees the employer should try and ensure that the employment contract is worded to be as flexible as possible so that, within reason, the employer can require the employee to be flexible. For example, if an employment contract says that the employee’s place of work is in Sheffield it would be potentially a breach of the employee’s contract of employment to require the employee to work in Doncaster, unless the paragraph in the employment contract regarding the place of work said something like “… your normal place of work is at our office in Sheffield but you may be required to work within a reasonable distance of your normal place of work “. Of course, there might be an argument as to whether Doncaster was within a reasonable distance of Sheffield. What is reasonable in one set of circumstances might not be reasonable in another.

What’s the difference between employment contracts and written statements?

The essential difference between an employment contract and a written statement is that an employment contract came into existence, even though it may not be in writing, the minute the employee agreed to work for the employer.

The written statement has to be given to the employee within their first 2 months of employment, and is merely evidence of what the contractual terms of the employment probably are.

When there is uncertainty in the terms and conditions of employment, as a general rule, an employment tribunal or a court will give judgement in favour of the employee, on the basis that the onus should be on the employer to make sure that the employee’s terms and conditions of employment are clear and unambiguous.

Therefore, the essential difference is that an employment contract is a contract whereas a written statement is merely evidence pointing to a term in the contract.

Because a court or an employment tribunal will probably find in favour of an employee if there is a dispute as to an unclear term in the employment contract it follows that an employer should make sure that the employment contract is as clearly worded as possible and gives as much flexibility for change as possible.

What should the written statement cover?

What has to go in a written statement is laid down by law, that is to say, by s.1 of the Employment Rights Act 1996, as amended. The following information must be contained in a single written statement:

  • Names of employer and employee
  • Date employment and continuous employment started
  • Job location
  • Pay and whether it’s weekly, monthly etc
  • Working hours
  • Holiday entitlement
  • Job description / job title
  • Details of any collective agreement that directly affect the employee’s conditions of employment.

The following information can be provided in the single document or in another document such as a staff handbook:

  • Sick leave and pay entitlement
  • Pensions and pension schemes
  • Disciplinary and grievance procedures
  • Appeals procedure under the disciplinary and grievance procedures

The rules about the content of Written Statements is changing on 6 April 2020, see my post Section 1 Statements for more information.

What should the employment contract contain?

As a general rule, an employer should only put in an employment contract what it is strictly necessary to put in the employment contract either by law or from a contractual point of view. Usually, the matters that should go in an employment contract should be the same as has to go in a written statement. Everything else should go in another document which is deemed to be non-contractual such as an employee handbook.

As stated above, an employer should only put in an employment contract what it is necessary to put in an employment contract because of statute or from a contractual point of view, in order to have maximum flexibility in the contractual relationship of employer and employee.

An employee handbook should contain ‘work rules’ for the efficient day to day running of the business. ‘Work rules’ should not be expressed as – or considered to be – contractual, but simply rules with which the employee must comply. Providing the ‘work rules’ are reasonable and the employer imposes the work rules in a reasonable way, the employer can change the work rules in the general interests of the business and after due consultation with employees even though the employee might not be happy with the change.

Thus, as an employer; only put in the employment contract what you have to put in the employment contract and put everything else in the employee handbook.

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Employment Contracts and Written Statements