How to Draft an Employment Contract

Introduction to Employment Contracts: Why They Matter

As a cornerstone of any successful business relationship, the employment contract is not merely a piece of paperwork. Instead, think of it as a roadmap that sets out the relationship ahead for both employer and employee. It’s a vital tool for setting clear expectations, establishing mutual trust and above all maintaining harmony in your workplace. Knowing how to draft an employment contract matters.

In my experience as an employment law specialist, I’ve seen first hand the repercussions of inadequate employment contracts. Misunderstandings that could have been easily prevented can snowball into expensive legal disputes. A comprehensive contract can help you avoid such complications, safeguarding the interests of your business.

The contract also shows your employees that you respect their role within the organisation. It gives them the peace of mind that comes from knowing their rights, responsibilities and rewards are clearly defined and protected. Remember, a confident employee is a more engaged and productive employee.

Now, let’s look into the standard elements of how to draft an employment contract:

Job Title and Description: Be as detailed as possible to prevent future disputes. Specify what the role entails and what is expected of the employee in terms of daily tasks, responsibilities, and objectives.
Start Date and Contract Length: The start date is usually straightforward but the duration of employment can vary. If the role is for a specific term, mention the end date. If it’s indefinite, state that the position is permanent.
Compensation: This is one of the most vital elements of a contract. Clearly stipulate the salary or hourly wage, how often the employee will be paid and details about bonuses or commission structures if applicable.
Working Hours and Location: Define the expected working hours, including start and end times, breaks and any expectations around overtime. Also, clarify where the work will be carried out – is it fixed at one location or could it change?
Termination Conditions: Outline the procedure for terminating the contract, including notice periods and any conditions for instant dismissal.

Getting these elements right from the outset is crucial for a healthy employer-employee relationship. In the next section, we’ll look at other essential elements to incorporate into your contract.

Essential Elements of how to Draft an Employment Contract

There are other essential items that need careful consideration and including these creates a transparent working relationship and also safeguards your business against legal issues.

Let’s start by clarifying the nature of employment. It’s important to stipulate whether the employment is permanent, temporary, contract-based or part-time. Each type of employment has unique legal implications, so a clear definition is essential to prevent potential misunderstandings or legal pitfalls.

Additionally, some less thought-of but no less important elements should be included in your employment contract.

Let’s consider these below:

Holiday Entitlement: By law, full-time employees in the UK are entitled to at least 28 days of paid leave per year, including public holidays. Part-time employees are entitled to a proportionate amount based on their work schedule. Clearly defining the holiday policy ensures that there’s no room for confusion about time off.
Sick Pay: Detail your company’s policy on sick leave and sick pay. Statutory Sick Pay (SSP) is a legal requirement but if your company offers a more generous sick pay scheme, be sure to include the specifics in the contract.
Probation Period: If you want to include a probationary period, specify the duration and terms. This helps manage expectations around performance and allows for a review period before the employment contract becomes fully binding.
Pension Schemes: If you’re enrolling your employees in a workplace pension scheme, include these details in the contract. The document should state which scheme is being used and any obligations the employee has regarding contributions.

Remember, every detail matters when it comes to drafting an employment contract. Each of these elements contributes to building a healthy and productive work environment. A well-drafted employment contract is a long-term investment in the stability and success of your business.

Drafting the Specifics: Tailoring to Your Business Needs

We’ve established the foundation of an employment contract and its essential elements but the contract should also fit the unique needs of your business and the specific role of your employee.

Every business is unique and it’s vital that your employment contracts reflect this. Whether it’s specific clauses for protecting intellectual property or conditions for remote work, tailored provisions can help create a more harmonious and productive workplace.

Take, for example, a software development company. In this case, it would be wise to include non-disclosure and non-competition clauses in your employment contracts. These clauses are designed to protect sensitive business information and prevent employees from leaving your company to join a direct competitor.

Here are some key points to consider when personalising your contracts:

Confidentiality Clause: This prohibits employees from sharing sensitive information during and after their employment.
Non-Competition Clause: This prevents employees from working with competitors for a certain period after leaving your company.
Intellectual Property Rights: Clearly state who will own the rights to any work created by the employee during their time with your company.
Flexible Work Conditions: With remote work becoming more common, it’s important to include any conditions for working from home or flexible work schedules.

Bear in mind, this isn’t an exhaustive list. Depending on your business type and the specific role of your employee, you might need to include other tailored terms.

Drafting these specifics can be a complex task. Every word can carry weighty legal implications. One-sided contracts that are overly restrictive may not hold up in court and can also damage relationships with employees.

Legal Requirements and Best Practices on How to Draft an Employment Contract

No matter how well-drafted your employment contract is, it won’t be worth the paper it’s printed on if it isn’t compliant with current UK employment law. These laws exist to protect the rights of workers and maintain a balanced relationship between employers and employees.

