An efficient injection of information about some of the key issues you should consider when employing people. What are the minimum contractual terms you must provide and what are the crucial ones to protect your business interests?

This article is intended to provide an efficient injection of information about some of the key issues you should consider when employing people. For example:-

  • What are the minimum contractual terms you must provide? 
  • What are the crucial ones to protect your business interests?

Ultimately an employment relationship is a balance between the greater rights an employee has from an employment relationship and the greater control an employer then has over that individual, for the benefit of its business.

A short summary of minimum terms/employee rights

  • National Minimum Wage (NMW). From October 2015 the NMW rose to £6.70 an hour for 21 to 24 year olds and to £3.30 an hour for apprentices. In the July 2015 Budget, the government announced that it would introduce a premium, over and above the NMW, for workers aged 25 and over to be known as the National Living Wage. The government will set the first premium in April 2016 at 50p resulting in a higher NMW of £7.20 for older workers.
  • Working time and holiday. There is a 48 hour working week cap, unless an employee opts out. For every 6 hours of work, an employee needs a 20 minute break. They are entitled to 5.6 working weeks worth of holiday a year subject to a maximum of 28 days. This amount can include the public and bank holidays.
  • Unfair dismissal. An employee usually needs 2 or more years of continuous service to claim they have been unfairly dismissed. An employer can fairly dismiss, provided it is for one of the 5 fair reasons namely, conduct, capability, redundancy, illegality or some other substantial reason. The employer must also follow a fair process, which in short usually means an invitation/explanation, hearing and appeal.
  • Redundancy. The right to redundancy pay applies after 2 or more years of continuous service. It is calculated using one weeks pay capped at £475 (as from 6 April 2015) for each complete year of service up to the age of 41. Then a week and a half’s pay (where again the week is capped at £475) for service aged 41 and over. A maximum of 20 years service applies for calculation purposes.
  • Equality Act. You must not discriminate on the grounds of a protected characteristic, such as age, race, sex or disability. This applies irrespective of an employee’s length of service and even applies pre and post the employment relationship (i.e. the interview process and when you give a job reference).
  • Family Rights. Do not forget the statutory family friendly rights, maternity and parental pay and leave. There is also the right of an employee with at least 26 weeks of continuous employment to apply for flexible working.
  • Pensions. Once an employer becomes subject to the new pension auto-enrolment duties, it must determine if it needs to automatically enrol an eligible jobholder into an appropriate pension scheme.

Do you need a written employment contract? 

You can use an oral contract consisting of express or implied terms. There is no legal requirement for an employee to have a written contract of employment. However:-

  • A written contract of employment gives certainty to both the employer and employee. It can specifically state what they are employed to do, level of pay, hours expected, and when and how much holiday they can take.
  • For key employees it is also a document that can be used to protect an employer’s trade secrets, client base and intellectual property from being exploited when that employee becomes an ex-employee.
  • Section 1 of the Employment Rights Act 1996 requires an employee to be given a statement of certain specified terms within two months of starting employment. A section 1 statement may not be a contract of employment in itself. Instead it is a statement of what has already been agreed orally or in writing. 
  • If an employee has not been given a section 1 statement they can seek compensation from their employer on the back of a successful employment tribunal claim for something else (e.g. a claim for unpaid wages or holiday) of either 2 or 4 weeks pay (subject to the current statutory cap of £475 a week), depending on how serious the tribunal considers the employer’s failure to be. 
  • Where an employer has not provided full and accurate particulars, an employee can go to the employment tribunal and ask it to determine the particulars that ought to have been included based on what the tribunal believes the parties agreed to.

Therefore to avoid uncertainty and legal risk it is best to use a written employment contract: 

  • It deals with the section 1 requirements.
  • You can specifically protect what you think is confidential to your business. Relying on just implied terms to protect your business interests is limited. Without an express written term, confidentiality is only really protected to the extent the information is a legitimate “trade secret”, e.g. like the secret recipe for Willy Wonker’s never ending gobstopper!
  • You can include reasonable restrictive covenants, to protect customers, client information, and other employees from being poached.
  • You can protect your intellectual property. You want to make sure that what is created while working for you that would benefit your business, is protected for you and you own it.