If your small business has staff, it’s important to recognise the different responsibilities that come with being an employer. There are lots of things to get your head round when hiring somebody new and understanding employment contracts is up there with the most important. This might seem like a daunting task at first, but don’t worry, we’ve got you covered.
If you’re thinking about taking the next steps to grow your business by employing someone for the first time, of if you’d just like to brush up on your knowledge, this guide to employment contracts for small businesses is just what you need.
What is a Contract of Employment?
A contract of employment is a contract between an employer and an employee and is a legally binding agreement. It details the responsibilities and the rights of both parties and sets out the basics of the role like pay, working hours, holidays, etc.
As a Small Business Owner, Do I Have to Issue Employment Contracts?
Yes, you do. Employment contracts are a legal requirement for all businesses and all new members of staff must be issued with a contract immediately upon being hired.
Changes to UK Law Regarding Contracts of employment in April 2020
There are two changes to employment contracts that came into effect on the 6th of April 2020 in UK law. These are:
- Written statements of contract must be provided immediately, rather than two months after the employee’s start date. A written statement of employment is now a ‘day one right’. Employees must get one on the day they start their job or before, if possible.
- All workers are now entitled to a written statement of employment. This now includes staff employed through an agency.
Do Employment Contracts Have to be in Writing?
No, they don’t. A contract can be agreed verbally or in writing between employers and employees. Obviously, verbal contracts are much more difficult to prove and enforce in the eyes of the law.
What if I Haven’t Received an Employment Contract?
Employment law in the UK states that employers should provide employees with employment contracts as soon as they start working, or before if possible. In practice, however, many workers never receive a written contract. You have a legal right to a written contract from your employer so you can ask them for one if you haven’t received anything.
What Might be Included in an Employment Contract?
Employment contracts in the UK can include both express and implied terms. Express terms are explicitly agreed terms and are often governed by law. These include:
- Job title and/or job description.
- Date the employment began and the main place of work.
- Amount of pay or pay rate as well as the interval between payments.
- Hours of work and any shift patterns.
- Holiday pay and sick pay entitlements.
- Any pension arrangements
- Length of notice period for both employer and employee to terminate the contract.
- Grievance and appeal arrangements
- Disciplinary rules or dismissal procedures
Implied terms include statements concerning such things as both parties have a duty to trust and respect each other and behave in a reasonable manner.
What’s Does Not Need to Be Included in An Employee Contract?
Some employment terms don’t always need to be included in a written contract. For example, it’s reasonable to expect that employees don’t steal from their employer without the need for it to be written into their contract. These are known as ‘implied’ terms.
An employment contract also doesn’t need to include details about the procedures for sick pay, discipline or grievances. However, the contract must tell employees where they can find this information, often in other workplace policies.
What Types of Employment Contracts Are There in the UK?
There are a variety of different types of employment contract in the UK. These include:
- Open contracts. These can be full-time or part-time and do not specify any length of employment. This is the most common type of contract in the UK. The contracts should clearly state the notice period on both sides along with terms of dismissal.
- Fixed-term contracts. These are generally the same as open contracts but will state how long the contract lasts for or give an end date. Once this date expires the employee will no longer be employed by the business. These are useful for probation periods or seasonal work.
- Zero hours contracts. These are commonly used for casual work as they don’t guarantee any number of hours per week. However, employees are still entitled to minimum wage pay and annual leave. They also have the right to look for and accept work elsewhere.
- Freelancer contracts. These are slightly different as workers are self-employed and take care of their own tax and National Payments. In many cases they won’t specify things like the number of hours to be worked or shift patterns but will detail how the contract will be satisfied. This is often on completion of the work.
Can an Employer Just Change an Employment Contract?
The short answer is no. Most changes to an employment contract need the agreement of both employee and employer. In some cases, an employer may try to arbitrarily change the terms of a contract, but this can often lead to industrial and legal action. To do this they may dismiss the current employees and then attempt to rehire them on more favourable terms. While this is not illegal, it is frowned on in the business world.
Can an Employee Change an Employment Contract?
An employee may need to change their contract of employment from time to time. This, more often than not, is due to a need to change the number of hours worked. An employer, however, does not have to agree to an employee’s request to amend their contract.
Are Part-Time Contracts Different to Full Time Ones?
A part-time contract is very similar to a full-time contract, and they’re usually given to employees with a permanent position. The main difference between the two is that part-time employees have fewer contracted hours and will have less leave entitlement.
Employment contracts are a topic that many small businesses struggle with and can be difficult to handle correctly. But with staff morale and legal issues rife if you get them wrong, it’s one area that must be dealt with appropriately.