As a small business, you may be asking if you need to issue your staff with employment contracts.
Technically the answer to this question is no. But don’t give a sigh of relief and click on another blog post just yet; even though you don’t have to issue staff with employment contracts, what you are required to do under the Employment Rights Act 1996 is provide all of your staff with a written statement of employment particulars.
So what’s the difference?
An employment contract, like any contract, is bound by contract law and places obligations upon both parties. A written statement of employment particulars can be a simpler document, such as a letter, setting out the key information relating to the person’s position with the company. The employee doesn’t need to sign this. The Gov.uk website provides a helpful list of what must be included, although you can add more information if it would be helpful to you or the employee to do so.
By law, you don’t have to do this as soon as a new employee starts, however you do have to provide it by the time they have been with you for two months. In practice, though, it is preferable to provide this information as soon as possible during an individual’s employment, as it can help answer any questions they have and avoid misunderstandings.
The downside to not issuing an employment contract
At this point, you might be thinking “I’ve had plenty jobs before where I haven’t had anything in writing, so what harm would it do conveniently forget?”. In some cases, perhaps maybe none; your employees may not be aware of this right, so wouldn’t seek redress by raising a grievance or ultimately bringing a claim. But take care not to fall into the trap of thinking that there is no need because you all get on well and have an understanding. If the relationship becomes strained though, which can happen over seemingly insignificant issues, this can quickly change. Your employment contract or written statement can be a very useful document for an employer to fall back on if an employee is claiming to be entitled to things that you don’t believe they are.
This is particularly relevant if you are looking to give staff additional benefits, such as a bonus or health insurance. If their entitlement is not clearly spelled out, there is potential for misunderstandings (“I thought my whole family was covered – I’ve booked my daughter’s operation now. You can’t make me cancel it, the company will have to pay!”) and custom and practice claims (“I’ve had an end-of-year bonus every year for the past five years. I’m due one this year too!”). Not only can scenarios like this cost your business money, but they can also cause bad feeling and distract you and your employee from the actual job you are both there to do.
A contract for clarity
A simple, written record or what employees are (and are not) entitled to can avoid all that time, expense and awkwardness. And if you issue an employment contract that is never referred to again, don’t think that you’ve wasted your money – instead, be reassured that it has done its job!