Notes on Worklaw's free Contract of Employment (revised September 2011).
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The numbering in the blue list below refers to the paragraphs as numbered in the free Contract of Employment.
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2. Continuous employment
3. Place of work
4. Collective agreements
5. Job title
6. Pay
7. Hours of work
8. Sickness absence
9. Holidays
10. Pension
11. Termination of employment
12. Lay Offs and short-time working
13. Grievance Procedure
14. Disciplinary Procedure
15. Changes to this Written Statement
16. Contract of Employment
The document is actually called a 'Written Statement of Main Terms and Conditions of Employment' because it is not a contract of employment until the employee has signed at the end of the document to confirm acceptance of Paragraph 16 which reads "I accept this Written Statement (plus any terms in a job offer letter) as my contract of employment....'
If the employee does not sign the document as drafted, for whatever reason, it remains as a Written Statement of Main Terms and Conditions of Employment.
There is no legal obligation on an employer to give an employee a written contract of employment, unless the employee is an apprentice.
There is a legal obligation on an employer to give an employee a written statement of main terms and conditions of employment.
There is no set name for this document. Some people call it, for example, 'written particulars of employment' or 'a statement of employment particulars' or, as another example name, a 'section one statement' because the obligation to give it arises from section 1 of the Employment Rights Act 1996.
We call it a 'Written Statement of Main Terms and Conditions of Employment' to give it its full name because that is what ACAS calls it. We call it a 'written statement' for short.
There is also no set format for a written statement. But however the written statement is set out it must contain the following information:
• the employer's name
• the place of work and the address of the employer
• the employee's name and the address of the employee
• the date employment began
• the date on which the employee's period of continuous employment began (taking into account any employment with a previous employer which counts towards that period - usually this applies where there is a TUPE transfer)
• where the employment is not permanent, the period it is expected to continue for
• where the employment is for a fixed term, the date when it is to end
• the job title
• the amount of pay and the interval between payments
• hours of work
• holiday pay and entitlement
• sickness and sick pay arrangements
• pensions
• whether a contracting out certificate under the Social Security Pensions Act 1975 is in force
• notice periods
• the disciplinary rules, disciplinary procedure and appeals procedure (these may be held in another document, see below)
• the grievance procedure including the appeals procedure (these may be held in another document, see below)
• any collective agreements which directly affect the terms and conditions
• where the person is required to work outside the UK for more than one month, the period he/she is to do so; the terms and conditions relating to his/her return to the UK
• The written statement must set out the employee's terms and conditions in full; it is not sufficient to refer employees to some other document, such as a collective agreement or an employee handbook.
There are, however, certain exceptions to this rule. The written statement can refer the employee to some other easily accessible document for detailed information on:
• disciplinary rules and procedure, grievance procedure and appeals procedures
• particulars of sick pay terms
• particulars of pension entitlements
• terms relating to notice of termination of the contract (i.e. relevant statutory provisions or a collective agreement).
The written statement must be given to the employee within two calendar months of the employee starting work.
Changes to the terms and conditions in the written statement must be given to the employee within one month of the change.
Failure by the employer to give an employee a written statement within two months, or to notify a change to the terms in the written statement within one month of the change, means an employment tribunal may award the employee an amount equal to two weeks' pay or an amount equal to four weeks' pay for this failure.
The reason a written statement is not an employment contract is because an employment contract exists from the moment an employee unconditionally accepts an unconditional job offer, even though not all the essential terms of an employment contract, such as hours of work, have been agreed.
As a written statement does not have to be given until within two months of the employment contract starting, it follows that the written statement cannot be the employment contract, but only evidence of what the terms of the employment contract probably are.
An employment contract can be entirely spoken; for example, if the employee agrees to start work following a meeting with the employer when nothing is put in writing at the meeting or after it. Or, partly spoken and partly in writing if, for example, the employee answered a job advert which mentions some of the terms of employment, such as the rate of pay, and then a meeting takes place. The terms in the job advert would form part of the employment contract plus whatever further terms were agreed at the meeting.
The employer might then send a job offer letter confirming what had been agreed at the meeting. This job offer letter could then also form part or all of the employment contract depending on how much necessary information it contains.
It is much better, for both the employer and the employee, if every relevant term of the employment contract is set out in writing from day one. This minimises the risk of a future dispute over the employment contract.
