Employment contracts form the cornerstone of the relationship between an employer and an employee, detailing the rights, responsibilities, and expectations of each party. Generally, they begin by addressing the fundamentals, such as names and addresses, the start date of employment, job title, and a concise description of the role.
However, there are various terms and clauses to include in order to mitigate risk for the business, while also reflecting the modern employment landscape, such as hybrid and remote work, and the need to engage and retain top talent.
A new working environment
Nowadays, many businesses are departing from the traditional, static workweek, opting instead for more flexible working hours and schedules. It’s wise to clearly document these agreed terms regarding the place and hours of work, along with the extent of flexibility, ensuring both parties fully understand the expectations.
Compensation and benefits are crucial for employees. The composition of these packages varies across sectors, companies, and roles but generally includes a base salary and possibly a discretionary bonus.
It’s important to also outline any relevant contractual benefits, such as company sick pay, private healthcare, pension plans, and paid leave for vacations or other needs.
Protection against business risks
Including measures to protect the business in case an employment arrangement fails is a vital component of the employment contract.
Conditions for terminating employment should be specified, including notice periods and grounds for immediate termination.
Employers often reserve the right to offer payment in lieu of notice or to place employees on garden leave during the notice period. Probationary periods are useful, especially when there is uncertainty about a new hire, as they allow for a shorter notice period during this time.
Additionally, to secure the business’s interests, it’s critical to incorporate strong confidentiality and intellectual property clauses and, where appropriate, a range of restrictive covenants.
Legal compliance and standard clauses
While they may seem minor, these aspects are essential for legal compliance. Employment contracts must clarify whether any collective bargaining agreements apply, if there’s any obligation to work abroad for more than a month, the mandatory training associated with the role, and statutory leave available to the employee.
Moreover, standard clauses typically included are:
- An entire agreement clause to ensure all terms are comprehensively documented within the contract;
- A counterparts clause to facilitate the contract’s execution; and
- A governing law and jurisdiction clause to determine that any disputes will be resolved under English law.
Beyond the employment contract
The employment contract often references a company’s policies. It is beneficial to consider which non-contractual policies should be implemented to support the contractual terms. Some policies are legally required, like disciplinary and grievance procedures, while others are advisable to reduce legal risks or enhance business efficiency and culture.
In summary:
A well-crafted employment contract is crucial for setting clear expectations, motivating employees, and safeguarding the interests of both the employer and employees. By incorporating these key elements, businesses can prevent potential conflicts and lay a strong foundation for a fruitful employment relationship.
We’re here to help with your queries around employment law, including the drafting of contracts for your business. Feel free to contact us at info@ignition.law.
Written by Nicky Cranfield.
