Employment Contracts

by Kate Russell

In a nutshell

1. Employment status

Employees are people who have and are bound by a contract of employment. If you are an employer

  • You are bound by the terms of the contract of employment
  • You may be vicariously responsible for your employee’s actions
  • You must deduct income tax and National Insurance
  • You have various legal duties


2. Workers and self-employed staff

Employees work under a contract of service. Workers in the wider sense work under a contract for services. In certain circumstances, a contract of employment may come into being where the contract was originally a contract for services. Ultimately, only an employment tribunal or court can give a definitive answer, but you can ask yourself:

  • To what extent does the employer decide what tasks the worker does and how he does them?
  • To what extent is the worker part of the organisation?
  • To what extent is the employer is required to offer the worker work and to what extent is the worker is required to do it?
  • How much financial risk does the worker bear?

Agency staff are generally workers who have a contract of some sort – but not an employment contract – with the employment agency. The Agency Workers Regulations 2010 comes into force in October 2011 and gives agency workers improved rights.

Self-employed people are those engaged in running their own businesses and some of those who describe themselves as ‘self-employed’ may fall within the statutory definition of ‘worker’ and have a worker’s entitlements.


3. Terms and conditions of employment

The relationship between employer and employee is governed by a contract of employment (see written statement template).

  • It is quite possible to have a valid and binding employment contract even if nothing has been put into writing.
  • If you fail to provide an employee with a set of written terms of employment, plus a complete or accurate statement or notification of any change to the written statement, the employee can complain to tribunal.
  • Certain terms in the written statement have to be included to comply with the requirements of the Employment Rights Act 1996.
  • Other terms may exist – terms which are not written or even agreed, but are an understood part of the contractual arrangement. These are known as implied terms.


4. Variation of contract

There are several ways in which an existing contract may be varied.

  • Variation by mutual agreement
  • Variation by collective agreement
  • Variation by flexibility clause
  • Variation by statute
  • Variation by dismissal and re-engagement
  • Variation by custom and practice


5. A summary of rights in the workplace

Employees, workers and the genuinely self-employed all share certain basic rights: not to suffer from unlawful discrimination, to have equality of pay, to belong to a trade union and to enjoy a safe work environment.

  • Employees and workers have further rights not shared by the self-employed.
  • Employees have several rights to which workers are not entitled.


6. Rights available to employees on fixed-term contracts

Fixed-term employees have the same statutory rights as permanent employees.

  • There are not many cases in this area, but one employment tribunal ruling suggests that employers may have to ensure parity on a term-by-term basis.
  • Differences must be objectively justified.
  • To avoid possible future legal expenses, employers should review their policies with regard to fixed-term employees.
  • If you do not renew a fixed-term contract on termination, this does not automatically amount to a dismissal. However, if you do not renew a fixed-term contract for a discriminatory reason, then a non-renewal may be capable of being an unfair dismissal.


7. Employees – parental rights

Maternity rights include the following:

  • Time off for antenatal care
  • Maternity leave (52 weeks)
  • Statutory maternity pay (or Maternity Allowance paid by the DSS)

The legislation allows an employee on maternity leave, by agreement with you, to do up to ten days’ paid work – known as ‘Keeping in touch days’ – under her contract of employment during the maternity leave period, without bringing the maternity leave and pay to an end.

Paternity rights include

  • Paternity leave of one or two weeks
  • Statutory paternity pay
  • Eligible fathers whose children are due on or after 3 April 2011 will have the right to take up to six months’ additional paternity leave (APL).

Since 6 April 2003, adopters of children newly matched with them have the right to time off and pay, similar to maternity rights. The right to adoption leave is not available in circumstances where a child is not newly matched for adoption – for example, when a step-parent is adopting a partner’s children.

Parental leave is a right for parents to take time off work to look after a child or make arrangements for the child’s welfare. Parental leave can only be taken in blocks of one week; there is no right to take just one day.


8. Employees and their dependants

An employee has the right to reasonable time off work to deal with an emergency involving a dependant. This could be a partner, child, parent, other someone who depends on the employee, such as an elderly neighbour. The right arises

  • If a dependant falls ill, has an accident or has been assaulted
  • When a partner is having a baby
  • To deal with a hiccough in normal care arrangements
  • To deal with an incident during school time
  • To make arrangements for an ill or injured dependant
  • To deal with the death of a dependant.

The right exists for unforeseen circumstances and employees should tell their employers the reason for their absence and how long they expect to be away from work as soon as practicable.


9. Employees and flexible working

Employees with six months’ service and a child under 17 (from April 2011 a child aged under 18) or disabled child under 18 have the right to request that they work flexibly. They do not have the right to demand it. As an employer, you have a duty to consider the request. There is a set procedure to be followed. Failure to follow a set procedure or decline a request without providing a recognised business ground can lead to a claim.


