Before a new employee starts work, a legal agreement needs to be created.
Whether it’s documented or not, a contract has been created–and you must follow through with your legal obligations.
Whichever agreement you choose to apply, you need to comply with laws and regulations. Failing this, you could face financial and reputational consequences.
In this guide, we’ll look at what a contract of employment is, using contractual terms, and how to create employment contracts.
What is a contract of employment?
A contract of employment is a legally binding agreement made between an employer and an employee.
These agreements can be made through verbal and written forms–both of which legally stand.
Under UK law, you don’t need to provide a written agreement . But offering no contract of employment can quickly distort what’s expected from you and the employee.
Contracts will normally include:
Both you and the employee have a legal duty to comply with the agreement, or until the terms have changed.
Different types of employment contracts
There are several types of employment contracts, and each has their own requirements:
- Permanent: These are for people who work regular salary jobs, like full or part-time employees.
- Fixed-term: These normally have a set duration and end date before the job begins. They’re usually used by contractors or freelancers.
- Casual: These are no obligations to provide or accept working hours. This is generally given to those who require complete flexibility between their professional and personal lives.
- Zero-hours: There is generally no obligation to offer work. However, the worker is usually obliged to be available to accept work when it’s offered.
Terms of an employment contract
There are several different contractual terms you can use–each used for specific reasons.
Examples of contractual terms include:
- Express terms: These are specific written terms for things like pay, location, and hours.
- Statutory terms: These are terms that outline legal rights under employment law. For example, protection against workplace discrimination.
- Implied terms: These are terms that may be too obvious to be written, like not stealing from the workplace.
- Incorporated terms: These are terms taken from other sources, like handbooks or customs and practices.
What are the laws on employment contracts?
The Employment Rights Act (1996) outlined what is needed in a contract of employment in UK law.
The act recognises three types of employment status: employee, worker, and self-employed. It defines the employment status and legal rights of a person. That’s why it’s so important to understand which type of status to apply to your contract.
What happens if you breach an employment contract?
If you breach an employment contract, the employee may raise their grievance to a tribunal. They may discuss the case and find you guilty of violating legislation.
The whole process can be gruelling for both parties. But if you lose, you could end up with expensive legal fees, paying compensation penalties, and facing business damages.
What to include in a contract of employment
Now that you’ve decided on a person’s status and job conditions, you should consider what to include in the contract.
For the employee’s benefit, it’s advisory to add outlines on work conditions, entitlements, and responsibilities. For the employer, you should add your own business regulations on:
When should an employee receive a contract of employment?
A contract of employment begins when they accept and starts–for written and verbal agreements.
Contracts can only begin earlier if:
- A job offer is accepted verbally or in writing.
- A job offer was unconditional.
- The employee met all the criteria for the job.
- The employer provided specific conditions for the job.
Can you change someone's contract of employment?
Yes, changing someone’s contract of employment is legally allowed. But only if you meet the following requirements:
- After discussions, the employee has agreed to changes.
- After discussions, the employee’s representatives have agreed to changes.
- The employee has already signed a legal agreement which allows changes.
Once you’ve attained permission, you’re allowed to add, edit, or remove a contractual term within reason.
Can you refuse to sign a new contract of employment?
Yes–employees can refuse to sign a new contract of employment. Even if your reasons are fair and just.
Try to explain why you’re introducing a new contract. This is beneficial, especially if the reasons are beyond your control. For example, maybe you need the contracts to comply with new legislation.
When introducing a new contract to an employee, there are three options:
- Continue with applying the new terms.
- Dismiss them and offer to re-employ them under the new terms.
- Accept their refusal and decide not to apply the new terms.
Can a contract of employment be terminated?
You or the person in question can decide on the termination of an employment contract.
This can be done through either:
- Resignation: This is when an employee decides to ‘quit’ their job. A resignation letter is normally provided, followed by a notice period, and final payments.
- Dismissal: This is when an employee is ‘let go´ from their position due to capability, conduct, redundancy, legislation, or other substantial matters.
Get expert advice on employment contracts with Peninsula
Despite it not being a legal requirement, providing work agreements can make your life easier in the long run.
They’re beneficial in understanding what you expect from your workers; and what they expect from you.
If you fail to provide any legal entitlements to your employees, your business could be met with harmful consequences.
Peninsula offers expert guidance on employment contracts. Our team offers HR documentation and contract services, which can guide you through legal rules when raising contracts.
Our 24/7 HR advice is available 365 days a year; with multi-lingual support and fully trained counsellors ready to help.
Want to find out more? Book a free consultation with one of our HR consultants. Call 0800 028 2420