E101 PERMANENT EMPLOYMENT CONTRACT
Please note that these Explanatory Notes are for guidance only and do not form part of the contract
This employment contract has been designed to be used by full time or part-time employees, whether permanent or fixed term. The contract should be issued to employees no later than 8 weeks after they commence employment. It is usual to issue the contract with a letter of offer.
The contract of employment should be sent in duplicate and a copy signed by the employee and retained on their file. This will act as proof that the terms and conditions of the contract were received and accepted. Please note that there will often be other documents relating to the employment relationship, principally a staff handbook (see ContractStore document E122) which, amongst other matters, will deal with disciplinary and grievance procedures, a Health and Safety booklet, a record of any voluntary opt-out from some requirements of the Working Time Regulations 1998 (see ContractStore document E121), a policy on employees’ use of email/internet (see ContractStore document E113), documents setting out the rules and entitlements due under any occupational pension scheme. Specialist legal/ accountancy advice is essential before agreeing to the provision of an occupational pension scheme or a bonus scheme.
As an alternative to a staff handbook employers may wish to note that ContractStore has a bundle of standard letters for employers dealing with matters such as maternity/paternity leave (E102) and individual policies for disciplinary and grievance issues.
It is important to review your contract to ensure that it is applicable for the changing needs of your business and is up to date in respect of legislative/regulatory changes. This document was last updated in December 2010. As the law changes quite often, you are advised to have your contracts reviewed by an employment law specialist at regular intervals. A brief guide to legal issues underlying contracts of employment is provided by ContractStore document Z153.
There are some clauses in the contract which may be changed in accordance with your business requirements; however the list below covers the essential headings of any employment contract:
(b) Job Title
(c) Place of Work
(e) Hours of Work
(f) Holiday Entitlement
(g) Sick Pay
(h) Pension (where provided)
(k) Disciplinary and Grievance
(l) Data Protection
Please note that this document generally provides employees with their minimum statutory rights and that it is always open for employers to provide more generous rights if desired.
GUIDANCE ON SPECIFIC CLAUSES:
1. START DATE
If this contract replaces an earlier contract with the same employer (or where an employee has transferred under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”)), the earliest start date must be stated. Please note that TUPE severely limits an employer’s ability to amend employees’ terms and conditions of employment and specialist employment law advice should be sought before seeking to make changes to existing terms where employees have transferred under TUPE. An employee start date will affect any entitlement to compensation for “Unfair Dismissal” and statutory redundancy pay (where 2 years’ continuous employment is required) as well as certain other entitlements that are measured by length of service.
2. PROBATIONARY PERIOD
Where this contract is issued to a new employee a probationary period may be included. The usual period is 3 months but should not normally extend longer than 6 months. Employers should ensure that in any event the probationary period is not extended to close to 12 months as dismissal would then be subject to the employee’s statutory right not to be dismissed unfairly.
Insert the normal place of work here, however if any travelling is required in the role it should be stated here. If no travel is necessary please state. It is useful for an employer to have the contractual right to require flexibility as to the employee’s place of work so as to reduce the risk that a change of work place would trigger an employee’s entitlement to redundancy pay. Specialist legal advice should be taken to ensure that such flexibility is legally ‘reasonable’. Any requirements to travel outside the UK for periods of more than 4 weeks should also be set out here.
Normally an employee’s salary will be paid monthly in arrears. Make sure that any deductions from salary are clearly understood and agreed with the employee (excluding tax and NI).
6. HOURS OF WORK [AND OVERTIME]
Normal office/ shift hours will apply but if any additional hours are required and agreed to, employers should be aware of the statutory constraints of the Working Time Regulations 1998. If an employer envisages an employee working, on average, more than 48 hours per week, an employee should be asked to sign form E121- Employee’s Opt-Out from the Working Time Regulations 1998. This is a separate document, but a copy should be retained with the contract. Where an employee has opted out of the Working Time Regulations limit on weekly working time but subsequently decides to remove their consent to their opt-out, the maximum period of notice the employee can be asked to give is three months. It should be clearly agreed whether the employee will be paid overtime for extra hours or is to take the time off ‘in lieu’.
