It is a legal requirement for all employees to be provided with a statement of employment particulars within the first two months of employment. For most employers this statement is either incorporated into or serves as the contract of employment. However, there are plenty of employers who do not get around to issuing their employees with contracts and even more who do not regularly update the contracts of their existing employees. Does this really matter and what are the consequences for employers who do not comply?
In order to be fully compliant with the law a statement of employment particulars must contain 16 elements, including important information relating to hours of work, notice periods and rates of pay. The advantage of a written contract of employment is that it gives both employers and employees clarity over the working relationship which helps to avoid disagreements about the terms on which the employee is employed. The other key thing to bear in mind is that a contract of some sort will exist between the organisation and the individual even if nothing is set out in writing, it is just that you will be left with considerable legal uncertainty in relation to implied terms or terms which may have been agreed verbally.
Written contracts also give employers the ability to include clauses in employment contracts which are not required by law but can give them greater freedom and flexibility to run their organisation. For example it is possible to include mobility clauses allowing employees to be relocated and clauses allowing the employer to make deductions from the employee’s wages in the event that the employee ends up owing the employer money. It is also possible to include restrictions on the activities of employees after their employment ends, seeking to prevent the misuse of confidential information and the poaching of clients.
Once contracts have been issued it is a good idea to keep them updated so that they reflect current employment law and best practice and the evolving job role of the employee as their career progresses with the organisation, for example to ensure that notice periods and post-termination restrictions remain relevant.
So as well as the legal requirements there are many sensible reasons why you should issue contracts of employment to your employees and ensure that they are regularly updated. But is there anything employees can do if they are not given a contract?
Yes…and no. Employees cannot bring a free-standing claim if they have not been given a contract but they can add a claim relating to a failure to receive a statement of employment particulars to another claim they have issued in an Employment Tribunal. The penalty on employers if the Tribunal agrees that no statement of employment particulars was given or if the statement did not include all the necessary information is between two and four weeks’ gross pay subject to the statutory cap (currently £475).
But the employee will only be successful with this claim if they are successful with the other part of their claim as well. This was confirmed in the very recent case of Advanced Collection Systems Limited v Gultekin. In this case the Tribunal Judge treated the wrongful dismissal part of the claim as being ‘successful’ when in fact it had been settled by the parties before the hearing. The rest of the Claimant’s claim failed but the Judge made an award of compensation because of a lack of a statement of employment particulars anyway. This decision was overturned by the Employment Appeal Tribunal because the wrongful dismissal part of the claim should not have been deemed successful because it had settled, therefore the claim for failure to provide a statement of employment particulars should have failed as well.
Employment contracts are not glamorous and (unless you are a geeky employment lawyer like me) they are not fun but they are a legal requirement and if other claims are successful Tribunals can award compensation to employees if you have not issued the correct paperwork. If you spend the necessary time arranging well drafted, up to date contracts for your employees they can prove a very useful tool in the effective management of your organisation.