Are you a business owner that is writing up their very own employee contracts for the first time? Or perhaps you already have some experience in employee contracts, but you feel that they need an improvement. Employee contracts are exceptionally important binding documents that are in place to protect both the employee and employer and immense care should be taken when creating these contracts.
An employment contract does not just stipulate the terms of employment but is also a resource for a future employee so that they know what to expect from their new job.
As small business enthusiasts, the team at Real Business has put together this contract review checklist to help business owners ensure that their employment contracts contain all the necessary clauses.
The first thing that needs to be laid out is the title and the description of the job at hand. It should also be stated whether the position is full-time, part-time, or on a casual or contractual basis. The job title and description should clearly detail the role that the employee will have in the company, the duties and responsibilities that they’ll need to undertake, and who they’ll report to. A job description should also describe the uniform, if any, and how employees should present themselves at work.
Does your employee need a driver’s license? What about proof of training? Or a competence certificate? Whatever your employee requirements are, they should be made clear, and it is a good idea to stipulate that it is the responsibility of the employee to keep these licenses, certificates etc., up to date. The employee would usually need to provide their employer with proof of these documents. Certain companies will provide their employees with the necessary training and resources to attain these certifications.
Working hours should always be very clear and should include:
- Starting time
- Finishing time
- Allowed lunch break
- When shift patterns will be released (if working shifts)
- The penalties involved with arriving late etc.
- If the employee is expected to work weekends, public holidays, night shifts etc.
If changes to working hours should occur, there should be some sort of notice period involved.
Remuneration is a vital element of any job. The wage or salary should be included in the contract (although this is usually subject to yearly increases). The day on which employees can expect to be paid should also be included. This allows employees to budget efficiently and ask for salary advances if that is allowable within your company.
Bonuses may be contractual (e.g. if an employee makes x amount of sales, they receive a bonus to the value of x), or they can be non-contractual in that bonuses and incentives are up to the employer or manager based on performance. Make it very clear as to how employees can effectively achieve these bonuses.
Bonuses and incentives are a fantastic way to increase productivity and motivate your staff to truly go the extra mile.
A full-time worker in the UK is entitled to 28 days holiday each year, and this should be clearly stated in the employment contract. These holiday days should be paid and should not interfere with employee salary. In some cases, employers may ask or even insist that employees take some of their paid holiday leave on national bank holidays, but that would be up to the employer.
Part-time workers’ holiday leave will be directly proportionate to how many days they work each week. I.e. If a part-time worker works 3 days a week, they’ll be entitled to 16.8 days of holiday leave every year.
Freelancers and contractors are not usually entitled to any sort of holiday pay, although they should be allowed to take a holiday upon request.
Notice periods have to do with termination and quitting. If an employer wishes to terminate the employee’s employment contract, they’ll need to give them a notice period of:
- One week for employees who have been employed for between one month and 2 years
- One week for every year of employment for employees who have worked for the company for anywhere between 2 years and 12 years.
- 12 weeks notice for employees that have been employed for 12 years or more.
These notice periods should be clearly laid out in the employment contract. In most cases, you’ll need to continue to pay the employee throughout the notice period.
If an employee plans on quitting, there should also be some sort of notice period stipulated so that your company will be able to find a replacement in time. Most businesses ask for at least one week’s notice from employees who plan to leave the company.
Will your employee’s employment contract come into effect immediately, or will there be some sort of probation period? Probation periods usually last around one to two weeks. This gives you the opportunity to get to know how a potential employee may gel with your company and if they are capable of the tasks at hand.
A probationary period gives a starting date of the contract should everything go according to plan, and should the employee’s work be up to scratch.
Performance reviews are also known as appraisals and are a fantastic way for motivating staff and gaining a clear understanding of your staff’s skill sets and work ethics. If performance reviews are something that your company partakes in, you may want to list the details of how your performance reviews work in your employment contract. Details could include:
- How often do performance reviews take place
- When performance reviews take place
- In what way will their performance be reviewed
- Are there incentives linked to performance reviews
- Are there penalties linked to performance reviews
It is important for future employees to know exactly what is expected of them.
