Employment Contracts

What is an employment contract?

A contract of employment is the agreement made between an employer and employee at the point when the employee accepts an offer of employment and starts working for the employer. It is usually in writing, although this is not always the case. It contains details of the employment including conditions, rights, duties and responsibilities.

The terms referred to in the contract may be listed in a separate document such as a written statement of employment or an employee’s handbook. Basics which should be detailed include the name and address of the employer, employee’s name and job description, the start date, hours of employment, remuneration, holiday allowances, grievance procedure and notice periods.

Is an employment contract legally binding?

An employment contract is legally binding. Where there is a written document, this should specify terms, ie. the issues by which the parties are bound. Terms may be found in other documents as well as the contract, for example a company handbook, a verbal agreement, an offer letter or email, a union or collective agreement or a legal requirement.

The contract is binding upon the employer as well as the employee. They will also have to abide by the terms which will govern their behaviour, treatment of the employee and their duties and responsibilities. The contract will remain in force until it is terminated, either by dismissal of the employee or notice that they intend to leave.

How do you terminate an employment contract?

A contract of employment can be terminated by giving of notice by the employer that they intend to leave. The contract will usually contain details of the procedure to be followed, for example three months’ notice in writing. Where the contract does not mention a notice period, then the employee still needs to give a minimum of a week’s notice.

An employer can terminate the contract where the employee has breached the contract terms. This could be where their conduct does not meet required standards, where they are not qualified for the job, where there has been long-term absence or where there is a breach of the law, eg. they are not entitled to work in the UK.

Does an employment contract have to be in writing?

A contract of employment does not have to be in writing, although an employee is entitled to a written statement containing the terms and conditions of their employment. This should be provided within two months of their start date. The written statement does not by itself constitute a contract, but it is evidence of the contract’s existence.

A unwritten employment contract can still be legally binding. It will come into effect once the employee commences work. Starting work signifies that the employee has accepted the employer’s terms and conditions. If the employee does not agree with any proposals, they should make clear to the employer before starting work that terms are still under negotiation.

How does an employment contract protect employees?

A well drafted contract of employment will clearly set out the rights, duties and responsibilities of an employer. Many employment disputes arise because of a poorly worded or ambiguous contract. If both parties are clear from the start exactly what is expected of them and what each will receive in return there is less scope for misunderstanding or disappointment.

An employee will be able to rely on the conditions contained in their contract and should the employer require more of them or act outside the scope of the document then the employee will have the right to pursue a claim against them at an industrial tribunal.

Do you legally need an employment contract?

A contractual agreement will exist between an employer and employee where the employee has done work and the employer has paid them for that work. Even if nothing has been put in writing, these acts constitute a contract. Legally the employer is entitled to a written statement within two months of starting work.

The written statement should contain the parties’ names, job location, job title, payment, hours, sick pay, notice period, grievance procedure and pension scheme details if entitled to join. It should also include the date that work was started. In the absence of a written contract a court will take these details as evidence of the agreement between employer and employee.

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