Employment Contract Notes (Z153)

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SOME NOTES ON THE POSITION UNDER ENGLISH LAW

 When writing an employment contract it is necessary to take account of the relevant legislation. Every country has laws that are designed, to a greater or lesser extent, to protect the rights of employees.  The European Union, of which the UK is a member, has developed a sophisticated and complex set of rules governing the rights of employees.

The UK legislation (based upon the Employment Rights Act 1996 as amended) requires every employer to issue to every employee within 2 months from the date he/she starts work a statement covering a number of items. This list contains the essential matters that any employment contract needs to deal with.

Here is an abbreviated list of those items (for more comprehensive checklist, see page 6):

    • Name of employer and of employee;
    • The start date of the employment;
    • Job title & brief description of the job;
    • The remuneration (or the method of calculating it);
    • An express right for the employer to make certain deductions from an employee’s pay;
    • Payment intervals – weekly, monthly etc.;
    • Terms & conditions relating to hours of work;
    • Terms & conditions relating to holidays, including public holidays and holiday pay;
    • Terms & conditions relating to sickness or other incapacity;
    • Any pension rights;
    • Notice periods;
    • The place of work;
    • Where the employment is not intended to be permanent, the planned duration or, if it is for a fixed term, the end date;
    • A note concerning the Employer’s disciplinary and grievance procedures.

There are also provisions that apply if the employee is to work outside the UK and in that case the period overseas, the currency of remuneration and any extra pay and/or benefits must be covered.

When the employer enters into a contract of employment with the employee covering these terms that will avoid the need for any separate statement to be issued. The employment contract will usually cover some other matters as well.  See our checklist below.  Also, ContractStore supplies a variety of forms of employment contract templates 

 STATUTORY RIGHTS OF EMPLOYEES

In addition to the statement of terms mentioned above, an employee has a variety of rights laid down by law that cannot be removed by the terms of any employment contract. The list below is by no means comprehensive but it does mention some of the more important rights.

The statutory rights include:

Itemised statement of pay.  This must be issued when an employee is paid and it must show: gross remuneration, net pay, and all deductions and where the pay is made up in different ways, these must be itemised.

Time off for public duties. Where an employee has any public duties – e.g. if he/she is a trustee of a NHS hospital trust or a prison visitor.  Similarly, if he/she is involved in trade union activities.

Notice of termination.  The minimum permitted notice periods are related to the length of service and are as follows:

None if this is less than a month

1 week if this is between 1 month and 2 years

2 weeks if this is between 2 and 3 years

Then an extra week for each full year of service up to a maximum of 12 weeks notice.

Sick Pay.  An employee who is absent from work for more than 4 days consecutively is entitled to sickness benefit for up to 28 weeks at rates that are set by the Government.  In practice employment contracts often provide expressly for the usual salary to continue for some time if an employee is off work due to sickness.

Maternity Leave.  All female employees are entitled to ordinary maternity leave of 26 weeks and additional maternity leave for a further 26 weeks. Employees who have at least 26 weeks’ continuous service up to the 15th week before their expected week of childbirth are entitled to a total of 39 weeks’ statutory maternity pay, the first six weeks of which are paid at 90% of the employee’s normal weekly earnings. The remaining 33 weeks are paid at a flat rate set by the government. There are plans to increase the statutory maternity pay period to 52 weeks in the future.

Note that it is a criminal offence for an employer to allow a woman to go back to work less than 2 weeks after childbirth (4 weeks in the case of factory workers).

Expectant mothers are also entitled to take paid time off to attend ante-natal classes, etc.

 Paternity Leave.  An employee is entitled to take either one week’s or two consecutive weeks’ paid paternity leave to care for the child or support the child’s mother if he/she satisfies certain requirements.  He/she must be either the father of the child or married to or the partner of the child’s mother and have responsibility for the upbringing of the child. In addition, he/she must have had at least 6 months’ continuous service by the 15th week before the baby is due. The employee must give at least 15 weeks’ notice before the baby is due and the leave must be taken within 8 weeks of birth/receipt of notice that a child is to be placed for adoption with him/her or their spouse or partner.

Employees earning over the weekly lower earnings limit for national insurance contributions are entitled to statutory paternity pay at the same flat rate as statutory maternity pay.

Since 3rd April 2011, parents of babies due or adoptive parents who are notified of having been matched with a child on or after 3rd April 2011, are entitled to take a maximum of 26 weeks’ additional paternity leave and will receive additional statutory paternity pay.  The eligibility criteria are similar to the requirements for entitlement to paternity leave/statutory paternity pay above (which will be known as ordinary paternity leave and ordinary statutory paternity pay).  However, the employee’s spouse, civil partner or partner must return to work with some of their statutory maternity/adoption leave untaken.

