Have you taken the time to protect yourself against Risk?
I’m sure you have by having business insurance in place and contracts with your suppliers and clients. But what about your employees? By have having incorrect or out of date Contracts of Employment and HR Policies, they actually introduce risk to the business – they do not offer the robust protection employers may need if things do go wrong, and they do not comply with current employment legislation, which may result in a legal claim. We have carried out a significant number reviews, and identified a number of common issues.
Firstly, what is a contract of employment?
A contract is the agreement between the employer and employee which outlines the rights and obligations of both parties. A contract always exists between an employer and employee, even if there is no written contract of employment.
Do I have to give employees a contract of employment?
All employers are currently required by law to give employees a ‘written statement’ of terms and conditions of employment within two months of their start date, however this will change from next 6 April 2020, when all employees will be entitled to receive a statement of written particulars on day one of employment (for any period of employment lasting longer than one month).
What should I include in the written statement?
There is a list of statutory information that must be included in a ‘written statement’, which is an outline of the basic elements of the employment relationship:
- The names of the employer and employee
- The date the employee started work
- The amount of pay the employee will receive and the arrangements for payments
- The hours of work
- Holiday entitlement
- Notice periods
- Job title
- Location of the job
- Disciplinary, dismissal and grievance procedures
- Sick pay
- Pension arrangements
What are the risks of not issuing contracts of employment?
If you fail to provide a written statement to employees, you face a number of key risks:
- Employment Tribunals: are costly, disruptive and time consuming. Employees can choose to make a claim in an employment tribunal if they have not been given a written statement in order to force their employer to provide this to them. Employment tribunals can be devastating for SMEs if an award for damages has to be paid to an employee, or a number of employees.
- Penalties: if an employer fails to fulfil their legal duty to provide employees with a written statement, employment tribunals can penalise them for this. Each employee can be awarded two to four weeks pay (capped at £450 per week).
- Risks of having only basic written statements: the list of statutory information above is the bare minimum employers are legally required to provide in writing to their employees. We would strongly recommend that employers have comprehensive contracts of employment in place to protect their business and give them the structures in place to effectively manage situations when things don’t go to plan, for example:
- Probationary period (with a reduced notice period)
- Intellectual property
- Restrictive covenants (to prevent employees from poaching clients or other employees should they leave)
- Arrangements for termination of employment, including garden leave
- Terms and conditions change
What are the common issues we have found when reviewing Employee Handbooks and Employment Contracts for SMEs?
- Contracts do not comply with current legislation: they haven’t been updated to reflect changes to shared parental leave and data protection (GDPR) for example.
- They are not issued with an Employee Privacy Notice (they should be to comply with GDPR.
- They do not include comprehensive post-termination restrictions, and so do not effectively protect the business when an employee leaves.
- They do not contain robust confidentiality clauses.
- They do not contain all the information needed, for example, clauses for suspension, garden leave, mobility, other employment, return of company property and many others!
- Contractual information is included in the handbook and non-contractual information is included in the contract – it is critical that it is clear which documents are contractual and non-contractual, to give the business flexibility when they want to make changes.
In summary, they actually introduce risk to the business – they do not offer the robust protection employers may need if things do go wrong, and they do not comply with current employment legislation, which may result in a legal claim.
Help is at hand – OptHR are currently offering a complimentary employment contract and HR policy review for all new clients. Providing you with a commentary of the risk and shortfalls on your legal requirements, and good practice which meets the needs of SMEs.
If you would like further information or advice, or would like support with your written statement of terms and conditions of employment, please contact us at firstname.lastname@example.org