7. HOLIDAY ENTITLEMENT AND HOLIDAY PAY
As of April 2009 all full time employees on a five day week are entitled to take 28 days’ paid leave p.a., (equivalent to 5.6 times the normal working week) which includes bank or public holidays. For part-time employees, the same rules apply on a pro rata basis so for someone working 4 days a week, the entitlement is 22.4 days (5.6 x 4) including 4/5 of the annual entitlement to bank/public holidays.
If an employee is given the statutory minimum of 28 days’ annual holiday, they are allowed to carry it forward if there is consent on both sides, however this should be avoided if at all possible as 28 days is the minimum the employee should always be taking, if the employer does not want to fall foul of their legal obligation.
8. SICKNESS ABSENCE
It is common practice to offer a period of full pay for a certain amount of time off sick in addition to the Statutory Sick Pay scheme (‘SSP’). Given the range of benefits offered by different employers, it is advisable for details to be contained within a separate policy, or within part of a staff handbook. Care must be taken to ensure consistent treatment of all employees so as to avoid claims for discrimination.
The government introduced compulsory workplace pensions in 2012 and vast numbers of employers, from the largest to the smallest, are affected.
Initially, smaller businesses with fewer staff need not to worry, because the reform is being carried out in stages.
Only employers with over 30,000 staff were forced by law to offer their workers a company pension scheme in 2012.
By 2013 any employer with more than 350 staff on its books was obliged to set up and contribute into workplace plan for its employees.
Between 2014 and 2016, those employers with fewer than 350 staff will be subject to the same rules.
Employees will be auto-enrolled and can expect their company to put a minimum 3% of any earnings between £5,035 and £3,540 into each worker's fund.
To help, the government is introducing NEST – National Employment Savings Trust – which will be provide a state-led alternative for any employer wishing to use it.
Here are some tips for employers to consider as the reform come into effect.
1. Budget now
Consider the cost impact of the compulsory 3% employer contribution or if you offer a higher contribution rate, the cost and sustainability of enrolling all staff on this basis. Consider also whether you will make contributions on the full salary amount or band earnings.
The key is to budget now for the new measures, so that bigger pension contributions will not mean a sudden spike in costs. One solution may be for employers to consider reviewing their total remuneration package to absorb the extra costs and looking at methods such as salary sacrifice as a cost-effective way of increasing pension contributions.
2. Decide which type of pension you want to offer staff
Consider the advantages and disadvantages of an employer pension scheme and the NEST scheme and decide which is more appropriate for your own organisation. It may be that a combination of the two schemes is the best approach in the first instance, with different staff being eligible for different schemes e.g. senior and employed staff being enrolled into an occupational scheme and contract staff being enrolled into a NEST.
3. Consider the impact on retaining and recruiting employees
What do you want your pension to say about your organisation? Consider how you want your pension scheme to fit in with your overall benefits package. While some employers may take this opportunity to reduce their pension contributions, organisations that provide pension schemes above the standard laid out by the Government are likely to be a more attractive proposition for new and existing employees and demonstrate a commitment to their workforce.
Employers who do intend to offer schemes with contribution rates above the statutory minimum may be interested in applying for a pension quality mark to differentiate their scheme from others. (www.pensionqualitymark.org.uk)
4. Does your existing scheme meet the Government's requirements?
Examine any existing pension schemes you have in place to determine if they will meet the minimum requirements set out by the Pensions Act. Also consider the likely cost implications of enrolling all non-members into this scheme. In particular, I would advise employers to review their default funds to ensure that they are appropriate for all staff, taking into account the ages of employees, especially those nearing retirement and any ethical or moral views regarding investment.
5. How will you communicate the changes to your staff?
Consider how you will go about communicating these changes to your staff. It is important to try and engage employees with their pension and there are a variety of methods on hand to do this.
6. Do you have systems in place to deal with the administration?
It is important to ensure that your payroll and HR systems are able to cope with any extra administration. This will be particularly relevant for any organisations that intend to run both an occupational pension scheme and enrol some staff into the NEST system.
