How to issue a Contract of Employment
November 7, 2019
Hi I’m Alex. Brogan at Human Resource Solutions That’s www.human-resource-solutions.co.uk This video tutorial is on how to issue a contract of employment We will be looking at your responsibilities as an employer. Especially useful if you are a new employer or haven’t employed anyone for a while So we’ll look at what makes up a contract of employment and what you need to include in this to ensure it complies with UK law We are a UK based company and so the information we issue is based on UK law But much of it is best practice in fact and so will be useful even if you are not yourself based in the UK We will also direct you to where you can find the necessary templates which you can download for free and use to issue to your new employee as your contract documents OK let’s crack on and look at how to issue a contract of employment. What is a Contract of Employment? The employment contract is an arrangement between two parties where one party makes a job offer and the other accepts specifically it is where one person performs work under the direction of another So the employment contract establishes the respective rights, responsibilities and duties of an employer and an employee The contract of employment is NOT a single document as some people think in fact its effectively made up of several different elements. Three of these you can directly control.. ..and two you have less or indeed no control over You can control the job offer you make – verbally and in writing the formal written statement of Terms and Conditions you’ll issue within 8 weeks of the employee starting and your Company policies and procedures referred to in both of those documents These are sometimes referred to as the EXPRESS terms of the contract because they have been specifically and clearly agreed I want to talk about all three of these in some detail in a minute but first lets look at the elements of the contract that you have no or little control over: What you can’t control The employment laws of the country govern many of the conditions of the contract and can’t be superseded in any way by the contract so for example the minimum wage, individual parental rights to time off and pay, minimum annual leave entitlements and so on So any terms which seek to limit the legal rights of the employee are likely to be completely ineffective in law IMPLIED terms are almost too obvious to be written down but can be implied into most contracts of employment for example that your employee won’t steal from you their employer or give away any confidential information You as the employer must, in turn, provide a safe working environment and not ask the employee to do anything illegal, such as for example drive a vehicle that is not insured Terms may also be implied through custom and practice This is where arrangements have never clearly been agreed but over time have become part of the contract Examples of this might include finishing early on a Friday, regular overtime or a Christmas bonus For an entitlement to become established by custom and practice it must usually be shown to be automatically received, uninterrupted, long-standing, expected and well-known To a degree these can be “controlled “ by you as the employer but be aware that it is very easy to set custom and practice precedents month on month or year on year without really realising it! Ok lets return now to the three elements of the Contract of Employment which you definitely can and indeed must control Firstly the Job Offer Normally following the job interview you will decide who you want to offer the job to and verbally make them the job offer remember once they accept – a legal contract is in place and this can only be changed by mutual agreement So for example if you want to change the hourly rate of pay, or number of hours they work after you make the job offer you really can’t unless the new employee agrees to this In fact there are ways to do this but it is messy and can be avoided if you are careful when you make the job offer Its also worth remembering that although this is a verbal offer such things as the conditions outlined in the job advert and the job description or any other materials made available to candidates as part of the recruitment process will also form part of the contract of employment at this stage Generally it is advisable to confirm the job offer in a Letter of Appointment which should be sent to the candidate immediately after you make the verbal job offer (assuming they accept of course) This will ensure there is absolutely no confusion about the terms and conditions on offer The letter need only be a one page document and can be produced very quickly We will show you where you can get a free template for this towards the end of the video One very important point to be aware of is that if the offer is dependant on anything such as checking their references are acceptable or confirmation of certain qualifications etc then it is vital that you state that as a condition of the job offer In this way if the condition is not met then the offer can be withdrawn without breaking the contract The next element of the Contract of Employment to consider is the Principal Statement of Terms and Conditions This is the main document which lays out all the key terms and conditions related to the job This document is often referred to as the “contract of employment” – and for simplicity that’s fine we do it on our website in fact. Just bear in mind that it is not the only thing you need to consider when thinking about the contract This document MUST be issued to the individual within 8 weeks of their commencement date Now some companies if they have all the information they need will simply issue this document instead of a letter of appointment it contains all that information and more. That is perfectly acceptable However experience shows that, in particular those employers who are quite new to issuing contracts prefer to take their time and ensure everything in the Statement is correct It also allows the employer time to ensure any conditions surrounding the job offer such as checking references etc have been completed satisfactorily The Principal Statement must contain certain information as specified in law – lets have a look at this in more detail: It should contain the name and address of both parties to the contract This is very straightforward just make sure you use the legal name of your company The only complication might be if you run several businesses in this case you should be sure you are clear which one the new employee is contracted to work for and state this in the document The Job title and description – this usually follows the job title and description specified in any recruitment advertisement or literature and subsequent appointment letter On an aside – it is useful not to describe a job too tightly this will allow you some flexibility in relation to the duties and responsibilities of the post over time Next is the location of the job name and address of where the employee will be based, and any other places where they may be expected to work including any outside the UK If an employee has to work abroad for more than a month, you must state -how long they’ll be abroad
-what currency they’ll be paid in
-what additional pay or benefits they’ll get
-terms relating to their return to the UK This information can be given to the employee in a separate document. By the way if you send an employee to another country in the European Economic Area (EEA) then they must get the terms and conditions that are the legal minimum in that country for -working hours and rest breaks
-minimum pay The date their employment in the new job started, and also the date of any continuous employment they may have with your company should be stated These dates will normally be the same unless the individual has maintained continuous employment with you and the post is just a different one such as a promotion Other circumstances might be where you have taken over an organisation with existing employees In this case their employment rights are maintained and so their continuous employment date is the start date with that organisation The fifth piece of information to be included in the principal statement of terms and conditions relates to pay It must specify when payment is made – so weekly, four weekly, per calendar month etc. It must also include details of the employee’s gross salary before tax, national insurance and any deductions this could be given as an annual, monthly, weekly, or hourly rate If the employees salary is variable in some way – for example dependant on piece work, overtime or commission then the method of calculating their remuneration must be specified. Remember: -All employees are entitled to an individual written pay statement.