10. Transfer of a Business or Undertaking (TUPE)

In April 2006, the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE 2006) came into force.

  • If either the new or the old employer dismisses an employee solely or mainly because of the transfer of an undertaking or part of it, the dismissal will be considered unfair.
  • The practical effects of the decision in the case of Gutridge v Sodexo (2009) are that claims for equal pay which have accumulated prior to a transfer under TUPE must be bought against the transferee within six months of the date of the transfer, otherwise they will be out of time.
  • Employees are transferred with all their contractual rights intact, and the transferee will have to take on all associated rights and liabilities (except for criminal liabilities and some liabilities in respect of occupational pension schemes).
  • If the new employer offers new terms that represent a fundamental breach of contract the employee can refuse to transfer and the outgoing employer will be liable for any breach of contract or unfair dismissal claim.


11. Termination of employment

You must give an employee at least one week’s notice after one month’s employment, two weeks after two years, three weeks after three years and so on up to 12 weeks after 12 years or more.

  • From October 2006, years worked before the age of 18 and after the age of 65 will be counted for the purposes of redundancy pay calculation.
  • Generally, employees must have at least one year’s continuous service in order to be able to make a complaint of unfair dismissal to an employment tribunal, unless the dismissal is captured by one of the statutory exceptions.


12. Rights of employees and workers

The Working Time Regulations 1998 have introduced a number of rights for both employees and workers:

  • Workers cannot be required to work for more than 48 hours a week on average.
  • Time spent ‘working, at his employer’s disposal and carrying out his activity or duties’ is working time.
  • Routine travel and rest breaks do not count as working time.
  • Young workers may not ordinarily work more than 8 hours a day or 40 hours a week.
  • Workers can agree to opt out of the 48-hour limit.
  • Young workers may not opt out of the limit.
  • The weekly hours of young workers may not be averaged.
  • The regulations define when ‘on call time’ counts as working time.
  • Night workers should not work more than eight hours daily on average, including overtime where it is part of a night worker’s normal hours of work.
  • A night worker cannot opt out of the night work limit.
  • Young workers should not ordinarily work at night, although there are certain exceptions.
  • Night workers are entitled to be offered a free health assessment before they start working nights and on a regular basis while they are working nights.


13. Formal disciplinary and grievance hearings

  • Workers and employees are entitled to be accompanied at formal disciplinary and grievance hearings by a fellow worker or a trade union official of their choice.
  • The general rule is that there is no right to be accompanied by a solicitor, family member, neighbour or friend from outside the business.
  • Workers have the right to take time off during working hours in order to accompany fellow workers who are employed by the same employer.
  • An employee does not have the right to be accompanied at an investigation meeting.


14. Part timers

The Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 ensures that part timers are treated no less favourably in their working conditions than comparable full timers, unless the less favourable treatment is justified on objective business grounds. Rights now include

  • Receiving the same rates of pay (including overtime pay), once they have worked more than the normal full-time hours
  • Not being treated less favourably for contractual sick pay or maternity pay purposes, or discriminated against over access to pension schemes or pension scheme benefits
  • Not being excluded from training simply because they work part time
  • Receiving holiday entitlement pro rata to that of comparable full timers
  • Having career break schemes, contractual maternity leave and parental leave made available to them in the same way as for full-time employees
  • Being treated no less favourably in the criteria for selection for redundancy.


15. Pensions

The Pensions Act 2008 provides that employers must auto-enrol all eligible employees not already participating in a workplace pension scheme into a qualifying pension scheme.


16. Statutory sick pay (SSP)

You must pay Statutory Sick Pay (SSP) to all eligible employees for periods of absence of four days or more for a total of 28 weeks in one period of incapacity for work.

  • You can make your own rules about when and how your employee should notify sickness for your own purposes but the SSP regulations do impose some restrictions.
  • Responsibility to stop paying SSP arises after 28 weeks or when an employee returns to work, leaves your employment, is in legal custody, is involved in a trade dispute with you or dies.


17. The Public Interest Disclosure Act 1998

The act provides protection for ‘whistle blowers’ – employees who are dismissed or victimised as a result of making a qualifying disclosure. The disclosure must, in the reasonable belief of the person making it, show that one of the following conditions applies

  • A criminal offence has been committed, is being committed or is likely to be committed
  • A person has failed, is failing or is likely to fail to comply with any legal obligation to which he is subject
  • A miscarriage of justice has occurred, is occurring or is likely to occur
  • The health and safety of the individual has been, is being or is likely to be endangered
  • The environment has been, is being or is likely to be endangered
  • Information tending to show any matter falling within one of the above has been, is being or is likely to be concealed.


18. Statutory rates

Some of the rates set by law:

  • Compensation limits
  • Parental payments
  • Sickness payments
  • National minimum wage