Firstly, let’s consider statutory rights – these are the rights given to employees under UK law. Every employment contract must at least meet the minimum standards set by these laws. They cover a wide range of areas, from the minimum wage to maternity and paternity rights.

The National Minimum Wage is a clear example. Regardless of the terms of an employment contract, you are legally obliged to pay your employees at least the minimum wage. Here are a few more examples of statutory rights:

Maternity/Paternity Rights: Employees have a right to take time off to have a baby or adopt a child, and may be eligible for statutory maternity or paternity pay.
Discrimination Laws: It’s crucial that your contract doesn’t discriminate on the grounds of race, gender, age, disability, religion, sexual orientation, etc.
Health and Safety: You have a duty to provide a safe and healthy working environment for your employees.

Aside from statutory rights, there are other legal considerations to bear in mind when drafting your employment contract. For example, the contract must not include any clauses that are unfair or deceptive. If it does, they may be deemed unenforceable by a court.

To ensure your employment contract is legally sound, here are some key steps to follow:

Review Regularly: Employment laws change regularly. Keep yourself updated and periodically review your contracts to ensure compliance.
Seek Legal Counsel: While it’s possible to draft an employment contract by yourself, getting legal advice can ensure you’re not overlooking any important legal details.
Transparent and Clear: Ensure the terms are clear and easy to understand, avoiding any ambiguous language that may lead to misunderstandings.

Reviewing and Updating Employment Contracts: Staying Current

It’s not enough to simply draft a solid contract at the start of employment and then file it away for the duration of that employee’s tenure. The contract should also be regularly reviewed and if necessary updated.

An employment contract is not a static document. It needs to be flexible and dynamic and able to adapt to changes in the law and your company’s policy. Regular reviews ensure that your contracts remain up-to-date and legally compliant, while also reflecting the current reality of your employees’ work environment.

For instance, if an employee is promoted or their role significantly changes, their contract should be updated to reflect this new reality. Equally, if your company introduces a new policy for example around remote working, this should be integrated into the relevant contracts.

The law can also change. With the introduction of new employment legislation or updates to existing ones, your contracts may need amendments to stay compliant. A contract that was fully compliant one year may be outdated the next.

Here are a few things to keep in mind when reviewing and updating contracts:

Set Review Dates: Regularly schedule reviews, such as annually or bi-annually. Don’t wait for a problem to arise before reviewing your contracts.
Monitor Legal Changes: Keep track of changes in employment law and promptly update your contracts when new legislation comes along.
Communicate Changes: Whenever a contract is updated, communicate these changes to your employees and make sure they understand what the changes mean.

Remember, any changes made to the contract should be agreed upon by both parties. You cannot unilaterally impose changes without your employee’s consent.

To wrap it up, how to draft an employment contract is a comprehensive process that demands your attention and care. It’s about creating a robust framework for your relationship with your employees, one that promotes a culture of transparency, respect and fairness. Regularly reviewing and updating contracts is a part of that process. Ensuring your contracts are not just legally compliant, but also a true reflection of your business values and practices.

Remember, when in doubt, seek legal counsel. It’s far better to invest time and resources in getting it right the first time, than deal with legal issues later on.

Seeking Legal Advice: The Finishing Touch

Drafting an employment contract requires careful consideration from defining the job role to ensuring legal compliance. While it’s feasible to take a DIY approach, especially for small businesses, seeking professional legal advice can add an additional layer of assurance.

Engaging an experienced employment lawyer to review your employment contracts offers numerous benefits. They bring a wealth of knowledge about current UK employment law. They can help ensure your contracts are fully compliant, reducing the risk of potential legal issues.

Here are a few key points where legal advice can be invaluable:

Identifying Legal Pitfalls: An experienced lawyer can identify potential legal pitfalls in your contracts and help you avoid costly mistakes.
Creating Tailored Clauses: If your business has specific needs, such as confidentiality or non-compete clauses, a lawyer can help draft these to provide robust protection.
Understanding Legal Changes: Employment law is a dynamic field, and keeping up with changes can be challenging. A lawyer can help you understand new laws and how they affect your contracts.

However, while the legal assurance that a lawyer brings is crucial, it’s important to remember that the drafting process isn’t solely about ticking legal boxes. It’s about crafting a document that reflects the working relationship you want to have with your employees.

This is where the principles of clarity, fairness, and transparency come into play. A good employment lawyer will not just ensure your contract is legally robust, but also that it’s fair to your employees and clear in its terms.

Remember the importance of clear communication, attention to detail and consideration of your needs and those of your employees. With these principles in mind and with the support of legal advice, you’ll be well on your way to crafting effective and comprehensive employment contracts.

Just remember, a well-drafted employment contract is more than just a legal requirement. It’s a vital tool that sets the tone for your relationship with your employees and can play a crucial role in the success of your business.

Call John Bloor at EBS Law on 01625 87 4400 if you are an employer and need free advice on Drafting an Employment Contract.