The risks of not providing an employment contract

What is an employment contract?

An employment contract is made between an employer and employee, which includes the terms of the contract and sets out the employee’s:

• employment conditions;
• rights;
• responsibilities; and
• duties

Whilst a verbal contract is legally binding and effective from the moment a person accepts a job offer, a written contract of employment protects both the employer and employee against potential disputes with regards to the terms of the employment. Moreover, working without a contract creates uncertainty, even if the main terms were agreed orally.

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It is a legal requirement in the UK for employer’s to provide a written statement of the terms of employment to the employee, within the first 2 months of the employment commencing. Although this is not a contract of employment it summarises the essential key terms of employment. So what does the basic written statement of employment terms need to contain?

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What is a written statement of terms?

So you've successfully attended an interview and received a job offer, now what? You are legally entitled to a written document containing the terms of your employment.

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The written statement of the terms of employment should include details of the:

• employer’s name and address;
• start date and end date (if the agreement is a fixed-term);
• job title/ brief description of role;
• place of work/working environment and whether they will be required to relocate;
• pay details (the amount e.g. annual salary or hourly based on national minimum wage, how often e.g. monthly and when e.g. 28th of each month);
• hours of work/days of work (e.g. 9am-5:30pm Mon-Fri);
• the amount of holiday pay;
• bonus pay (if applicable);
• holiday entitlement/annual leave (including details of how it is calculated if the employee joins mid-year or when the employee leaves);
• sick pay and sick leave;
• other paid leave (for example maternity leave and maternity pay );
• benefits including redundancy pay;
• other benefits (including non-contractual benefits);
• notice period each party is required to give;
• probation period if applicable (duration and conditions of the probationary period);
• work abroad requirements (how long, payment currency, additional benefits and terms relating to their return to the UK);
• training the employee may be required to complete if applicable;
• pension and pension schemes;
• any collective agreement with a trade union that affects the employment;
• any other right to non-compulsory training provided by the employer;
• details of the employer's staff handbook; and
• disciplinary and grievance procedures.

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The written statement of terms may also be provided in the form of an employment contract. An employment contract contains a written statement of the employment rights, obligations and benefits an employee may be entitled to. It is recommended employers have a comprehensive employment contract in place. Alongside the terms above, it also includes clauses such as:

• Confidentiality
• Intellectual property
• Restrictive covenants
• Contractual sick pay
• Garden leave

An employer may also include details of policies, outside interests and expenses alongside other important matters of employment. A detailed contract of employment ensures the employee understands the nature of the employment, the business and what is expected of the employee.

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Confidentiality clauses safeguard the employer’s financial and business interests and ensure the employee is subject to maintaining confidentiality over sensitive information disclosed during the course of their employment. Similarly Intellectual Property clauses ensure any Intellectual Property created by the employee during the course of employment belongs to the employer (which is the general position under English law).

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What are the risks of not having an employment contract in place?

By failing to provide employees with a written statement of the terms of employment, employers may face disciplinary action from employment tribunals. This is costly, time consuming and can have reputational damage for the business. The employee may decide to raise concerns with an Employment Tribunal if an employer fails to provide the requisite information regarding the terms of the employment.

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Where an employer is found to have failed to provide the employee with a written statement, the Employment Tribunal may penalise the employer for non-compliance and the employee may be awarded damages.

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If your employment contract is governed by the laws of England and Wales, there are several implied terms providing employees with certain statutory rights such as statutory sick pay, minimum notice periods, minimum holiday entitlements, national minimum wage and limits on the number of hours an employee can work each week. The law prescribes the minimum an employer must do, the employer may choose to offer you more than what is recommended. Where an employer offers you less than the law prescribes you may seek legal advice in order to ascertain your rights under employment law and find a solution prior to commencing a claim with an Employment Tribunal.

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The government guidance note is useful for individuals who have received a written statement and is not happy with the terms. It is advised they can:

1. Try to solve the problem with the employer informally;
2. Take out a grievance against the employer;
3. Take the case to an Employment Tribunal.

The employment tribunal will then decide what the employment particulars should have been.

You may also reach out to ACAS, which is an organisation that provides employees and employers with free and impartial advice on workplace rights, rules and best practice.

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About Legislate

When hiring, it's important to have legally sound employment contracts in place to protect your company and employees. With Legislate, you can easily tailor lawyer approved agreements to suit your needs, and easily extract relevant data from these agreements. Plus, our platform allows for electronic signing, making the contract process more efficient for both you and your employees. Book a demo or sign up today.

The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.