What should be included in a contract of employment?

If you employ staff you need employment contracts. It just makes the whole staff management process much easier for you and your workers, because you know where you stand and so do they. Without a contract in place you’re opening yourself up to all sorts of problems - whether that’s a dispute over pay or an issue with holiday hours.

Why is a contract of employment important?

A contract of employment is a two-way document between you and each staff member you employ. It protects you and reduces the risk of legal action, and it regulates your employees’ behaviour in the workplace.

For staff, it offers peace of mind and security. If they have negotiated better terms for themselves, they’ll want them in their contract to make sure they get them.

A well-drafted document means all parties know where they stand and can help avoid disputes at a later stage.

Terms of an employment contract

Any employment contract will contain express terms and implied terms.

Express terms are ones which are actually stated in writing or verbally. They are explicit. They will meet any legal requirements such as the right to breaks, holiday, maternity or sickness entitlement. They are not limited to the employment contract but can include other documents such as your staff handbook.

Implied terms, or psychological contract, are ones which aren’t written down in the contract, but are implicit in it such as a term incorporated by statute or so obvious that it is assumed to have been impliedly agreed, e.g. an employer’s duty to provide a safe and comfortable place of work or the right to receive at least the minimum wage.

Written statement of particulars

Every employee who has been with you for at least a month must be given a written statement of terms. It’s not a contract of employment but can give a good indication of terms and can be incorporated into a contract at a later date. It should include:

Names of the employer and employee
Date employment commenced
Date continuous employment began
Amount employee is to be paid and when
Place and hours of work
Holiday entitlement
Notice period employee needs to give to terminate employment
Statutory sick pay and what to do if an employee can’t work
Job title and description
Details of any pension scheme entitlement
Any collective agreements which may affect terms of the employment

Additional clauses

As an employer you may include other terms depending on your business such as non-compete clauses in the event the employee leaves or terms relating to bonuses, pay increases and promotions.

Other things you might choose to include cover accepting gifts or benefits, corporate entertainment, dress code if you have a uniform, intellectual property rights, relationships in the workplace, office conduct and restrictions on second jobs.

Can you change a contract of employment?

You can vary the terms of your employees’ contracts but you should do so with caution. It also normally requires the consent of the employee.

You can agree the changes with the employee after consultation – you can offer an incentive to get them to accept the changes.

You can make changes unilaterally but this can be risky, because your employee could bring an action for breach of contract if it is something they disagree with. An employee might also resign and then bring a case of constructive dismissal.

You could terminate the existing contract by notice and offer them re-engagement based on the new contract terms. However, this could be considered as redundancy dismissal and you’ll need to follow rules around consultation periods for redundancy. You also need to offer them re-engagement immediately. Even then, an employee could potentially still bring a constructive dismissal case.