Employment Contracts

Taking on employees can be a daunting prospect. There are a wide range of statutes and regulations to comply with dealing with everything from holiday entitlement and maternity pay to how many hours employees are allowed to work per week.

Failing to take advice at the outset can often be a costly mistake. The next three guides will walk you through the basic issues that you may come across when becoming an employer.

Before taking anyone on you should establish whether they are to be an employee or self employed. This status is not always easy to define but the rules that apply can be quite different. If you are unsure about the status of anyone carrying out work for you then you should seek expert advice.

This guidance only applies to employees.

Many small employers do not wish to use long complicated employment contracts and are happy to have people work for them on a ‘cash in hand’ basis.  Unfortunately there are a number of things wrong with this, not just the fact that all income should be declared to HMRC! The law states that when someone is employed, certain details must be written down and given to the employee within 2 months of the employment commencing. Some of this information must be provided in a single principle statement. This information is:

  • Names of the employer and employee

This may seem obvious but if you are working for a partnership then you will be employed by the individuals and if you are working for a company then your contract is likely to be with the company itself.

  • The date the employment starts and the date the employee’s period of continuous employment began

The date the employment began or is to begin. This is the date on which the employee starts employment and not the date on which the employment contract is signed.

The statement must also state whether any employment with a previous employer counts as part of the employee’s continuous period of employment and, if so, the date of commencement of that employment.

  • Pay (or method of calculating it) and frequency of payment 

The rate of remuneration or the method of calculating it must be stated as well as whether it will be paid weekly, monthly or at other specified intervals. Remuneration will include salary and other cash benefits, such as bonuses or commission payments.

  • Hours of work

The statement must give details of the employee’s hours of work and normal working hours. “Normal working hours” are the number of hours in a week, or other period, after which the employee is entitled to overtime pay.

  • Holiday entitlement and holiday pay

The statement must specify holiday entitlement, including public holidays and holiday pay.  There must be sufficient detail to allow a precise calculation of the employee’s entitlement, including any entitlement to accrued holiday pay on termination of employment.

  • Job title

The statement must include the title of the job which the employee is employed to do or a brief description of the work required.

  • Place of work

The place of work should be stated or, where the employee is required to work at various places, an indication of that fact and of the address of the employer

If the employee is or may be required to work outside the UK for more than one month, that must also be stated.

  • Whether there is a contracting-out certificate under the Pensions Schemes Act 1993

The principal statement should specify if a contracting-out certificate, for the purpose of the state second pension, is in force in relation to the employment.

  • Key information on disciplinary and grievance procedures

Details of who the employee can contact with any grievance relating to the employment and who to appeal to if he is dissatisfied with any disciplinary decision relating to him.

Other information must also be provided to the employee within the first two months but this can be in a separate document or can be contained in an employee’s handbook referred to in the statement

  • Terms related to work outside the UK for a period of more than one month
  • Terms as to length of temporary or fixed term work
  • Pensions
  • Collective agreements
  • Absence due to incapacity and sick pay
  • Notice periods for termination by either side
  • Further information on disciplinary and grievance procedures
  • Pensions

Helen Paull of Lindleys SolicitorsAbout the author: Helen Paull is a newly qualified solicitor at Lindleys specialising in company/commercial and commercial property matters.


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