Employment Contracts – All You Need To Know

July 8, 2019

Employment Contract

Employment contracts clearly set out the rights and responsibilities between businesses and employees. An employment contract is also known as a Statement of Written Particulars .

Traditional Employment Contracts

Also referred to as Full or Part Time Contracts, traditional contracts are the most common type of employment contract. They are usually offered for permanent positions. The weekly hours and expected working patterns should be clearly stated. Full-time hours vary between businesses but tend to be 37 hours per week or above.

Employees on part-time contracts work fewer hours per week than if employed full time. There is no specific number of hours that make an employee full or part-time. However, the Gov.UK website states

a full-time worker will usually work 35 hours or more a week

Terms and conditions for part-time employees are offered on a pro rata basis.

The hourly rate should be clearly shown. When quoting annual salaries, make clear if this has been calculated based on full time equivalent hours or actual hours if part time.

Traditional contracts generally refer to work over a full year of 52 weeks.

Fixed Term Employment Contracts

Fixed term contracts are also referred to as temporary contracts. They can last for a pre-agreed period, or for the duration of specific tasks or projects.

Fixed term contracts are commonly used for substantive postholders, e.g. for maternity, long term absence or secondments. They are also used when roles are only funded for a specific time, or for seasonal work.

Fixed term contracts are offered when employment is expected to be temporary. They can be extended in line with business need.

Employees on fixed term contracts have full employment rights.

Zero Hour / Casual Contracts

Zero-hour contracts are used when the business need greater flexibility. Weekly or monthly hours can vary considerably, and there may be times where no work is offered.

Subject to contract terms, people on zero hour or casual contracts may have full employment status. Alternatively, they can be classed as workers, with reduced employment rights.

Businesses don’t have to provide fixed hours, and employees don’t have to accept any hours offered. Employees on Zero hours contracts may be looking for other roles, or have their main job elsewhere. Legally, the contract must allow them to do this.

Flexible Employment Contracts

Flexible contracts provide employment status and greater commitment and security than zero hour or casual contracts. They are used when work is regularly needed, but where there are times of the year where more, or less, hours are needed. Or when work is not required over the full year.

Flexible contracts are commonly used in child care, teaching, hospitality or leisure.

A business plans the amount of work needed across the year and pays employees in 12 equal monthly installments. This provides regular financial control for both employer and employee. The actual hours worked each month vary.

It’s important to have good administrative systems to record the actual hours worked. Regular monitoring is also needed to ensure a neutral balance at the end of the year

Contractors

An external contract, also known as outsourcing or a service level agreement, can be offered for certain positions.

People on external contracts are generally considered self-employed or freelance. Employment status does not apply.

Contractors must meet HMRC rules to be classed as self-employed and will need to show they work for multiple companies.

Why provide an employment contract?

Advantages of employment contracts

  • You meet your legal obligations!
  • Employment contracts ensure a mutual understanding of obligations
  • Employers have more control over how employees work.
  • Contracts can be referred to if a future dispute arises over the employment terms.
  • It can create a positive relationship between employer and employee.
  • It provides a sense of stability and security for the employee.

Disadvantages of employment contracts

  • A contract is two way so an employer has obligations to fulfil as well.
  • Contracts can limit the flexibility of the working arrangement
  • Poorly written contracts can lead to problems or lack of control if terms are missing, vague, rigid or make promises that aren’t kept!

Can I make changes to an Employment Contract?

Changes can be made to employment contracts, but the following points need to be considered:

  • Employers should consult with their employees over changes to contracts and act reasonably.
  • Changes should ideally be agreed between the business and employee before being implemented
  • Changes can be agreed individually or collectively
  • Employers must give written notification of any changes. Notification can be by a variation to contract letter, or by issuing an updated contract

Employers can enforce contractual changes which are genuinely necessary for the business.

However, enforced changes could result in unhappy or unproductive staff, grievances, or tribunal claims for constructive dismissal. Employers should follow a fair process, ensuring employees understand why any changes are necessary. Acting reasonably is critical to success!

Can I end an employment contract?

Yes, this is known as a termination.

Both employees or employers can decide to end an employment contract.

Employees can end a contract by handing in a resignation letter, generally providing their contractual notice.

Employers can terminate employment contracts by dismissing an employee.

When dismissing an employee, employers must meet their statutory obligations. They should act reasonably. This should include appropriate fact-finding and following a fair process. Where relevant, employees should have the right to be accompanied to meetings. The correct notice should be provided. Where relevant, a right of appeal should be given.

Fixed term and temporary contracts will automatically end. When ending fixed-term contracts, notice should be given to employees that the contract will not be extended.

Fixed term / temporary contract terminations are classed as redundancy in employment law. Redundancy payments will apply to contracts of 2 years or more.

Whether notice is required to terminate a zero hour or casual contract will depend on contractual terms. If employment status applies a fair process will need to be followed.

Do I have to provide an employment contract?

Having something in writing can make it easier to understand what your contractual obligations and rights are.

If there is no other contract, statutory employment laws will apply

Statutory laws are weighted in favour of the employee, not the employer.

In the event of a dispute, a court will decide what the employment terms are by looking at other employment documents. These documents may include the offer letter or job advert. A court will also consider what has actually happened in practice. This is referred to as custom and practice.

Employment contracts are designed to ensure both employers and employees are legally protected.

A few final points to remember:

Contracts should be regularly updated and relevant to your business needs.

Ensure the wording and terminology is clear. Don’t be vague or over wordy.

Ensure contractual terms are consistent with the employee’s role within your business.

If you would like advice to ensure your employment contracts are right for your business contact Concilium HR today on 07885 370054 or email debbie@concilium-hr.co.uk

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