Employment Contracts: 5 Common Mistakes and How to avoid them?

We spend a lot of time looking at employment contracts, not just writing and reviewing them but also handling the employment issues that result - or not being able to handle issues as a result of a poor contract.

Employment contracts are not standard, a template will rarely cover your needs or represent your brand. Not having one certainly won’t protect you.

In this blog, I’ve put together the 5 biggest mistakes we come across, more importantly how and why you should avoid them.

1. Not Having the Employment Contract in Writing

An employment contract is formed when there is an offer of employment and that offer is accepted, i.e. the individual agrees to provide their services in exchange for payment of wages. It can be oral or in writing.

When nothing is provided in writing, the employer has breached the individual’s right to a Statement of Particulars of Employment, which must be provided by the end of day 1 of employment. More problematic on a day to day basis, the agreement is ambiguous, open to dispute and will provide very little if any protection to the business. Just one example, deductions from wages clauses - an employer may write into a contract that it has the right to deduct from wages for damage to company property. This deduction can only be made with the express consent of the individual which is normally gained in the employment contract. When the contract is not in writing, the express consent is not given and the employer will not be able to deduct from wages.

2. Not Reading the Employment Contract

You’ve employed an expert to write an employment contract for you, you trust it’s legally binding and you just issue it out to your employees. See also mistakes 3 and 4. It does not matter what expert has written your contracts of employment, only you are an expert in your business. This is a legally binding agreement between you (the employer) and your employee.

Yes, any consultant writing an employment contract for you should get to know your business first. They will understand your industry. They’ll see the mistakes people make and know how to avoid them. They’ll know what can happen during employment and will ensure your contracts protect you. They’ll know the law and ensure they’re legally binding. You know your business. Ensuring the contract says what you want it to say in words that fit your brand voice. This might be one of the first impressions your new recruits get, are you happy with that impression?

We have on occasions done fact finding calls with clients, they tell us what happens, how the business works and what they expect of their employees - a recent one we had was a client who told us they give an hour for lunch. It was only when the client read the documents we supplied that they got thinking from their employees point of view, for years they’d been splitting the lunch break into 3 smaller breaks. This was just what happened but the employer still called it an hour for lunch. These details matter and can easily get missed. Always read the contracts your consultant supplies and prepare yourself for issuing them to employees but reading from their point of view.

3. Relying on a “legally compliant” template Contract of Employment

A legally compliant document is a Statement of Particulars of Employment that must be issued by the end of day 1 inline with the Requirements of the Employment Rights Act 1996. The list of information to be provided was significantly changed in April 2020.

This is about providing information the employee requires. This does not include additional clauses an employer may put into the contract to protect the business, clauses like deductions from wages, short time working and lay-off, right to search or drug and alcohol testing. These clauses should only be used when relevant to the particular employer and may even vary between employees.

A “legally compliant” template is unlikely to provide your business much protection or even fit what you really need.

4. Using the Employment Contract from your Last Employer

Organisations vary, even within industries and dramatically between industries. The contract from your last employer is likely to be legally out of date (particularly if it was written or reviewed pre April 2020). It will fit their business and what they needed, assuming it was written in the best way in the first place.

The worst case of this I have seen is a small manufacturing business using a Police force Contract and Policies, as a starting point Police Officers are not even employees (they are Crown Servants) and they have legal obligations beyond that of most employees. Documentation relating to Police employment would never be right for a small private business. Whilst this is extreme, the same would apply to most public sector documents, they often go well beyond legal requirements and have their own duties in the public sector. Large corporates are also likely to have detailed policies and procedures that just couldn’t apply to a small business.

5. Writing an Employment Contract that Sounds Threatening

Your Employment Contracts are just one of the documents setting out expectations of your people and what they can expect of you. It’s likely to be a first formal impression of the business and its management style.

We have discussed protecting the business in your Employment Contracts and this is something we always recommend, but it can go too far. If your contract reads as a threatening list of consequences it’s likely to put people off accepting the role.

This is your employer brand, attracting and retaining the right people. How you treat people and communicate with them matters, particularly in times where people have a choice in the job they do.