Are your Employment Contracts Legal?

It's been a crazy 18 months, and the return to more of a normal life has been so very welcome. However, there's one thing I've noticed.?Many employers have understandably missed the fact that the law on employment contracts changed in 2020 as part of the governments 'Good Work Plan'.

So what changed?

1: The obligation to provide the written statement (contract) was extended so that it now must also be given to workers

2: Employers must give both employees and workers the contract before or at the latest on day 1 of employment.

3: There are new obligations regarding what should be included within a contract of employment.

While most of the changes are straightforward, a few have caused a headache for employers.

What additional items need to be included?

Section 1 of the Employment Rights Act 1996 details several particulars of employment, the majority of which must be provided in a single written document (usually referred to as the contract).

There’s a new requirement to include:

1: details of the normal working hours and working pattern,

2: entitlement to paid leave (including maternity and paternity leave for example),

3: any probationary period (and its length),

4: any benefits and any training the employer requires to be undertaken, including any mandatory training provided by the employer for which the employer will not bear the cost.

Problems arising from the changes?

Working Hours

As mentioned above, the contract must now include details of normal working hours, the days of the week the worker is required to work, whether such hours or days may be variable, and if so, how they vary or how that variation will be determined.

This can be difficult, especially for those employers who engage casual or zero-hours workers whose working patterns may change regularly depending on the assignment they’re working on.

A compromise might be to set out a typical working pattern but indicate that the worker will be notified of the hours and days they'll be required to work as clearly as possible in advance of each assignment.

Benefits

All contracts have to include details of any other benefits provided by the employer that are not already covered elsewhere (e.g. sick pay, pension and holidays).

This means that contributions in 'cash or kind' like vouchers and travel to work loans for example, would also need to be included in the written statement.

There’s a question over whether the contract should include details of non-contractual benefits as well as contractual benefits.

Employers would therefore need to include any benefit which is provided to employees and workers as a matter of general practice, but make sure that where the benefit is discretionary or non-contractual, this is stated clearly in the contract!

Again, this is a potentially onerous requirement, particularly for employers who don’t provide standard benefits or whose benefit offering differs depending on location or where there’s a flexible benefits offering.

In addition, benefits are often changed regularly, resulting in new contracts having to be prepared whenever such a change occurs.

There’s no easy way to deal with this in practice, so it’s likely that many employers will continue to include general wording in the written statement listing the benefits which are available even if they’re dependent on specific criteria or policies and then refer employees and workers to the intranet or handbook where they can obtain further details.

While this isn't strictly compliant with the new requirements, as this would not provide all the information in a single document, it seems practically this might be the easiest way forward for many businesses.

Training Entitlements

Employers must now also include details of any training entitlement they provide, including specifically listing any part of that training that is mandatory and paid for by the employer and any other compulsory training that the employer will not pay for.

Details of the mandatory training (whether or not paid for by the employer) must be set out in the contract, although further information of non-compulsory training can be included in another readily accessible document.

Again, this can be onerous where there are numerous compulsory courses, particularly concerning different business areas, either meaning that different versions of the written statement would be required, or else including all the options in one version.

In addition, where new compulsory courses are added in the future, perhaps because of developments in the law as we saw with GDPR, this would require employers to issue new written statements.

Again, therefore, many employers are taking the approach of listing the required mandatory training courses and then referring employees and workers to further information available either in other documents or on the intranet.

Extending contracts to Workers

Employers may also be concerned that extending contracts to workers may confuse their employment status. This is because many of the terms that must now be included are associated more with being an employee than a worker (for example, statutory sick pay, maternity leave).

However, the changes were made to increase transparency, give workers clarity on their employment relationship, and ensure workers can access fair and decent work, not alter their worker status.

Practically, however, it’s advisable to prepare separate contracts for employees and workers to ensure that the wording is consistent with their intended status.

Remedy?

Ultimately, employers may decide that a practical approach to these points is the best way forward.

The risk is that an employee or worker could bring a claim to the Employment Tribunal alleging that the contract was inaccurate or incomplete. Still, in such circumstances, the Tribunal would determine what particulars ought to have been included.

It’s only where the employee or worker also has a successful substantive claim against the employer (such as for unfair dismissal, discrimination, breach of contract or unlawful deduction from wages), and at the time such claim was brought, the employer was still in violation of its duties concerning contracts, that they can claim compensation for the breach.

In such circumstances, the Tribunal must make a minimum award of two week's pay. However, it may award up to four weeks' pay if it’s just and equitable in all the circumstances.

Given that the sums involved are not significant, employers may be inclined to take a commercial approach.

If you need any help reviewing your current employment contracts to ensure legal compliance and/or a creative look at how you can make it as easy as possible for yourselves administratively, Skora HR will be happy to help. 0330 056 3664.

Skora HR - HR Services - HR Dorset

www.skorahr.co.uk