Contracts of Employment

A contract of employment is a legally binding agreement which exists between an employee and employer, and exists even where there is nothing in writing, as the agreement to work for an employer and the employer’s agreement to pay an employee for work automatically forms a contract.

A contract of employment is usually made up of two types of contractual terms, those being ‘express terms’ and ‘implied terms’.

Express Terms

Express terms are explicitly agreed between the employee and employer. They include:

• the rate of pay, including any overtime or bonus pay;
• hours of work, including overtime hours;
• holiday entitlement and pay;
• sick pay;
• redundancy pay; and
• notice periods

Express terms might not be in one written document, but could be in a number of different documents, including:

• the job advertisement;
• a written statement of main terms and conditions;
• any letters sent by the employer pre-commencement of work;
• anything the employee was asked to sign when or since they started work;
• instructions or announcements made by the employer on a notice board at work; and
• an office manual or staff handbook

Implied Terms

Every contract of employment has general ‘implied’ terms for employees and employers including:

• a duty of trust and confidence between each other
• a duty of care towards each other and other employees
• a duty to obey any ‘reasonable’ instructions given by the employer

Written Statement of Terms and Conditions

In accordance with section 1(2) of the Employment Rights Act (ERA) 1996 a worker (including employees) now has a legal entitlement to receive, from the first day of their employment, a written statement of particulars of their employment.

The written statement must include:

• the names of the worker and employer;
• the commencement date;
• details of any probationary period;
• notice entitlements;
• the rate of pay and how often the individual will be paid;
• the hours and days of work;
• the holiday entitlement and rate of holiday pay;
• notice periods for the employer and employee;
• job title;
• job location

Other provisions that may be included are:

• disciplinary, dismissal and grievance procedures in the workplace;
• other paid leave;
• details surrounding the sick pay scheme;
• collective agreements;
• the employer’s occupational pension scheme

The written statement of terms is not itself the contract but acts as evidence of what the contractual terms are, and if the employer fails to supply a statement within the prescribed period the worker has a statutory right, in accordance with the ERA 1996, to apply to an Employment Tribunal to determine upon the particulars which ought to have been given in a statement.

Under section 38 of the Employment Act 2002 an Employment Tribunal can make an award of up to four weeks’ gross pay where the employer is in breach of the duty to supply the statement it a separate claim has been made to the Employment Tribunal to enforce other statutory rights i.e. unpaid wages, unfair dismissal, discrimination etc.

Statutory Rights

The rights that an individual has under their contract of employment are in addition to their minimum statutory rights. These include rights in relation to:

• paid holidays;
• the National Minimum Wage / National Living Wage;
• a written statement of the terms of employment (as above);
• an itemised pay statement;
• maternity leave;
• pay in compensation for being made redundant; and
• not be unfairly dismissed

Employers and employees can agree any terms in the employment contract that they want, but can’t agree to a contractual term that makes an individual worse off than they are under their statutory rights.

For advice on the preparation and content of contracts of employment and statements of terms and conditions, please do not hesitate to contact the team at Elmwoods Law & Mediation.