Due to the nature of an employment relationship it is rare that the original terms of the contract remain exactly the same throughout the relationship. When interpreting the terms and conditions it may be necessary to refer to various documents, such as offer letters, job advertisements and assess what happens in practice.
As many employers are aware, there is no legal requirement to provide a written contract of employment. A contract may be oral or in writing or a mixture of the two and the terms of a contract may be express (explicitly agreed between the parties) or implied (terms that are too obvious to mention or are developed through custom and practice).
When a dispute arises the starting point for interpreting the terms and conditions is usually the written contract of employment. However, custom and practice will often overrule what is written in the contract of employment.
Statement of terms of employment
Although there is no legal requirement to provide a written contract of employment, employers have a duty to provide employees with a written statement of the specified terms of employment under S.1 of the Employment Rights Act 1996 (ERA) within two months of starting employment.
This is not technically the same as a written contract of employment because it does not have to record all of the terms of employment, just the main ones.
The statement must include the following terms:
- the names of the employer and employee
- the date the employment began and the period of continuous employment
- job title or brief description of duties
- place of work, or if the employee is required or permitted to work at various locations, confirmation of this and employer’s address
- salary, payment dates and method of pay
- hours of work and details regarding normal working hours
- holiday entitlement and holiday pay and entitlement to accrued holiday pay on termination of employment
- rules regarding sickness absence reporting and sick pay
- notice period the employee is obliged to give and receive on termination of employment
- details of the disciplinary or grievance procedure or where to find them, i.e. employee handbook
- any collective agreements.
There is no freestanding right to compensation for failure to provide a S.1 statement. An employee will only receive compensation for breach of this right to receive a S.1 statement when they have a separate successful substantive claim such as unfair dismissal, unlawful deduction of wages, discrimination or breach of contract.
Advantages of a written contract of employment
Some employers believe that not committing anything to writing gives them more flexibility however this is incorrect as the lack of a written contract causes uncertainty over the terms of the contract. Employees will have employment rights regardless of whether or not they are provided with an employment contract, however, provision of a contract of employment makes it clear what is expected of employees and what they are entitled to.
A written contract of employment noting the current terms provides certainty and helps prevent or resolve disputes as both parties are able to identify specific terms of the agreement.
When a contract of employment has not been provided the default position will be that statutory employment provisions will apply. For example, if an employee has not been provided with a contract of employment with a specific clause about how much notice they should provide on termination, the employee (when they have been employed for one month or more) will only be obliged to provide the legal minimum requirement which is one week.
In the event of a dispute, tribunals will treat the S.1 statement or contract of employment as strong evidence of what was agreed. Therefore, it is in the employer’s interests to provide a written contract of employment to support their version of the working arrangement.
The benefits of a well drafted contract of employment are that:
- it allows employers to have a greater degree of control over employees, i.e. in relation to the expected standards of performance
- it provides a greater degree of protection for business interests, i.e. employer can insert confidentiality provisions that prevent an employee from disclosing information or using confidential information for personal gain, or a restrictive covenant preventing an employee from competing against the company for a reasonable amount of time after they leave the company. Such clauses do however require to be written with precise terms otherwise they will be difficult to enforce
- it provides an employer with a greater degree of flexibility to vary the terms of the contract. An employer does not have an automatic right to vary the terms and conditions of a contract and the extent to which they can alter working arrangements will be based on what the terms of the contract state. Flexibility may be built into the contract regarding changing terms such as place of work and entitlement to bonus schemes
- it can impose more extensive obligations on employees as opposed to statutory law, for example the contract could require an employee to give enough notice for the company to find a replacement. The contract could also include a provision for payment in lieu of notice, without this clause an employer would not be able to enforce this provision.
It is recommended that employers provide written contracts of employment with precise terms to minimise the risk of a dispute regarding the terms and conditions. Provision of a written contract of employment will also comply with the legal obligation to provide a written statement of particulars.
Employees should sign and date the contract of employment and return it with a copy kept for safekeeping by the company and a copy provided to employees as well. It is also a good idea for any contractual changes to be documented and signed by employees. Such documents reflecting the contractual changes should then be attached to the original contract of employment.
If you would like assistance on drafting or revising contracts please get in touch with our employment team who would be happy to help.