If you use our free employment contract we suggest that you give a prospective employee a copy and ask them to sign it at the time you make, and they accept, a job offer.
You need to complete the blanks to tailor the contract to the employee, for example, insert their job title in Paragraph 5. If you do this, and the employee signs to accept the written statement as their contract of employment, you will have an employment contract in force from day one, and you will also have complied with your statutory obligation as an employer to provide a written statement within two months as the employment contract contains all of the information, set out above, which you are required to give by law.
We now explain some of the more obscure paragraphs in the free employment contract.
Paragraph 2.1 asks for the date the employee's continuous employment began with you as the employer. This date will be the date the employee agreed to start working for you.
Paragraph 2.2 says that 'no employment with a previous employer counts as part of your period of continuous employment'. However, if you have acquired employees under the provisions of TUPE by taking over the whole or part of another business then you will need to say that the period of continuous employment starts with the date they became employed by the other business. TUPE is a very complex area of employment law. If you think TUPE might apply to your business then you need to take legal advise from an expert in employment law (such as a Worklaw consultant).
Paragraph 2.4 says 'this Statement annuls any previous agreement whether verbal or written given to you at any time'. This just means that any previous written statement or employment contract is replaced.
Paragraph 3.2 says 'the Company may move your normal place of work and/or may require you to work at other locations within a reasonable distance of your normal place of work from time to time'.
If the normal place of work is stated to be, for example, an address in north London, and the business wants to move to south London, theoretically the employer would be in breach of the employment contract by requiring the employee to move their place of work. The wording which says 'the Company may move' gives the employer flexibility in changing the place of work without being in breach the employment contract. However, note the words 'within a reasonable distance'. Any term in a contract of employment which seeks to give the employer flexibility to change the term without the agreement of the employee must be reasonable otherwise it will not apply and the employer will still be in danger of being held in fundamental breach of contract.
If an employer is in breach of a fundamental term in an employment contract the employee could resign because of the breach and claim constructive dismissal.
The closure of a place of work is within the definition of redundancy, but that is another issue.
Paragraph 3.3 requires the name of the employee's current line manager to be inserted with the line manager's job description. The reason for this is that the Grievance Procedure at Paragraph 14 and various paragraphs in the Employee Handbook say the employee should contact their line manager. Therefore, you need to make it clear who the line manager is. Obviously, you can insert more than one line manager if appropriate.
Paragraph 4 requires a statement as to whether any collective agreements apply to the employment contract. If so, details have to be inserted. A 'collective agreement' means any agreement or arrangement made by or on behalf of one or more trade unions and one or more employers or employers’ associations and relating to one or more of the matters specified below; and “collective bargaining” means negotiations relating to or connected with one or more of those matters which are;
(a) terms and conditions of employment, or the physical conditions in which any workers are required to work;
(b) engagement or non-engagement, or termination or suspension of employment or the duties of employment, of one or more workers;
(c) allocation of work or the duties of employment between workers or groups of workers;
(d) matters of discipline;
(e) a worker’s membership or non-membership of a trade union;
(f) facilities for officials of trade unions; and
(g) machinery for negotiation or consultation, and other procedures, relating to any of the above matters, including the recognition by employers or employers’ associations of the right of a trade union to represent workers in such negotiation or consultation or in the carrying out of such procedures.
Paragraph 5 requires the employee's job title or job description. Changing a job title or job description in an employment contract without the employee's consent would probably amount to a breach of the employment contract. The wording which says 'it may be necessary in the interests of the Company as a whole for changes to be made to your job title or your job description' gives the employer flexibility in changing the job title / job description without being in breach the employment contract. However, note the words 'within reason' in the next sentence. Any term in a contract of employment which seeks to give the employer flexibility to change the term without the agreement of the employee must be reasonable, otherwise it will not apply and the employer will still be in danger of being held in fundamental breach of contract.
Paragraph 6 refers to 'Pay' and you need to delete whether pay is hourly, weekly or monthly as appropriate. Pay, being wages or salary, includes bonuses, commissions, Statutory Sick Pay and Statutory Maternity Pay. Sometimes 'pay' is referred to as 'remuneration’. But 'remuneration’ is wider in that it is usually defined as pay plus whatever other monetary benefits go with the job, such as a company car, company mobile phone, health insurance etc.
