Employment Contracts

by Kate Russell

Terms and conditions of employment

The law places a number of obligations on and has created a number of rights for both employers and employees.

Note

Even if nothing has been put into writing, it is quite possible to have a valid and binding employment contract.

Contracts of employment

The relationship between employer and employee is governed by a contract of employment.

As a contract of employment is a type of contract, it must meet the formal requirements that apply to all legally-binding contracts. An employment contract can arise from a variety of sources. These will commonly be a variety of documents and statements, including verbal statements.

Employers must give employees a written statement of the main particulars of employment (terms and conditions of employment) within two months of the beginning of the employment. The statement should include details of pay, hours, holidays, notice period and disciplinary and grievance procedures. While two months may be the limit, it is obvious good sense and good practice to have this prepared as soon as possible.

If you fail to provide an employee with a set of written terms of employment, or a complete or accurate statement or notification of a change to the written statement, the employee can complain to tribunal. The tribunal will award minimum compensation of two weeks’ pay (based on the statutory cap used in the calculation of redundancy at that time) and may increase it to four weeks if it considers it just and equitable to do so.

What must be included in the written statement?

The written particulars should include the following:

  • Names of the parties to the contract
  • Dates
  • Pay
  • Hours
  • Holidays
  • Job title
  • Place of work
  • Sick pay rules
  • Pensions
  • Notice
  • Collective agreements
  • Working abroad.

The written particulars must also include, or include reference to, the discipline and grievance procedures.

You can include additional matters in your written particulars, for example, dress code standards or internet and email procedures.

For a sample statement, see Written statement template.

Terms

Certain terms in the written statement have to be included to comply with the requirements of the Employment Rights Act 1996. These are known as express terms and deal with matters such as pay, holidays and hours of work.

However, 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. For example, an employee is under a duty to give personal service and both employer and employee are under a duty to behave reasonably.

In some cases the implied term can regulate the express term.

Example

In the following case, there was an express mobility clause in the contract allowing the bank to move employees anywhere in the UK. A was asked to move from Leeds to the Birmingham branch. The bank gave him six days in which to effect the move.

While A accepted this mobility clause as an express term of his contract, he asked for three months’ notice to move this time, as he had to sell his house and his wife was ill. The bank refused his request and insisted on only one week’s notice. In doing so they infringed his implied right to reasonable treatment. A resigned, successfully claiming constructive unfair dismissal on the grounds that in requiring him to make such a move in six days the bank was behaving wholly unreasonably and was therefore in breach of its implied duty to behave reasonably.

Terms may also be incorporated into the contract by reference to other documents: for example, collective agreements between an employer and a recognised trade union.

Employer and employee are generally free to agree terms and conditions of employment and these expressly-agreed terms will usually prevail unless the law intervenes to override or vary contradictory terms. For example, if the National Minimum Wage rate changes and as a result an employee’s hourly rate falls below that specified by Parliament, the statute will have the effect of implying the new National Minimum Wage rate into the employee’s individual contract.