Business Law: Clare Richards on the importance of written employment contracts
ALL employment relationships are underpinned by a contract, but the contract is not always a written one.
The Employment Rights Act 1998 requires an employer to provide written particulars of employment to the employee within two months from the start of employment. These relate to the core terms of employment namely job title, type and place of employment, amount and frequency of pay, provisions relating to hours, holidays, sickness, pension and length of notice.
This requirement is normally seen as another employee protection. Failure by the employer to comply may lead to compensation payable to the employee of between two and four weeks’ pay (at the Tribunal’s discretion) if the failure is brought to a tribunal’s attention in the context of another successful claim by the employee e.g. unfair dismissal. A week’s pay for this purpose is subject to a statutory limit.
In fact, ensuring that the employment contract is in writing or that suitable written particulars are provided can also offer significant advantage to the employer.
The employer can include various rights that vary terms that would otherwise be implied by law. The terms could include:
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: : Some flexibility about the employee’s hours of work.
: : Flexibility about the employee’s place of work.
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: : Specified holiday restrictions and days that must be taken as holiday.
: : Restriction on an employee working for a competitor.
: : A minimum notice period to be given by the employee.
If such terms which may be necessary or helpful to the employer’s business are not recorded in writing, it would be very difficult to impose them at a later date.
A further reason that it is extremely desirable for an employer to have written terms for all its employees relates to the prospect of business sale. Whether the sale of the business is by shares or assets a purchaser will certainly expect to see written terms for all the employees.
If the terms are not committed to writing the potential buyer may insist that new written contracts are put in place before the sale can go ahead. At this stage the employer runs the risk the employees will not agree to the written terms or the suggested terms do not accurately reflect their existing terms.
If the written terms impose some detrimental change in relation to a business sale it could give rise to an automatically unfair dismissal, not to mention jeopardising the sale process.
In conclusion, employers should recognise that the legal requirements to have a written employment contract or written statement of employment particulars, is not only a legal requirement but also makes good commercial sense.
: : Clare Richards is a solicitor with Barker Gotelee