'Pay' is obviously a contractual entitlement. However, as the employer, you can say that other benefits (eg company car, company mobile phone, health insurance etc) are not contractual but discretionary. In other words, theoretically, the benefit in question can be taken away at your discretion, as the employer, without the agreement of the employee. This is why such benefits are usually set out in a job offer letter or an employee handbook. As a general rule, only terms which are contractual should go into the employment contract and any other conditions of employment should go into an employee handbook or, if the condition is specific to a particular employee, in a job offer letter addressed to that employee.
However, great caution must be exercised before using your discretion to take away or suspend a benefit, such as a company car. It could be, that although the benefit is described as 'discretionary' it has become contractual because the employee had received the benefit over a number of years and has a reasonable expectation that the benefit would continue. If a discretionary benefit has become a contractual benefit then to take it away or suspend it will be a breach of the employment contract.
All employees are 'workers' although not all 'workers' are 'employees'.
All workers in the UK are entitled to be paid at least the national minimum wage which is currently (since 1st October 2011):
• £6.08 per hour for workers aged 21 and over
• £4.98 per hour for workers aged 18 to 20
• £3.68 per hour for workers aged under 18 but above compulsory school age
• £2.60 per hour for apprentices under 19 - or those aged 19 or over and in the first year of their apprenticeship.
There is a separate minimum wage for agricultural workers.
Men and women must be paid equally for doing like work or work of equal value otherwise it is sex discrimination.
Employers must not make deductions from wages without the employee's prior written agreement unless required or authorised by the employees’ contracts or by law (eg National Insurance contributions): special limits apply in retail trade for deductions to recover cash shortages or stock deficiencies.
Paragraph 7 refers to hours of work. 'Overtime' is usually the aspect which causes a problem. It is important to make clear that the employee might be required to work overtime as an employee is not otherwise obliged to do so.
Paragraph 8 refers to Sickness Absence and, in particular, to the employee’s entitlement to statutory sick pay (known as 'SSP') as opposed to contractual sick pay. 'Contractual' sick pay is the employee's entitlement to their full wages, or part wages, when they are off sick. The right to pay when off sick arises from a specific term in the particular employment contract. 'Statutory' sick pay is the Government sick pay scheme which entitles all employees to a specified amount of sick pay providing they qualify under the scheme. Paragraph 8 is setting out what the employee must do to qualify for SSP.
Paragraph 9 refers to Holidays. The contract as drafted gives employees the minimum statutory holiday entitlement only. This is currently 28 days in the holiday year for employees who work a 5 day week. You can give your employees longer holidays if you wish. The minimum statutory holiday entitlement is inclusive of the 8 bank holidays (see Paragraph 9.4.) You can if you wish exclude the 8 bank holidays from the statutory holiday entitlement which means that your employees would then have 32 days (24 plus 8) this holiday year.
Paragraph 10 refers to Pensions. The employer is obliged to say what pension scheme is applicable to the employment. If the employer employs 5 or more employees and does not already offer pension provision, the employer is obliged to offer access to a 'stakeholder' pension scheme.
The employer must also say whether or not there is a certificate contracting out of the additional State Pension in force. If you are in doubt as to whether there is, or is not, a contracting out certificate ask your pension advisor.
Paragraph 11 refers to termination of employment. As drafted, the Employment Contract gives the statutory minimum period of notice required to be given by an employer to an employee, which is one week for each complete year worked to a maximum of 12 weeks. An employer can increase the period of notice. For example, it is common for an employment contract to say that a monthly paid employee is entitled to a month's notice.
Paragraph 11.3 reserves a right to an employer to make a payment in lieu of notice. If this right was not included, any payment in lieu would be a technical - if probably academic - breach of contract by the employer.
Paragraph 12 refers to layoffs and short time working. An employer needs to reserve the right to layoff staff or place staff on short-time working in the interests of the business, otherwise to do so would be a breach of the employment contracts.
Paragraphs 13 refers to the Grievance Procedure. As drafted, these procedures follow the ACAS Guide on Discipline and Grievances at Work.
Paragraph 14 refers to the Disciplinary Procedure being in the employee handbook. You can download a free basic Employee Handbook designed to go with the free Employment Contract.
Paragraph 15 refers to the right to make reasonable changes to the Written Statement. Any change must be notified in writing within one month of the change.
Paragraph 16 refers to the conversion of the Written Statement into an Employment Contract if the employee signs.