-Pay slips/statements must be given on or before the pay date.
-Fixed pay deductions must be shown with detailed amounts and reasons for the deductions – e.g. Tax and national insurance -Part time workers must get the same rate as full time workers.
-In the UK most workers are entitled to be paid the National Minimum Wage. You should include the number of hours they are contracted to work per week Unless of course it is a zero hours contract with no agreed number of hours It is also advisable to include any working pattern they are expected to work especially if there is shift work involved. Shop and betting workers who are required to work on a Sunday under their employment contract can give three months’ notice to their employer, in writing, of opting out of Sunday work These workers must be informed of this right when they start work If someone works at night, there are rules covering the hours they work Employers must make sure that workers don’t work more than an average of 8 night hours in a 24-hour period and workers can’t opt out of this working limit You must keep records for 2 years of night workers’ working hours to prove they aren’t exceeding night working limits Employees only have to work overtime if their contract says so Even if it does, by law, they can’t usually be forced to work more than an average of 48 hours per week An employee can agree to work longer – but this agreement must be in writing and signed by them You don’t actually have to pay workers for overtime, however, employees’ average pay for the total hours worked mustn’t fall below the UK National Minimum Wage State whether the job is permanent, temporary or fixed-term and if it is fixed-term then state the end date of the contract If it is fixed-term but is dependant on something other than a date to end the contract then state what this is – for example the return of someone from maternity leave or the end of a project. It is perfectly in order to have a probationary period in a contract and state that the individual is employed subject to satisfactory completion of this trial period It could be anything in the region of 1 week to 6 months depending on the length of the contract Normally during a probationary period you might give less favourable terms such as a reduced notice period or no entitlement to certain other benefits such as occupational sick pay. All workers are legally entitled to 5.6 weeks’ paid holiday per year But you can include bank holidays as part of this statutory annual leave entitlement. This means workers who work a 5-day week must receive 28 days’ paid annual leave per year Part-time workers are also entitled to a minimum of 5.6 weeks of paid holiday each year, although this may amount to fewer actual days of paid holiday. So if a worker works 3 days a week – then their leave is calculated by multiplying 3 by 5.6, which comes to 16.8 days of annual paid leave If someone works irregular hours, then you should outline how their leave will be calculated (or at least refer them to another document which does outline this). Workers are entitled to a week’s pay for each week of leave they take. If their pay varies each week for example if they work overtime or shifts then a weeks pay is the average over the previous paid 12 weeks A collective agreement is one made in writing between a trade union and an employer covering such things as: terms and conditions of employment, trade union membership, negotiating arrangements etc. These should be incorporated into the contract and will affect the employee whether or not they are a trade union member You should outline the procedure for the employee if they are sick and unable to come to work either in the contract or refer them to a policy or handbook where this information is available Normally employees are entitled to statutory sick pay. This is paid for every day that would normally be worked, but does not start until the fourth working day of sickness and lasts for a maximum of 28 weeks. You can offer company sick pay which may give full or part pay for a set period of sickness. If you do you should outline this in the terms and conditions of employment In the UK by 2018 every employers will be required to enrol their workers into a workplace pension scheme. All new employees must be automatically enrolled but can then opt out of the pension scheme if they want to If you have not already started autoenrolment then you can find out the date you must start on the pension regulators website: www.thepensionsregulator.gov.uk/ If you do not yet have an occupational pension scheme you can opt in to the government National Employment Savings Trust (or NEST) which will allow you to meet your employers pension obligations under these new pension regulations The web address for that is www.nestpensions.org.uk/ Notice entitlements should be outlined. It is also acceptable to refer to the legal minimum as the notice period. Notice periods currently are: one week’s notice if the employee has been employed by the employer continuously for one month or more, but for less than two years two weeks’ notice if the employee has been employed by the employer continuously for two years and one additional week’s notice for each further complete year of continuous employment, up to a maximum of 12 weeks. For example if an employee has worked for 5 years then they are entitled to 5 weeks’ notice. Employees must give their employer a minimum of one week’s notice once they have worked for one month. This minimum is unaffected by longer service However contractual notice is the amount of notice that you set out in the terms and conditions of employment which can be longer (but not shorter) than the statutory notice. For example the statutory notice an employee must give to an employer is one week, however, an employer can state within the terms of employment that an employee must give one month’s notice The written statement must also contain grievance and disciplinary information either in the document itself or referenced in another document such as a handbook or separate policies. This should include: -who to go to with a grievance
