Blog » Contracts of employment – what you need to know

Contracts of employment – what you need to know

1st October 2019

This month we’ve teamed up with the CIPD to answer some of your questions around employment contracts. Here’s what you need to know about contracts of employment.

What is the main purpose of a contract of employment and why is it necessary?

A contract of employment is a legally binding agreement between an employer and an employee. Anyone who is classed as an employee and who is employed for one month or more has the right to a written statement of employment particulars that should set out most of the employee’s terms and conditions as part of the contract.

Contracts are important because they give clear information about the job to both the employer and the employee, ensuring that there are no misunderstandings on either side.

Does a contract have to be written?

While most contracts are in writing, a contract can also be verbal. An employment contract begins once the employee has accepted the job, whether the contract was written or verbal.

Verbal contracts have the same legal authority as written contracts, but the CIPD advises all employers to provide written contracts to ensure that both employer and employee are clear on the terms of employment. 

Where the contract has been verbal, and the employee has started work, a statement with written particulars of employment should be provided within two months of the start of employment.

What should be included in a contract of employment? 

Employment contracts should be tailored to your organisation, but the key information should include:

  • A job title and a brief description of the role
  • Details of pay, timing and method of payment
  • Normal working hours
  • Place of work
  • Holiday entitlement and holiday pay
  • Access to in-work benefits such as sick pay
  • Start date and notice period

Within two months employers should also provide other details including terms and conditions relating to incapacity for work due to sickness or injury, sick pay provision and pension scheme arrangements.

template for a written statement of employment particulars is available on the Acas website.

Can you write your own employment contract? 

There’s lots of support online to help employers to write their own contracts, and most templates can be customised to reflect your policies and practices. It would be wise to share any contract with an HR specialist or employment lawyer before issuing it to make sure that you’ve covered everything and are compliant within the fast-moving world of employment law.

What is a valid contract?

A contract does not have to be signed to be valid. Once the applicant has accepted the job, there is a legally binding contract of employment between the employer and the applicant, and in the case of a written contract, the contract is valid whether or not it has been signed.

Are contracts of employment a legal requirement?

While the CIPD would advise all employers to provide written contracts, and most employers do provide them, it’s not compulsory to provide one before the employee starts their job.

Certain particulars do have to be put into writing within two months of the start of the contract in a ‘written statement of employment particulars’ which advises the employee of the more important aspects of the terms of employment. 

Small companies should be aware that they are under the same obligation to provide a written statement.

What about zero-hours contracts?

There has been a lot in the press about zero-hours contracts, which are generally contracts where there is no set minimum number of hours, with employees only working as and when they are needed, and there is no obligation for employers to offer any hours of work.

Used responsibly, zero-hours contracts can provide flexibility that works for both employers and individuals. 

The CIPD recommends that employers should ensure that there are comparable rates of pay for people doing the same job, regardless of differences in their employee status. Sick pay is often not included, though holiday pay should be included because of the Working Time regulations.

The employment status of people working on a zero-hours contract can vary but many are ‘employees’, which means that these individuals are also legally entitled to receive a written statement of employment particulars from one month of employment.

Employers who use zero-hours contracts should be aware of the changes to the law as in the future, employers who engage staff without guaranteeing them work may need to use more permanent arrangements to avoid the new zero-hours contract rules. 

Find out more on the CIPD website.

What’s happening next month?

Next month’s topic is all about bonuses and incentives. Do you want to know how they can benefit your business? How they benefit employees? Or maybe you’d like to know how to design an effective bonus and incentive scheme? We’re here to answer all your questions.

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