22 Aug 2014  •  Practice Management  •  4min read By  • Peninsula Business Services

The Importance Of A Contract Of Employment

Looking for some clarity on what should be included in your contracts of employment? Here, employment law and HR specialists Peninsula Business Services simplify what’s legally required from you in a contract of employment and what the consequences could be if you don’t get it right.

What is a contract of employment?

A contract of employment is an agreement between an employer and employee and is the basis of the employment relationship. The ‘contract’ is a notional concept containing all terms and conditions agreed between the parties, whether in writing or not. Part of the contract is the written statement of the employee’s main terms and conditions of employment which you are required to provide to your employees within a set timescale. Once signed, it is considered both parties agree to abide by those terms and conditions, and, after this point, the terms are enforceable permitted they do not breach minimum statutory requirements.

What do I need to include in a contract of employment?

A Statement of Main Terms (SMT) is the main document issued as part of an employee’s contract of employment, but there are other elements that make up a full contract of employment which need to be considered too. These include employee handbooks, policies, memos, letters, etc.

What needs to be included in an SMT?

The SMT sets out the main terms and conditions governing an employee’s employment. The Employment Rights Act 1996 requires that the employer gives this document to the employee within two months of the start of employment. The law also states that certain pieces of information must be included in that document, these are listed below:

  • The name of the employer and employee and the employee’s job title
  • The commencing date of employment
  • Details about pay and the frequency of payment
  • Holiday entitlement
  • Entitlement to sick pay
  • Details of applicable collective agreements
  • Information on disciplinary and grievance procedures
  • Notice periods, etc.

What happens if I don’t provide my employees with an SMT?

If this statement isn’t provided, or only partly provided, then your employee is entitled to make a claim to an employment tribunal for failure to provide the statement. The tribunal will make a judgement on the particulars to be included, and may amend or substitute them.

If an individual brings a claim of failure to provide a statement at the same time as bringing another claim, e.g. unfair dismissal, unlawful deductions, and is successful with that other claim, then the failure to provide an SMT can carry an award to the employee of two or four week’s pay.

A tribunal may also make an award to an individual for failure to provide a statement when it becomes apparent, during a hearing for another claim, that a statement hasn’t been provided, even though the specific claim of failure to provide hasn’t been made by the employee.

What other policies and procedures need to be accessible to my employees?

Many employers use the SMT as the document to include a number of policies and procedures in, however it may be more advisable to include those procedures in a separate document, such as an employee handbook.

The law permits that a number of the required elements of the SMT can be provided in a separate document that is accessible to the employee, for example, information on disciplinary and grievance procedures.

Something else to be aware of…

Even if a policy or procedure doesn’t appear in the SMT or handbook then it doesn’t necessarily mean that it’s not contractually binding. Employees are within their rights to refer back to their offer letter or their job advertisement, for example, as contractual terms they can rely on too.

Should you have any doubts at all about your situation and its next steps, we always recommend that you seek the advice and support of legal and employment law specialists.

If you want some help ensuring your contracts of employment are up to date with the latest requirements, why not take a look at our HRPlus service – it’s easy to use and guarantees to save you time and reduce hassle!

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