In certain circumstances, a father may also be able to take additional paternity leave where the mother has returned to work.

Adoption Leave   An employee who has been newly matched with a child for adoption and has completed 26 weeks’ service by the week in which they are notified of the adoption, is entitled to 26 weeks’ ordinary adoption leave followed by 26 weeks’ of additional adoption leave. Leave may start either from the date of the child’s placement, or up to 14 days before. Statutory adoption pay is payable for 39 weeks and at the same rate as statutory maternity pay.

N.B. A couple who adopt may, subject to eligibility, agree that one of them takes adoption leave and the other takes paternity leave in respect of an adopted child.

Parental Leave.  An employee who has completed one year’s continuous service with an employer is entitled to take 13 weeks’ unpaid leave for the purposes of caring for a child at any time within 5 years of birth or adoption in respect of each child.  The right of the employee to take parental leave applies to both mothers and fathers and to a person who has obtained formal parental responsibility for a child under the Children’s’ Act 1989. Parental leave in the case of disabled children is increased to 18 weeks to be taken before the child’s 18th birthday. Note too that all employees regardless of length of service are allowed to take reasonable unpaid time off to deal with emergencies etc. affecting dependants.

Employees who take any of the statutory leave entitlements – maternity, adoption etc. are entitled to receive most contractual benefits during leave and return to the same job at the end of the leave period or be offered a suitable job with no less favourable terms and conditions, if that is not practicable.

Similarly, the employee has the right not to suffer any unfair treatment or be dismissed or selected for redundancy on any grounds related to their maternity etc.

FLEXIBLE WORKING

 All employees with at least 26 weeks’ service may apply to their employer to change their working arrangements to enable them to look after children aged 16 or under, disabled children under the age of 18, a spouse, partner or civil partner, other adult relative or any other adult who lives with the employee. ‘Flexible working’ is broadly defined and includes part time working and working from home. There is a formal procedure for the consideration of applications and all requests must be considered seriously. However an employer may reject a request based on a number of stated grounds, such as the burden of additional costs. An employee will have the right to appeal to the employer against their decision.

Note that rejection of a request for part-time working may constitute indirect sex discrimination.

ACAS have published a helpful booklet giving guidance to employers dealing with requests for flexible working.

NATIONAL MINIMUM WAGE

The UK Government sets a new National Minimum Wage and a National Living Wage on 1st April each year.

More details can be found on https://www.gov.uk/national-minimum-wage-rates

 WORKING TIME REGULATIONS

 The Working Time Regulations stipulate an average 48-hr working week as a maximum which employees can be required to work. The average is usually calculated over a seventeen-week period. The regulations also contain provisions for minimum periods of break, separate provisions for ‘night workers’ and for 28 days’ paid holiday in any year for all full time employees. Part time employees have the right to take pro-rated paid leave. Bank and public holidays may be included in an employee’s annual leave entitlement. There is no statutory right for employees to take bank/public holidays as leave.

Employees may be asked to contract out of the 48 hours limit but cannot be asked to contract out of provisions relating to breaks, night time working or paid leave.  To minimise the risk that an employee’s contracting out from the 48 hour week limit may be regarded by an employment tribunal as ‘involuntary’ we advise that the opt-out is dealt with in a separate document and is not part of the contract of employment.

DISCRIMINATION

 It is illegal for an employer to discriminate on grounds of sex, race, marital status, disability, age, religion or belief, sexual orientation or trade union membership. The Equal Pay Act 1970 also places an obligation on employers to ensure that women’ pay matches that of men in the same job or a job of similar worth. The obligation not to discriminate applies both in the recruitment process and in the course of an individual’s employment e.g. training, promotion and remuneration. These obligations may also continue once employment has ended, for example, in the provision of references.

There are some exceptions to the basic rules – e.g. where the individual’s gender is an essential requirement for the job – e.g. a female model.

Two points regarding disability and religious discrimination:

  1. employers are obliged to make ‘reasonable adjustments’ to both premises and working practices to accommodate the requirements of disabled employees;
  2. “religious discrimination” includes discrimination on the basis of a philosophical belief, the absence of faith or the absence of any philosophical belief.

Part-time and fixed term employees have the right to be treated no less favourably than full-time employees.

The Code of Practice on Employment” and the “Non-Statutory Guide on Employment” published by the Equality and Human Rights Commission, provides useful assistance in respect of discrimination law and are available on their website at www.equalityhumanrights.com.

Note that unlike awards for Unfair Dismissal which are capped, compensation awards for unlawful discrimination are uncapped.