7. When do you need to start considering what to do?
Starting to prepare for the reform now is a good idea. Beginning sooner, rather than later, will enable changes to be broken down into smaller, more manageable tasks rather than waiting for the Pensions Regulator to begin contacting employers directly, which it is scheduled to do from 2012.
For more information for employers and employees visit:
10 &11. DISCIPLINARY AND GRIEVANCE PROCEDURES
Employers should follow the ACAS Code of Practice on Disciplinary and Grievance procedures and ensure that the principles set out are incorporated into the Company’s procedures. The ACAS Code can be found here:
A failure to follow the ACAS Code may impact upon Employment Tribunal claims and legal advice should be sought in relation to disciplinary or grievance matters to ensure compliance.
Employers are legally required to give employees with one month’s service or more but less than two years, a minimum of one week’s notice. Thereafter, employees are entitled to a minimum of an additional one week’s notice for each completed year of service, up to a maximum of twelve weeks’ notice for twelve years of service.
Employees who have been continuously employed for one month or more are legally required to give the employer a minimum of one week’s notice to terminate.
However, whilst employers cannot give less notice than the statutory minimum, it is common to make provision for longer notice periods to ensure some security for employees, although this does not usually exceed 3 months. Further, employees are normally required to give more notice than the statutory minimum, to allow employers to make provisions and find alterative staff.
A separate clause is given for an employee with a fixed term contract. Specific legal advice should be sought in relation to fixed term contracts.
Finally there is a garden leave clause. This gives the employer the option of requiring the employee to serve their notice period, but to do away from the office. This may be appropriate in circumstances where the employee is disgruntled about the employer and/or their departure, or perhaps where the employer has reasons for wanting to keep the employee away from current business information, contacts etc. Please note that when an employee is placed on garden leave, they must still be paid their salary, benefits etc in full during the notice period.
Specialist advice around termination of employment should always be sought when an employer is considering dismissing an employee. There are currently minimum procedures set out in the ACAS Code of Practice which should be followed in relation to disciplinary/conduct and capability matters in order for any dismissal to be fair. Employment Tribunals will take account of a failure to comply with the Code and can increase an award made to reflect such failures.
15. CONFIDENTIAL INFORMATION
Employers have the right to protect confidential information such as trade secrets and customer lists etc. both during and after a term of employment. Exceptions, set out in this section, include disclosures required by law. You should ensure that all types of information you wish to protect is listed in this clause.
17. DATA PROTECTION AND PRIVACY
To ensure compliance with the provisions of the Data Protection Act 1998 (‘DPA’) employers must tell employees the purposes for which they propose to collect and process personal data and sensitive personal data and where that data may be processed outside the European Economic Area this must also be stated. Employers must ensure that they adhere to the principles set out in the DPA (very broadly data must only be collected/processed where necessary, for the purposes advised, held for only so long as necessary and must be held securely).
18. RESTRICTIVE COVENANTS
It is reasonable for employers to include this type of clause in employment contracts so as to take steps to protect legitimate business interests. However great care needs to be taken to ensure that any restrictions upon an employee’s future employment are not struck down by the courts as being unreasonable. Restrictions can only go so far as reasonably necessary to protect an organisation’s legitimate business interests. The 6 month limit is a suggestion only and it is essential that specialist legal advice is taken before including any restrictive clause.
19. ENTIRE AGREEMENT
This is a standard provision to ensure that there is no confusion as to precisely what the terms of an employee’s contract of employment are.
20. GOVERNING LAW
This contract is governed by English law and is not suitable for use in other countries.
There is no retirement age specified in this contract because from 6 April 2011, retirement ceased to be a potentially fair reason for dismissal. Employers in the UK will be prohibited from issuing new notifications of retirement using the statutory retirement procedure. If an employer does prescribe a compulsory retirement age, he will have to justify it. Employers that do not prescribe a compulsory retirement age must rely on one of the designated fair reasons for dismissal set out in Section 98 of the Employment Rights Act 1996 to achieve a fair dismissal (e.g. redundancy).
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