The Importance of Employment Contracts: Everything Employers Need to Know

If you have staff, then no matter what size of employer you are, you need to be thinking about employment contracts. Or contracts of employment. Or a statement of terms and conditions. Or a Section 1 statement. Confusingly, many different terms might be used but fundamentally we are talking about the terms of the contract that you have in place between you, the employer (whether you are a sole trader, a partnership, a limited company or a charity for example), and your employee/s. Whether you are just starting out or have been established since 1799 as Hibberts has, the importance of your employment contracts cannot be overstated.

Why and what do employers need to know about them? Well, firstly they are a legal requirement. It is now a so-called ‘day one’ right of an employee to be given a contract of employment that complies with the minimum terms set out in Section 1 of the Employment Rights Act 1996 legislation and they must receive this document either on or prior to their first day. 

Failure to provide a compliant employment contract can land an employer in hot water leading to both bad press and a financial penalty. Not to mention you setting off on the wrong foot in this new relationship with your employee. It pays to have an employment contract at the top of your list of priorities as an employer.

So, employers need to know that they should have employment contracts in place. This is something that can be done relatively quickly and for a reasonable price. Even if you do have a contract of employment, when was it last reviewed? Employment law is constantly changing and it is important that both your employment contracts and your employment policies are reviewed regularly to ensure they are up-to-date. At Hibberts we think that is just one part of the battle though; as well as being up to date with legislation do they actually reflect what you as a business want them to? Do they look and sound how you want them to? Or are they just off-the-shelf documents that you started using years ago and have never really looked at again?

A well-drafted and clear contract of employment is essential to set out what the rights and obligations of both parties are and can reduce the risk of misunderstandings, disputes, claims or complaints at a later date. The document needs to contain the required terms and conditions of employment as set out in Section 1 of the Act including things like pay and holiday entitlement and other types of vital information such as notice periods from both parties. From an employer’s perspective, a professionally drafted contract of employment can be absolutely crucial to safeguard and protect your business by including appropriate clauses dealing with things like confidentiality, intellectual property and restrictive covenants (also known as post-termination restrictions).

If you need support having a contract of employment drafted or to have your existing contracts, policies and procedures reviewed and updated then please contact our experienced Employment Law team here.