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Changes To Your Contracts

As of 6th April 2020, You must give employees written information on their main terms of employment by the date that they commence employment. Previous to this date, the requirement was to give them written information on their main terms within two months of their start date. You must now also give them a written statement containing details of any change to these terms within one month of the change.

If you fail to provide an employee with the required statement of main terms, or fail to provide the required details of a change of their terms, the employee is not entitled to compensation for that failure alone. An employment tribunal can rule on what the information should have been. However, if the employee succeeds in another claim to a tribunal and the tribunal also finds that you have not met your information obligations, the tribunal must award the employee between two and four weeks’ pay as compensation.

You should ask the employee to sign and return a copy of the contract, to confirm that he or she has received it and as evidence of a binding contract. You should chase up those who do not provide it, otherwise there may be uncertainty over their contractual terms.

You are also required to provide a section 1 statement to your workers, i.e. individuals who are not employees but who are employed under any other contract to personally do work or provide a service for you, provided you are not a client or customer of that individual.

The format of the document you provide is up to you, although there will be some differences from the contract that you use for employees, as workers do not have all of the same rights as employees you are unlikely to offer them exactly the same benefits. However, the points discussed below regarding the requirements of a section 1 statement will still apply, unless otherwise specified .

What needs to be included?

The information that you must include in a contract to meet the requirements of a s1 statement is listed below. If there are no relevant details to give on a particular subject, then the contract should make that clear. For example, if there are no collective agreements, the contract should say so.

As identified below, for certain details relating to sick leave and pay, other paid leave, pensions, training entitlements, disciplinary rules, disciplinary, dismissal and grievance procedures and notice periods, it is acceptable to refer the employee to separate documentation, such as your company policies and procedures. Such documentation must be reasonably accessible to the employee, either because they have a reasonable opportunity of reading it in the course of employment, or in some other way. Referring the employee to documents on your company intranet is acceptable.

1. The employer’s name and the name of the employee

Take care when naming the employer that you identify the correct legal entity, particularly if the employer is one of a group of companies.

2. The date the employee’s employment begins

Specify the start date of the employee’s employment with you.

3. The date the employee’s period of continuous employment began

The date on which the employee’s continuous employment, for statutory purposes began, may be a date before the employee starts working for you. For example, if the employee was previously working for an associated company, then this period may need to be included as part of his or her period of continuous employment with you. (Note that this provision is not applicable to workers.)

4. Where the employment is not intended to be permanent, the period for which it is expected to continue, or the date when it is to end

If the employee is employed on a temporary or fixed-term contract, you must identify when it is expected to end, either by reference to a specific date, or some other event, e.g. the completion of the project for which the employee has been engaged.

5. Any probationary period, including any conditions and its duration

It is common for new employees to be subject to a probationary period for the first few months of their employment, during which their performance will be monitored to ensure they are meeting the demands of the role. You must set out in the contract the details of any probationary period (e.g. when performance will be assessed, notice entitlement during probation if this differs from the ordinary notice entitlement, whether the probationary period can be extended, etc.), or specify if there is no probationary period.

6. The employee’s job title and/or a brief description of their work

We recommend requiring the employee to be flexible in his or her duties. However, there are often issues as to the validity of flexibility clauses and, even where they are enforceable, other legal issues may arise, including that they must be exercised reasonably. Therefore, significant changes to the employee’s duties are still likely to require express consent and you may want to take our advice when seeking to rely on a flexibility clause.

7. The employee’s place of work or, where the employee is required or permitted to work at various places, an indication of that and the address of the employer

As with job title, above, we recommend requiring the employee to be flexible in his or her place of work.

8. The scale on which or rate at which the employee is paid, or the method of calculating pay

This will require you to set out the details of the employee’s basic pay and how it is calculated and may involve, for example, giving details of overtime, commission, bonuses, allowances, performance – and profit-related payments. The wording of the legislation does not appear to expressly permit you to refer out to separate documentation for details of pay and in respect of basic pay full details should be set out in the employment contract.