Confidentiality clauses are put in employment contracts to protect both the employee and the employer. During their time working at a company, employee’s may have to share personal and confidential data with their employers. This information could include criminal records, as well as security data such as CCTV footage and taped phone calls etc. In a confidentiality clause, it should state that this information should never be leaked and that security data should be deleted in x amount of days. It is your duty as an employer to treat your employees’ personal data with care.
In addition, your employees, over the course of their employment, may discover some confidential information about your company. Whether it be secret recipes or your marketing plans for the future, you do not want your ideas leaked to competitors or the general public. The repercussions for breaches in confidentiality should be plainly listed.
Benefits are an integral part of any employment contract as many employees are attracted to certain jobs based on the benefits alone. Mandatory employee benefits in the UK include:
- Retirement / pension
- Holiday pay
- Maternity leave
- Paternity leave
- Sick pay
Additional benefits, which are not mandatory, include:
- Income protection
- Life assurance
- Critical illness insurance
- Dental insurance
- Private medical insurance
- Employee assistance programs
- Employer-sponsored retirement
- Virtual GP services
It is up to you if you want to offer any of these additional benefits, but offering these are a great way to draw in potential employees of value.
It should be noted that freelancers and contractors are not entitled to any benefits, although your business can make the decision to offer them should they wish to do so.
Employee perks are another great way to draw quality employees in. Any perks you want to offer are completely up to you as an employer and are by no means mandatory. Common company perks include:
- Company car
- Lunch allowance
- Child care vouchers
- Season tickets
- Workplace cafeterias
- Workplace facilities such as game rooms, gymnasiums, showers etc.
In some cases, employment contracts are governed by a certain timeframe. In other cases, the contract is somewhat evergreen. It is recommended that contracts are only valid for certain terms so that there is a chance to have them reviewed yearly or so to make sure everything is still favourable to both the employee and the employer.
Ownership of Work
If you are a company that is involved with coming up with new ideas, products, and inventions, you may want to put a clause in that covers ownership of work. If there isn’t, an employee that invents something while using your tools and resources may be able to legally claim it as their own intellectual property and even sell it to a rival company. You will save yourself a lot of trouble by including this clause if this may potentially be an issue for you.
Ensure that the contract is non-discriminatory
This is 2021, and there is no place for discrimination in the workplace. Allow your HR rep to read through your contract to ensure that it is non-discriminatory by nature and that it is fair to people of all ages, genders, races, and disabilities.
Expressed terms are all of the terms that were explicitly expressed in the contract, but even if certain terms were not expressed, there is a list of implied terms that need to be followed. Some implied terms, which are basically seen as a given, include:
- It is the responsibility of the employer to provide the employee with a safe workspace.
- Both employer and employee need to make an effort to maintain a relationship with one another that promotes trust and confidence.
- Employees need to follow all reasonable orders from their employer.
It is better that these implied terms are physically expressed in your employment contract so that everyone is on the same page. It should be noted that expressed terms are not only found in the contract but in the job advert and in any official communication between the employee and employer.
Incorporated terms are documents that may be incorporated into the employment contract. The most common of which is the employee handbook which should give certain guidelines and rules to the employees in a clear and concise way. Examples of misconduct should be outlined, and the handbook should be packed full of useful information to give new employees the confidence they need to navigate their new workplace.
Any other documents that you think may be useful to the employee can also be attached to the employment contract.
Changes to contracts
Contracts may need to undergo certain changes, such as
- Changes in pay
- Changes in working hours
- Changes in responsibility
- Changes in place of work
If these changes were to occur, you would need to gain an agreement from the employee.
Go through the contract
It is important that you check the contract for any confusion and errors, and instead of just handing it over to your employee, you should go through the contract with them and ensure that they understand everything. Allow them to ask any questions that they may have so that you are on the same page from day one.
The last thing you need to do is ensure that you and your new employee (or withstanding employee) signs the contract and seals the deal.
If you’re at all unsure about if your employee contract covers all bases, it is best that you go to an HR or legal professional for advice. If your contract has any loopholes, you could be in for some trouble in the future. Care should be taken when creating employment contracts, and they should always be within the law. For example, you need to offer the obligatory benefits, and you cannot offer an employee below minimum wage etc.
Ensure that you keep an online copy and a hard copy of each employee’s employment contract in a safe place so it does not get lost as it is a very important document that you have to report back to.