-how to complain about how a grievance is handled -how to complain about a disciplinary or dismissal decision
-where the Grievance and Disciplinary rules can be found That concludes the required content of the Principal Statement of Terms and Conditions. Remember – the third element that forms the contract of employment relates to the company policies and procedures which have been referenced in the job offer and Principal Statement of Terms and Conditions Formal policies are not always necessary but the following 5 areas should be covered somewhere such as in a staff handbook or other document. For very small companies with only a few employees it would be sufficient just to describe them in a few paragraphs, perhaps referring to other documents or websites if necessary Incidentally if you have more than 5 staff you must, under current legislation, have a written health and safety policy. There are plenty of resources on our website to help you with this if you don’t have one yet. There are a number of other company policies which although not strictly required as part of the contract it is probably a good idea to have something written down on each of them – especially if the policy is particularly relevant to your business even a paragraph or two on each can be enough – so lets go through these: The first one is pay if how pay is reviewed and calculated in your company is very straightforward, then you probably don’t need anything written down however if it is more complex for example if it involves commission arrangements or overtime calculations it is probably a good idea to have something in writing It can also be useful to demonstrate how you ensure you pay at least the national minimum wage Working hours or shift patterns again this is worth clarifying if there is anything complex about it in you terms and conditions Company and personal property if you issue your staff with any company property such as vans, cars, phones, tablets, etc. you might want to be absolutely clear about their responsibilities with your property so for example can they use the phone to make private calls, can they smoke in your van etc. Also be clear about your employees personal property so if they get an expensive watch damaged at work or their car gets dinked in your car park who is responsible? We said before that there were some things which were too obvious to write down within the contract of employment confidentiality would probably come under that. However it does no harm to be absolutely specific about your expectations around this with your employees and what might happen if they divulge company sensitive information A few more to think about: Maternity, parental leave and flexible working arrangements these are entitlements based in law and so while you don’t need to have a policy until someone activates this for example by asking for parental leave or requesting flexible working it can be useful to have something written which describes your policy on this and how the employee can apply for them Dress code is probably only relevant if you have a company where your staff meet the public or have to wear a uniform however it could also be important if they are required to wear protective clothing This might also extend to wearing of jewellery, personal hygiene if appropriate and so on. And finally if your staff use email or the internet what restrictions if any do you want to place on that also what about social media are you happy that they might represent your company on twitter or facebook. OK let’s sum up then how you go about issuing a contract of employment to a new member of staff firstly make the job offer verbally and then and follow this up in writing either with a letter of appointment or with the full statement of terms and conditions if you are ready to do so If you haven’t already issued the full statement of terms and conditions ensure you do so within 8 weeks of their start date there are templates available to make this very straightforward and I’ll point you to these next And finally just ensure any of your company policies referred to or policies that you think need to be brought to their attention are both up-to-date and available. These don’t always have to be formal policies a paragraph or two describing your policy is often sufficient Let’s go ahead now and look at where you can find some templates to help you with this Firstly you can Google “contract of employment templates” or you can go to our website at www.human-resource-solutions.co.uk So that will take you to our home page. If you go to the left menu you will see an option called Contract of Employment. Click on that it takes you to our contract of employment page. Part way down we have a section which contains a number of employment contract policy and document downloads. On there you will see for example we have a template for a letter of appointment we also have a template for a standard contract, one for fixed-term and one for zero hours. we also have a new template which is a contract of employment and integrated staff handbook. This is really good for small organisations which is maybe issuing their first or second contract. What happens when you click on one of those? It will download to your computer, or automatically open itself in Word. You will see that the red areas are the blanks which need to be filled out If you do that you have a fairly instant – in this case – letter of appointment. Its the same with all the other templates we have there. So feel free to go on to this site and browse. They are all free to download so feel free to browse around. So its Human Resource Solutions at www.human-resource-solutions.co.uk. Well that’s it – thanks very much for watching. If you have any questions at all get in touch via the web site. See you next time!