However, in respect of other elements of pay we take the view that while the requirement to provide ‘particulars’ means you must identify the types of payment that you provide, it does not mean you must set out every applicable condition or rule relating to those payments. Accordingly, if there is a reason why you do not want to include full details of a particular type of pay in the employment contract, we think that you can take a pragmatic approach, identifying the relevant types of pay and referring out, e.g. to a bonus or commission scheme, for full details where applicable. However, note that this argument is untested.

9. The intervals at which and method by which the employee is paid

Payment is likely to be at either weekly or monthly intervals, and by credit transfer into the employee’s bank account.

10. Any terms and conditions relating to hours of work, including normal working hours, days of the week the employee is required to work and whether or not such hours or days may be variable, and if they may be how they vary or how that variation is to be determined

This should include not only the number of hours but also when they are worked, including details of any shift system or flexi-time. You should also provide details of overtime arrangements and specify whether the overtime is compulsory or voluntary for the employee. Where hours may vary, the requirement to state how they vary or how that variation is to be determined could be satisfied, for example, by referring to the provision of a rota.

11. Any terms and conditions relating to holidays, including public holidays, and holiday pay

The details must be sufficient to enable the employee’s entitlement, including entitlement to accrued holiday pay on termination of employment, to be precisely calculated.

If you want to grant leave on public holidays, the contract should specify a fixed number of days’ holiday plus bank holidays, or a fixed number including bank holidays. Arguably, the latter is preferable since it provides a more equitable result for part-time workers by avoiding the lottery of whether a bank holiday falls on one of their normal working days.

Where possible, rather than simply stating in the contract that holiday will be paid at the employee’s “normal” rate of pay, you should state what elements of pay will be included in holiday pay, e.g. overtime, commission, etc. You should set out the exact method of payment for holiday and you should ensure that you include enough detail on the payment of accrued holiday on termination of employment to enable the employee to calculate their entitlement.

If you wish to limit the carry-over of holidays from one holiday year to the next, you should state this expressly.

Note: carry-over of Working Time Directive (WTD) leave must be permitted where an employee does not take it due to sickness, and carry-over of WTD leave and the additional 8 days of UK statutory leave should be permitted where the employee is unable to take it due to family leave. Employers must allow carry-forward in these circumstances in any event, whether or not they include such wording in the contract.

12. Any terms and conditions relating to incapacity for work due to sickness or injury, including details of any sick pay scheme that the company operates

The contract can refer to separate documentation for details of sick pay arrangements, such as a company attendance management policy, or it can set out all or some of the relevant sick pay/sickness absence provisions.

13. Any other paid leave

The requirement to set out particulars of other paid leave means that the contract must at least refer to maternity, paternity, shared parental and adoption leave, all of which employees are automatically entitled to if they meet the relevant eligibility criteria. You must also identify any other types of paid leave that you provide which might include, for example, compassionate leave, leave for jury service, etc. The contract can refer to separate documentation for full details of the various types of paid leave that are available.

14. Any terms and conditions relating to pensions and pension schemes

Limiting the details in the contract to a confirmation that you will comply with your legal obligations relating to pensions is that you avoid making a contractual commitment to, for example, providing contributions at a particular rate, which you may later wish to reduce if the applicable law changes to allow you to do so.

15. Any other benefits provided by the employer

You are required to include in the contract particulars of any other contractual benefits you provide. This might include, for example, a company car, car allowance, health checks, private health insurance, etc. If you do not provide any other benefits, you must state that fact.

The wording of the legislation does not appear to expressly permit you to refer out to separate documentation for details of these additional benefits. However, we think that you can take a pragmatic approach, identifying the relevant benefits and referring out, e.g. to a company car policy or the rules of a private health insurance scheme, for full details where applicable . However, note that this argument is untested.

Some of these benefits, such as car allowance, health checks, etc., you will want to be contractual. However, if you provide any benefits on a discretionary basis only and/or you wish to reserve the right to withdraw, vary or amend such benefits, the employment contract should state this expressly.

