The Employment Contract - what is it exactly?
What is the employment contract?
It’s that 4 or 5 page document you get with your offer letter that details your terms and conditions of employment, right?
The Written Statement of Particulars is one aspect of the employment contract but it’s not the only one.
The concept of an employment contract is not entirely tangible. There isn’t one thing you can point to and say “Here is my employment contract”. It is made up of a lot of different things and some of them are not physical.
So here is a rundown of things that can form an employment contract along with how to avoid pitfalls:
The Recruitment Stage
Anything you write or say at any stage of recruitment can be part of a binding contract. For example; if you verbally tell a candidate during an interview that you offer 30 days holiday and you are mistaken and it’s only 25 days, a savvy candidate could hold you to the 30 days unless it is corrected at the point of any offer. If your job advert says that they will be able to work flexibly and you don’t allow a person to do that, they could claim a breach of contract. If a recruitment agency misrepresents your benefits to a candidate, this could also be an issue.
In short, be careful what is written and said during the recruitment stage. If you do make an error and you need to correct it, be explicit about the error at the offer stage so that the candidate is absolutely clear of the terms on which they are accepting the role.
The Offer Stage
Anything you include in your offer paperwork including the covering letter, the written statement of particulars and any introduction pack can form part of the contract of employment, depending on how it is phrased. That doesn’t mean to say you cannot vary these during employment but you will have to follow a process to achieve a fair variation of terms.
You also need to be clear if the offer is subject to anything such as satisfactory references, evidence of qualifications and the right to work in the UK (which should be provided before or on day one of employment if you are to avoid any risk of prosecution from employing an illegal worker).
From 06 April 2020, any new employees will have the right to receive their written particulars before or on day one of employment. For your free checklist detailing what information should be contained within a written statement of particulars, click here.
Written Statement of Particulars aren’t valid unless the employee has signed them.
Wrong – Once an employee begins working and accepting payment for that work, any expressed terms are deemed to have been accepted. However, having a signed copy does give you evidence that they were clear on the terms that the role was accepted.
The Employment Stage
Any policies and procedures that are available to employees and which don’t state that they are non-contractual may form part of the employment contract – for example; if you run a bonus scheme and you don’t state that it is non-contractual, you can’t just stop paying bonus without following a process.
Every letter that you issue changing something about an individual’s job e.g. pay increases or change in hours layers on top of the original written statement of particulars and supersedes what was originally included. Again, no signature is required but it helps to provide evidence of the change if required.
The actual behaviour between you and your employees may also form part of the contract of employment, particularly if it contradicts anything you have put in writing. For example; if the hours of work are stated in the written statement as Monday to Friday 8.30 - 17.00 but you allow a person to regularly work from 8 am and leave at 4.30 pm, these can become the contractual working hours.
Any practice that you repeatedly do over a protracted period of time may also become contractual as a result of custom and practice. For example; if you have always provided car parking on-site and move premises where there is insufficient parking, you may be liable to provide parking nearby or if you have given a 2% across-the-board pay increase for the last 5 years, you may not be able to suddenly decide to only give a 1% increase without following a process. Custom and practice is a tricky area and, ultimately, is one that is decided only if you get into a legal dispute but it is always good to ask yourself the question, would your employees reasonably expect the practice to continue?
Any verbal commitment made by your managers where there is an expectation that the manager is empowered to make such a commitment due to their status of authority in the business could be said to be contractual e.g. promising a specific pay rise without caveats could still need to be applied even if the employee isn’t performing at the expected level.
The ‘After Employment has Ended’ Stage
Unless you have a clause allowing you to pay-in-lieu instead of letting employees work their contractual notice, you could be liable to provide all the contractual benefits stated in any of the above forms until that notice period has ended even if they aren’t actually working for you. This includes holiday pay, sick pay, pension contribution and potentially bonus.
Ex-employees are contractually entitled to a reference from their previous employers
Wrong – there is no legal entitlement to a reference although it is good practice to provide one if requested to by another organisation. References should be factual and only contained information that you can back up such as employment dates and job title. Avoid offering any comments on suitability for a particular role or their conduct during their time with you.
The Other Stuff
And there's more.....There are statutory aspects that override your terms if you are offering less than is statutorily required. For example; you might state that the pay rate is £7 per hour whereas the minimum national living wage is actually £8.72. Putting £7 in the contract does not permit you to pay only £7 because the statutory requirement supersedes this.
Case law can also change statutory elements so it’s useful to have someone connected with your business keeping an eye on this.
Finally, there are implied terms that are so obvious you don’t need to include them anywhere else such as not physically assaulting a colleague. It can be useful to provide a flavour of these obvious things as part of other policies but you won’t be able to cover off every implied term and can still rely on them when needed.
If you need your documentation reviewing, 2020 HR can provide this service or you can download the free checklist of what your written statement of particulars should contain here.