Are Your Contracts of Employment Legal?

Are your contracts of employment legal within government guidelines? What should be included in them? Find the answers to these questions and more here!

With all that’s been happening in the world since the start of 2020, and the return to ‘normal’, many employers have missed the fact that the law on contracts of employment changed on 6th April in 2020 as part of the Governments ‘Good Work Plan’. What changed?

• The obligation to provide the written statement (contract) was extended so that it now must be given to workers as well as to employees.
• Contracts must be given to both employees and workers before or on day 1 of employment.
• New obligations were brought in regarding what should be included within a contract of employment.

While most of the changes are straightforward, a few have caused headaches for employers. What additional items need to be included? Section 1 of the Employment Rights Act 1996 details several particulars of employment, the majority of which must be provided in a single written document (usually referred to as the contract). There’s also a new requirement to include:

• Details of the normal working hours and working pattern,
• Entitlement to paid leave (including maternity and paternity leave),
• Any probationary period (and its length),
• Any benefits and any training the employer requires to be undertaken including any mandatory training provided by the employer for which the employer will not bear the cost.

However, there are also problems arising from the changes, that involve working hours. As mentioned above, the contract must now include details of normal working hours, the days of the week the worker is required to work and whether such hours or days may be variable and if so, how they vary or how that variation will be determined. This can be difficult, especially for those employers who engage casual or zero-hours workers whose working patterns may change on a regular basis depending on the assignment they’re working on. Often, with such workers, employers have an initial contract setting out the general terms and then separate statements for each assignment setting out the hours of work and other assignment specific terms. However, considering the change, this specific information now needs to be included within the contract given on day 1.

Employers will want to avoid the need to issue a new contract with each assignment but including all possible variations is unrealistic for some. On the other hand, wording which is too generic may fall foul of these new requirements. A compromise might be to set out a typical working pattern but indicate that the worker will be notified of the hours and days they will be required to work as clearly as possible in advance of each assignment.

All contracts have to include details of any other benefits provided by the employer that are not already covered elsewhere (e.g. sick pay, pension and holidays). This means that contributions in cash or kind like vouchers, travel to work loans would also now need to be included in the written statement. There’s a question over whether the contract should include details of non-contractual benefits as well as contractual benefits. Employers would therefore need to include any benefit which is provided to employees and workers as a matter of general practice, but make sure that where the benefit is discretionary or non-contractual this is stated clearly in the contract! Again, this is a potentially onerous requirement particularly for employers who don’t provide standard benefits or whose benefit offering differs say depending on location or where there’s a flexible benefit offering where employees can choose which benefits to take up.

In addition, benefits are often changed on a regular basis which would result in new contracts having to be prepared whenever such a change occurs. There’s no easy way to deal with this in practice so it’s likely that many employers will continue to include general wording in the written statement listing the benefits which are available even if they’re dependent on certain criteria or policies and then referring employees and workers to the intranet or handbook where further details can be obtained. While not strictly compliant with the new requirements, as this would not provide all the information in a single document, it seems practically this might be the easiest way forward for many businesses.

Employers must now also include details of any training entitlement they provide, including specifically listing any part of that training which is mandatory and paid for by the employer as well as any other mandatory training which the employer will not pay for. Details of the mandatory training (whether or not paid for by the employer) must be set out in the contract although details of non-compulsory training can be set out in another easily accessible document.

Again, this can be difficult where there are numerous compulsory courses, particularly in relation to different areas of the business, either meaning that different versions of the written statement would be required, or else including all the options in one version. In addition, where new compulsory courses are added in the future, perhaps because of developments in the law as we saw with GDPR, this would require employers to issue new written statements. Again, therefore, many employers are taking the approach of listing the key mandatory training courses and then referring employees and workers to further information available either in other documents or on the intranet.

Employers may also be concerned that extending contracts to workers may confuse their employment status. This is because many of the terms that now must be included are associated more with being an employee than a worker (for example statutory sick pay, maternity leave etc). However, the changes were made to increase transparency, give workers clarity on their employment relationship and to ensure workers can access fair and decent work, not to alter their worker status. Practically, however, it is advisable to have separate contracts prepared for employees and workers to ensure that the wording is consistent with their intended status. Ultimately, employers may decide that a practical approach to these points is the best way forward. The risk is that an employee or worker could bring a claim to the Employment Tribunal alleging that the contract was inaccurate or incomplete, but in such circumstances the tribunal would determine what particulars ought to have been included.

It is only where the employee or worker also has a successful substantive claim against the employer (such as for unfair dismissal, discrimination, breach of contract or unlawful deduction from wages), and at the time such claim was brought the employer is still in breach of its duties under section 1, that they can claim compensation for the breach. In such circumstances, the Tribunal must make a minimum award of two week’s pay and may award up to four weeks’ pay if it is just and equitable in all the circumstances. Given the sums involved are not significant, employers may be inclined to take a commercial approach.

For more information on the writers of this article, Skora HR, click here.