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Do employees really need employment contracts?

Yes, they do!. Employment contracts provide employers and employees with a set of rules that both parties must abide by. Some employers believe that where an employee has had years of trouble free service that there is no need to formalise the working relationship in a written contract. However, the reality is that contracts are like insurance, they are only needed when trouble occurs. Another misconception is that once a contract is in place it will last forever, unfortunately this is not the case, the rules of the game change, for instance an employee may take on a new role with new responsibilities and as we all know so well, employment legislation constantly changes.

The practical benefit of an employment contract is that it sets out the fundamental principles of the relationship and obligations between an employer and employee. Put simply, the agreement between the parties is in black and white, for instance, it sets out the job description, the times and days during which the employee is required to work, the rate of pay, the place of work, holiday entitlement, sickness entitlement etc. This is important as it means that there are no grey areas in respect of an employees contractual obligations to its employer, they can’t simply say, “oh well, I thought I could knock off at 4pm” when in fact you definitely need them at their desk until 5pm or “ I thought I had 30 days holiday” when in fact they only have 25 or saying “I’m not moving offices!”! It makes managing your staff significantly easier when you have clear requirements.

An employment contract can be as simple or as detailed as your business or the job requires, clearly the contract used for a cleaner will be significantly different to that of a Finance Director. For example, when employing a professional or someone who builds relationships with clients, it is important to consider what restrictions are necessary to protect your business when they terminate their employment. Restrictive covenants can limit a former employee’s contact with clients, staff and suppliers once they leave the business, furthermore they can be used to stop them from setting up a business in direct competition. Meanwhile confidentiality clauses can be incorporated to protect your businesses interests, in particular the use of business information.

Bespoke contracts will ultimately provide better protection for a business in comparison to standard, generic contracts as they are tailored to business and its industry. They can also be used as a great tool in recruitment to attract top talent through competitive contractual benefit packages.

Whilst in the majority of industries there is no authority that will search out those employers who haven’t issued an employment contract, it is a legal requirement to provide a written statement of terms of employment, as prescribed by section 1 of the Employment Rights Act 1996, within 2 months of the commencement of an employees employment. If you are pulled over the coals in an Employment Tribunal and there is not a contract in place, you are likely to start out on the wrong foot with the Judge before the hearing has even begun! A contract demonstrates to a Judge that you are aware of your legal responsibilities and commitments to an employee and that you take them seriously. Without a contract in place, a Judge will probably ask himself, what else have you not done properly?

Updated contracts and indeed staff handbooks are a couple of the simple ways that an employer can take preventative steps to reduce the risks to them when employing staff and dealing with any fall outs. Aside from the basics, here are a few things to consider when updating your contracts: overtime rates; bonuses and commission; qualification requirements; DBS checks; probation periods, notice periods, restrictive covenants; confidentiality.

If you would like your employment contracts reviewed to ensure that they are compliant with current legislation or you would like new contracts prepared, please contact us at or on 01425 205391 for a free discussion.