16. Information about disciplinary and grievance procedures and with whom the employee can raise a grievance

To meet the requirements of a s1 statement, the contract must include a note of the following:

  • the disciplinary rules and procedures that apply to the employee
  • the person to whom the employee can apply if dissatisfied with a disciplinary decision/decision to dismiss and
  • the person with whom the employee can raise a grievance.

You can refer the employee to a separate policy for the full details of your disciplinary, grievance and dismissal rules and procedures. Most employers prefer to keep their disciplinary and grievance procedures non-contractual, to avoid the possibility of a breach of contract claim if they do not follow those procedures, or seek to change them without the employees’ agreement.

17. The length of notice the employee is obliged to give and entitled to receive to terminate their contract

The contract can set out applicable notice periods in full, or can cross-refer to the statutory minimum notice periods in the ERA, or to the notice provisions of an applicable collective agreement.

During the first month’s employment, you are free to stipulate whatever notice period you consider appropriate. You might, for example, provide for as little as 24 or 48 hours’ notice.

The statutory minimum notice the employee is required to give is one week. It applies only after the first month’s employment, but many employers choose to require at least a week’s notice from the employee from the outset (and our template contract takes this approach).

Whether or not the employee is required to work outside the UK for more than one month and, if so, specific details relating to that overseas work

If the employee is required to work outside the UK for more than one month, you must specify in the contract:

  • the period for which they are to work outside the UK
  • the currency in which they are to be paid while working outside the UK
  • any additional pay or benefits resulting from the requirement to work outside the UK and
  • any terms and conditions relating to the employee’s return to the UK.

If the employee will not be required to work outside the UK for more than one month, you must state that fact.

Any collective agreements that directly affect the terms and conditions of the employment, including, where you are not a party to a collective agreement, the persons by whom the agreement was made

This will entail listing the dates, title or subject matter and parties to any domestic, local or national collective agreements dealing with terms and conditions that are incorporated into the employee’s contract.

You should explicitly refer to an agreement where its terms are incorporated automatically into the contract of employment, such as terms related to pay, hours and holidays. However, where a relevant collective agreement largely deals with procedural issues but may have an effect on individual employees in one or two areas (such as enhanced redundancy payments or lay-off) you may wish to remain more equivocal about the issue of incorporation.

Any training entitlement provided by the employer, any part of that training entitlement which the employer requires the worker to complete, and any other training which the employer requires the worker to complete and which the employer will not bear the cost of

You must specify in the contract itself if there is any training that you require the employee to complete and, if so, whether you will require the employee to bear any of the cost of that training.

You must also include in the contract particulars of any other training entitlement you provide, although you can refer to separate documentation for full details of such training. You should take care when drafting this provision that you do not create a binding contractual entitlement to particular training that you may not always wish to provide.

If you do not provide any training entitlement, you must state that fact.

Additional contractual clauses

A contract that includes all the above necessary minimum details will meet your obligation to provide a s1 statement. However, providing your employee with a more comprehensive contract of employment will allow you to include additional terms, which can reduce the scope for disputes over the terms of the relationship and give you certain important rights. Common additional clauses for incorporation into an employee’s contract include clauses covering the following:

  • Pay review. The template contract provides that pay will be reviewed annually and may be increased at the Company’s discretion. It also states that you will not give a pay rise if the employee has resigned or been given notice.
  • Payment in lieu of notice
  • Deduction from wages (necessary to avoid unlawful deductions claims)
  • Obligations on termination
  • Confidentiality
  • Intellectual property
  • Garden leave
  • Data Protection
  • Pay review.

Referring to staff handbooks and other documents

Ordinarily, the provisions of a staff handbook, or separate policies and procedures, will be non-contractual. However, employers may wish to cross-refer to these documents in the contract of employment, in order to draw them to the employee’s attention.

You should take care if you want some of the terms in a handbook or policy to be contractual, but not others. (For example, you may wish to make the section of an attendance management policy that deals with sick pay contractual, but not the remainder of the policy.) If so, you should make this clear by way of an express statement as to which parts of the policy have contractual status in both the employee’s contract and the relevant policy or handbook.

If you want any of the terms in your handbook to be contractual, then you should expressly state that in the relevant place in the handbook and also in the employee’s contract.