Contracts of Employment for Small Businesses
Good employment relationships begin with legally compliant well-drafted Contracts of Employment
Which type of Contract of Employment is the right one?
All employees and workers are legally entitled to be provided with a 'statement of their employment terms and conditions' on or before their first day at work.
A Contract of Employment sets out the full terms and conditions, rights and responsibilities of the employer and employee in detail. This provides better protection for the employer and provides the employee with clarity on the terms of their employment.
A key factor is to decide on the employment 'status' of the individual. Are they an employee, a worker, or are they truly self-employed. The correct terms must be applied....
An employee has to perform the work you want them to do personally and they can only be absent from work for occasions such as sickness absence, maternity or adoption leave.
An employee has full employment rights.
A worker is offered work which they can refuse but having accepted it they again have to perform the work personally.
A worker has more limited employment rights.
Both an employee and worker accrue statutory holiday and must be paid National Minimum wage or Living wage.
A self-employed contractor has no employment rights so is not entitled to things like holiday pay or statutory sick pay and is responsible for paying their own tax and national insurance.
An important element to deciding self employed status is that they can provide a substitute to do the work for them.
Yet more paperwork... let's just shake hands on it.
Issuing a written Contract of Employment to an employee may seem like tedious paperwork and an unnecessary piece of admin that's just not worth the time.
That is, until the full extent of their importance becomes clear to you when something goes wrong later on in the employment relationship.
You may feel that a verbal agreement with an employee saves time. However, it can also cause all sorts of problems for you should problems arise later in the employment. An apparently trivial misunderstanding can quickly escalate into a full-blown tribunal. Tribunals invariably are very costly for employers - even if you win!
Therefore, it is wise to prepare a well-drafted, legally compliant Contract of Employment prior to an employee’s start date to reduce any misunderstanding before they begin work
What should a Contract of Employment contain?
Employment and worker contracts must contain all the information prescribed by the 'Employment Rights Act 1996' (which was updated in April 2020).
Contracts of Employment typically include: the business name, start date, details of the work, conditions of pay, hours of work (and if the hours are variable), holiday entitlement, sick pay, probation period, notice period, pension entitlement, and any mandatory training.
Employers must also have written Disciplinary and Grievance Procedures (and give the employee or worker details of these within two months of their start date). These are commonly contained in a Contract of Employment, but may also be separate documents to which Contracts of Employment refer to.
An important consideration to make is notice periods. If the employee is key to your business or hard to replace you may want them to give a longer notice period.
You may also wish to include things that can protect your small business from harm such as IT, data security, privacy and social media use, as well as terms that cover confidential information, or 'Restrictive Convenants' (which, for example, could prohibit an employee from competing with you for a certain period after the employee has left your business). A well-drafted Restrictive Covenant in a Contract of Employment can afford you this type of protection.
It is critically important to remember that a Contract of Employment needs to be compliant with UK law.
Because of the serious legal risks, it is highly inadvisable to attempt to create employment contracts yourself.
Getting your Contracts of Employment right (first time)
Giving employees or workers 'bad' contracts is just as risky as staffing your business with no Contracts of Employment at all.
A Contract of Employment is legally binding, but only if it has been drafted correctly. So, whilst writing a contract yourself, or downloading a Contract of Employment template from the internet might look like it will do the job, it won’t necessarily work for your small business or provide you with the relevant legal protection.
Add to the mix a variety of working hours and shift patterns, which is commonplace with today’s approach to flexible working, and you potentially have an entire workforce without the right contracts of employment. Dodging that minor paperwork pain can quickly become a major employment nightmare.
It is also important to note that template contracts can be out of date and not reflect the most recent legislative changes or case law. But how would you know? Are you confident about the employment status of your new recruit, are they a worker or an employee? Their rights are different.
We can put together all your Contracts of Employment, so you can be confident they are legally compliant and your small business isn’t exposed to unnecessary risks, as you grow your workforce.
If you're a small business in Denbighshire, Flintshire, Conwy, Isle of Anglesey, Wrexham, Gwynedd, Conwy, or Powys- we can help you.
Are you looking for other HR Services?
Our HR Services for small businesses in North Wales support our clients to succeed.
The HR Essentials Toolkit For Small Businesses
All The HR Essentials You Need
With this comprehensive package of bespoke HR documents, you can employ staff with confidence, knowing that all the key legal essentials are covered.
Inside, you'll find everything you need to establish strong HR Operations, including an offer letter template, contract of employment, and an Employee Handbook of essential policies covering key topics like employee code of conduct, disciplinary, grievance, confidentiality, annual leave, sickness absence, equal opportunities, harassment, whistleblowing, and more.
Get expert help with your small business HR today
If you’re about to hire your first employee or would like to review your current contracts of employment, we can help. Contact us today for peace of mind, knowing that your small business's contracts of employment are on the right side of employment law.
WHAT PEOPLE SAY...
"Luke quickly implemented new employment contracts and policies into this business that enabled us to comply with employment law."
DENNIS BEHENNA | MD | DMB CONSTRUCTION LTD