UNFAIR DISMISSAL

 In most cases the employee’s employment commenced before 6 April 2012, they must have at least one year’s service to bring a claim for ordinary unfair dismissal, with employees whose employment commenced on or after that date, needing two years’ service before they are entitled to bring a claim .Exceptions include where an employee is dismissed with less than 12 months’ service due to pregnancy and various other incidents, which may attract a claim for “automatic unfair dismissal”. ‘Unfairness’ may be either substantive i.e. dismissal for a reason not recognised in law, or procedural i.e. failure to observe a fair and reasonable disciplinary/appraisal system.

Employers and employees should comply with the ACAS Code of Practice on Disciplinary and Grievance Procedures. The Code is not legally binding, however if an employer unreasonably fails to comply with the Code, an Employment Tribunal will have the power to increase any compensation awarded to the employee by up to 25%. If an employee unreasonably fails to comply with the Code, the Tribunal can also reduce any compensation awarded by 25%.

The maximum award of compensation, in most cases, for unfair dismissal is currently £72,300. This is in addition to any uplift (as above) and the basic award, which is compensation for breach.

Note that ‘Unfair Dismissal’ rights are separate from and in addition to employees’ rights in respect of ‘Wrongful Dismissal’ (see below).

WRONGFUL DISMISSAL

 Wrongful Dismissal is a dismissal in breach of any of the employee’s contractual rights which has caused them loss.  Although separate from an Unfair Dismissal claim, both may be pursued together in an Employment Tribunal.

USEFUL SOURCES OF INFORMATION ON EMPLOYMENT LAW

 The Department for Business Innovation and Skills has an excellent website. It is designed to provide a user-friendly guide through different aspects of UK employment law.  There are different guides depending on whether you are an employer or employee and, by going through the website; you can get specific guidance on individual situations.

The website enables you to get detailed information on the National Minimum Wage, Maternity Rights, Paternity Rights, Adoption Rights and Flexible Working Rights.

Click here for the government website:  http://www.bis.gov.uk/about

The principal legislation in the UK is also available on the web from www.legislation.gov.uk

Employment Rights Act 1996

http://www.opsi.gov.uk/acts/acts1996/ukpga_19960018_en_1

Equality Act 2010 http://www.legislation.gov.uk/ukpga/2010/15/contents

For information on age discrimination legislation go to:  http://www.direct.gov.uk/en/Employment/Employees/DiscriminationAtWork

CHECKLIST FOR EMPLOYMENT CONTRACTS

 Here is a list of items to consider when preparing a contract of employment:

  • Name and address of Employer
  • Name and address of Employee
  • The start date of the employment (and the date continuous employment began if this is different)
  • Job title
  • Brief description of the job
  • The remuneration
  • Payment intervals – weekly, monthly etc.
  • Method of payment – cash, cheque, bank transfer etc.
  • The Employer’s right to make deductions from remuneration
  • The place of work
  • Any probationary period
  • Terms & conditions relating to hours of work.
  • Terms & conditions relating to holidays, including public holidays and holiday pay.
  • Terms & conditions relating to sickness or other incapacity
  • Any terms relating to pension rights
  • Any relevant collective agreements
  • Where the employment is not intended to be permanent, the planned duration or, if it is for a fixed term, the end date
  • The Employer’s disciplinary procedure
  • Grievance Procedure
  • Expenses – what expenses are recoverable and the method of claiming them
  • Benefits – e.g. car, mobile phone etc.
  • Grounds for suspension of employee
  • Termination – notice periods for employer & employee, grounds for instant dismissal etc
  • Confidentiality provisions
  • Intellectual property rights and restrictions
  • Data protection
  • Restrictions on competition/soliciting customers etc. after termination
  • Changes to terms of employment

 EMPLOYMENT OVERSEAS

 Where an employee is to go to work overseas, a number of additional considerations arise. These will vary depending on the location and whether the employee will be accompanied by his wife/family.

Matters to be considered include:

  • Duration of overseas posting
  • Salary and currency(ies) of payment
  • Additional leave (entitlement to public holidays in country of work rather than UK)
  • Airfares to be paid by employer to/from place of work to home country
  • Housing and other benefits (utilities, car, servants, phone bills etc.)
  • Taxation (how does the tax position in the country of work differ from the home country and whether this will be reflected in the salary arrangements)
  • Education allowance for children
  • Entitlement to return to job in home country on expiry of contract and repeal of above payment/ expenses/ holiday clauses

ContractStore has some templates for overseas employment contracts – see our form of appointment of an employee to an overseas post, document E116, and  our document  E109, Expatriate Contract 

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Explanatory Notes

This document is free and consists entirely of notes, so there are no explanatory notes to go with it. All normal ContractStore contracts come with free explanatory notes which you can read here before purchase.