UK Contracts of employment
10 quickfire questions to test your knowledge!
Welcome to this HR blast from Jaluch on contracts. As a training company we would never want all of our readers to be just passive readers 😊 so this time we have a few questions for you!
The context of this is that we have in recent months seen coming through our advice desk a large number of contract queries that in some cases, are far from simple to answer…hence our focus today on contracts of employment! You might even enjoy using these as a fun CPD session if you are part of a wider HR team.
Read through each question below and see if you know the answer, once you've had a think and are ready to see the answer, click each question tab to reveal the answer!
If they are more than just a contractor (on a contract for services) for example because you are now paying them through PAYE, BUT they do not have the full status of an employee (on a contract of employment) for example because they are not granted certain benefits given to your employees, then you will probably put them on a Workers’ Agreement – so neither employment contract nor contract for services. As with all things though, it will entirely depend on the arrangement you have with each particular ‘worker’ and we advise you get specific advice for each case.
You have a great employee on a fixed term contract and you are thinking about extending the contract. It finishes today but you don’t have time to meet with the individual for another week. You ask them to keep working and say you will soon discuss a contract extension. What is their contractual status between end of fixed term contract and any agreement that might come out of that later discussion?
Ah! Your lack of organization has potentially created a bit of a minefield should an extension not go ahead as planned or should any dispute arise. We suggest that what you now have in place is an ‘implied contract’, the terms of which might be clear given the original contract in place but for example in the case of a notice period, the terms are anything but clear. In this case you would revert to statutory notice periods – probably! Again, get advice if any disputes arise.
In most cases of contractual change (salary, address, new benefit etc) you can issue a ‘variation to contract’ letter rather than reissue the whole document. We believe it is good practice though once every 3-5 years to reissue the whole contact so that everyone is clear on all the terms and you have a high degree of consistency across all your team members. If you are changing 5+ paragraphs in your contract, for tidiness, legality, business change etc it is probably better to reissue the whole thing than a complex variation to contract letter.
No, but some might consider getting signatures ‘tidy’. Most business nowadays use Docusign or equivalent for issuing these kinds of documents and of course using this to get a signature means you have an automatic back up of documents to rely on should questions ever be raised. Emails notifying employees of a variation to contract invariably never make it on to an employee’s file…in our experience!
Again, it is tidy for all people working in an organisation to have clear paperwork setting out how they are paid, who they are paid by and the terms of their work and employment. If a director is a director in name only (i.e. they are not registered as an executive director at companies house) then ‘director’ in this case is probably just a job title and you should definitely have a contract in place. For executive directors who are also shareholders you may take a view as to what, if anything, you wish to issue. Its good practice to have something in place and most commonly a directors service agreement would be a more appropriate document than a contract of employment. Many non executive directors are on contracts for services rather than a contract of employment or directors service agreement. Again, get advice if you are unsure or have a dispute.
If you are aware of the clause eg because the employee has shown you or their previous employer has written to you letting you know of the existence of such a clause then you need to be careful not to be complicit i.e. do not knowingly allow your new employee to breach their former contract. You can be held responsible in law even though it was not you who signed the contract.
What do you do if you have an obligation in your contract for all staff that no one has ever enforced, but now you want to start enforcing it? An example might be ‘we have a 3 day shut down at Christmas and you are required to reserve 3 days holiday for this’ – working practice until now for this example has been to give unpaid leave during this 3 day period for anyone who doesn’t have enough holiday left.
Past practices and precedent means that you have probably invalidated the original clause you had. So start consulting with your staff (12 weeks is a good period to consult over) and seek to get you’re their agreement to bring the clause back in. In addition an employer can, as with all holiday, give notice to an employee to take holiday, as long as twice as much notice is given, compared to the amount of holiday you would like them to take.*
*Under reg.15 of the Working Time Regulations 1998 (SI 1998/1833) an employer may nominate dates on which an employee must take some or all of their statutory annual holiday entitlement, provided that the employer gives the required advance notice. The notice required is a minimum of twice as many days as the number of days' holiday that the employer wishes the employee to take.
Is your contract currently enforceable under UK law? Probably. If they breach their contract whilst outside the UK you might want to check if you still have the right to enforce it. Understand your contract vulnerabilities eg to restraint of trade, confidentiality etc and get legal advice. You might also consider that most HR teams simply cannot begin to understand the personal and corporate taxation laws of other countries. Do you need to warn your employee they might be exposed to double taxation? Is this even your responsibility? And don’t get us started on data protection legislation challenges when someone is out of territory! Just be careful for what on the face of it seems simple, is anything but - and many business now ban international working.
When HR stops keeping the paperwork tidy then life gets complicated and messy. It may be that everyone knows what they are doing and what is expected but, just to be safe, please do those letters and issue any necessary updated contracts. Get it all signed off and filed. As a side note, are your contracts clear about whether home to work travel costs can be claimed by the employee as for permanent home workers and not considered by HMRC as a benefit in kind. There is a taxation cross over here as well as additional health and safety duties in regards to your need to protect workers, even in their own homes. Think more widely than just the contract of employment when keeping things tidy and compliant.
You send out updated contracts that includes a clause around the claw back of training costs should an employee leave within 12 months of going on a course. One employee fails to sign. They leave a few months later. Can you rely on the clause to now claw back training costs recently incurred for this employee?
There is a difference in law between a refusal to sign and a failure to sign. If your employee has simply failed to sign, then you may be able to enforce this clause. However, if they did not sign after indicating why they were unhappy with it, then that is a refusal to sign. In which case the clause cannot be enforced. Again, please do come to us to ask for specific advice if you have any issues.
Keeping things tidy might suggest you can delete, shred, or bin old documents after 6 months which allows for an ex employee to have brought any tribunal claims. However many organisations keep such documents for 6 years which is in line with how long financial documents need to be kept for tax purposes and as long an ex-employee has to make a breach of contract claim.
We might argue that what the law requires is no more than is ‘reasonable’ and with the move to digital payrolls etc. are all the HR documents on a person’s file really needed for 6 years? In exceptional circumstances such as issues around public liability, some documents are kept for up to 20 years.
Jaluch doesn’t just give advice on HR matters, we are also trainers and love sharing our knowledge to build confidence and competence. Surely far better to educate your managers and HR teams then keep on dealing with issues that arise simply because someone ‘didn’t know’? Please do ask us about our training that includes UK employment law or check out our training store:
Please note that many of these courses include soft skills as well as knowledge building of what the law requires:
- TUPE training for managers
- Employment law essentials for managers
- Data Protection
- Managing discipline and dismissals
- Managing grievances
- Conducting investigations
- Note taking at formal meetings
- Equality Act and discrimination laws
- Managing performance
- Managing Absence
- Recruiting safely
- Staff representation and consultation