What are the essentials of an employment contract

In the UK, it is not only a legal requirement that employers have a contract of employment in place for all of their employees but also good business sense as it essentially lays down a set of ground rules between the two parties. Here, we look at what are the essentials of an employment contract.

What is an employment contract?

Employment contracts are largely governed by the same core principles of any contract. There must be an intention between the parties to enter into legal relations. An offer must be made and must be accepted, and there must be consideration.

Under the Employment Rights Order 1996, employers are required to provide an employee with a written statement of certain terms and conditions including for example, the employee’s job title with a brief description of the role, contracted hours, remuneration, notice of termination, and pension arrangements, to name but a few.

This written statement must be provided within two months of the employee commencing their employment with the employer. Terms such as these would typically be found as express terms in a contract of employment. However, contractual terms do not necessarily need to be written down in an employment contract in order to be legally binding.

What should be included in a contract of employment?

1. Names of the Parties

The employer’s organisation details and the employee’s full name and address.

 2. Start Date

This is important as it also includes a brief statement to say that employment with a previous employer does not count towards the various rights gained by employees after one and two years of service. In other words, the employee starts again from zero with the new employer. 

3. Job Title and Description

This usually follows the job title and description specified in any recruitment advertisement and subsequent offer letter. However, to suit the employer, it also allows for flexibility in the employee’s role.

4. Place of Work

Allows the employer to specify the location where the employee will work. However, it also allows the employer to specify any other location in the future. 

5. Hours of Work

The employee’s hours are specified in the contract; however, the employee also agrees to work additional hours if the employer reasonably requests it. However, the hours cannot exceed the 48-hour per week as specified by the Working Time Regulations.

6. Probationary Period

The employer can specify a trial period for the employee with the option of a short notice period at the end of the trial if the employee does not fulfil expectations. The employer can also extend the trial period.

7. Salary

Details the employee’s gross salary before tax, national insurance, and any deductions. It also specifies when payment is made.

8. Assessments

The employer can state when the employee will receive their first work assessment and the timing of all subsequent regular assessments, for example, every 12 months.

9. Deductions

This clause details all the circumstances in which the employer can make deductions from the employee’s salary.

10. Expenses

The employer can agree with the employee on which work-related expenses will be covered and when the employee will be reimbursed. However, to prevent errors and possible fraud, the clause makes it clear that proof of payment is required.

11. Holidays

This clause specifies when the holiday year will run from. It allows the employer to specify the number of days per year that an employee can take (subject to a statutory minimum of 28 days) and whether bank and public holidays are included or excluded from this. 

12. Sickness & Disability

This clause states by what time the employee must inform the employer that they will be unable to attend work (it does allow for a third party to contact the employer on the employee’s behalf). The clause also states when a doctor’s certificate is required and whether the employee will receive statutory or contractual sick pay. It is recommended that organisations have a separate Sickness & Absence Policy.

13. Pension

This clause states the pension provision provided by the employer; all employers have a duty to provide a pension scheme.

 14. Notice

The notice period to be given by either the employer or the employee. However, this clause also provides a detailed list of actions that constitute gross misconduct allowing the employer to dismiss without giving notice.

15. Grievance and Disciplinary Procedure

This clause refers to the detailed separate Grievance and Disciplinary Policy. A disciplinary procedure is used by an employer to address an employee’s conduct or performance. A grievance procedure is used to deal with a problem or complaint that an employee raises.

16. Retirement

Refers to a separate Retirement Policy – which every organisation should have in place. This clause and the retirement policy ensure compliance with the Equality Act 2010.

17. Particulars of Employment

Under Section 1 of the Employment Rights Act 1996, all employee contracts must set out the main terms of the contract in a separate schedule. This is so that the employee (and the employer) can easily refer to this schedule when they wish to remind themselves of the main terms.

We hope you have found this post on What are the essentials of an employment contract useful.  Should you have any questions, please do not hesitate to contact a member of the team here.