The relationship between employee and employer is underpinned by a contract, however in many cases the contract is not always necessarily a written one.
The Employment Rights Act 1996 requires workers to provide written particulars of employment to the employee within two months from the start of employment. This is known as a Section 1 Statement. It is not a contract of employment. It will state the core terms of employment and include job title, place of employment, frequency of pay, provisions relating to the number of hours, holiday entitlement, sickness, pension and length of notice.
Ensuring that these details are included in a written employment contract is not only beneficial for the employee but can also offer significant advantage to the employer. The employer can include various rights that vary terms which would otherwise by implied by law. These often include:
- Flexibility about the employee’s place and hours of work
- Specified holiday restrictions
- Restriction on an employee working for a competitor
- A minimum notice period to be given by an employee
If such terms which may be necessary to the business are not recorded in writing, it may be very difficult to impose them at a later date.
Employment law is currently going through a significant number of major changes, making a binding contract all the more important for both parties. The latest proposed “Rights4Shares” scheme announced by George Osborne will mean employers can have the option of offering shares to employees in return for some of the rights stated above as well as relinquishing their rights on unfair dismissal, redundancy and flexible working requests.
Workers could also be exempt from capital gains tax when they sell company shares allotted to them.
A further reason that it is extremely desirable for an employer to have written terms for all of their employees relates to the prospect of business sale. Whether the sale of the business is by shares or assets a purchaser will certainly expect to see written terms for all employees. However if the written terms impose a detrimental change in relation to a business sale, it could give rise to an automatically unfair dismissal.
All employers should recognise the legal requirements to have a written employment contract or written statement of particulars. This is not only a legal requirement but also It goes without saying that it makes good commercial sense to have a written contract of employment with sets out the rights and obligations of each party.
About the author: Diane Massey is Principal and head of Civil Litigation and Employment Law at DSM Legal, a leading solicitors firm Warrington, Cheshire which specialises in employment law for employees and employers.