In the course of our work we obviously read lots of different contracts of employment being used by a variety of organisations. These vary widely in quality and appropriateness, and we come across a range of different issues with them. Sometimes an organisation knows their contract isn’t fit for purpose, sometimes there are potential problems they hadn’t even considered.
With that in mind, here are some of the most common problems we encounter with contracts we read. Do any of these apply to your business?
Most business owners are at least vaguely aware that staff should have something in writing but it’s still surprising how many employees, especially those in tiny businesses, who have nothing written down about the terms they are employed under. For the avoidance of doubt, employees must receive at least a written statement of particulars of their employment – details of the basic terms and conditions they are employed under – by the time they’ve been with you two months.
Out of date
Depending on how old the contract is, and what is included in it, contracts in your business may well be out of date and not in line with current legislation. The reality is that employment law does change on a frequent basis, so it’s vital you ensure your contracts are checked on a regular basis to ensure they comply with prevailing requirements.
Often if business owners have used a contract sourced from another business, it may have things missing which are crucial to their business, or may contain reams of clauses that are not necessary at all.
An example would be that in some businesses, a clause ensuring that anything written or developed in the course of employment belongs to the employer may be absolutely crucial, and extremely commercially relevant. In many other businesses, that type of clause would be unnecessary, irrelevant and even unreasonable to include.
In a standard contract or one sourced from another business, those types of specific requirements may well not be met. The level of detail in clauses and what that detail actually consists of may also not be what would suit that business best. Contracts are most effective when they are highly relevant to the needs of the business in question.
Lack of clarity
It’s all very well ensuring that a contract contains the information you need in it, but is the meaning actually clear? We regularly come across contracts where the exact meaning of clauses is vague, ambiguous, misleading or even completely indecipherable.
This often results from including clauses which are irrelevant or unnecessary, but it can also result from being drafted by someone who won’t use ten words when they could use 60… Yes it’s important to include everything and get the right protection in place for the business, but if a contract is very long and wordy, it reduces the likelihood of the meaning being clear, and it is also less likely to fit with the culture of a small business.
Clearly employees are not all going to be on exactly identical terms and conditions. Pay will vary according to role and other factors, and some clauses may only be appropriate to certain types of staff members. That’s all fine, but we also come across inconsistency in areas where this isn’t necessary at all.
This could be a legal concern, if differences in terms could be discriminatory, but it’s also a management problem. If managers know, for example, that all staff are on a six month probationary period, managing probation effectively is far more likely.
The more unnecessary variations you have to terms and conditions, the more challenging managing staff will be. You may come up against complaints of unfairness, complaints about managers assuming a certain set of terms apply, and administrative difficulties.
If any of these issues apply to the contracts you’re using, it might be time to get them looked at and updated in order to make them fit for purpose and as effective as possible in protecting your business.
If you’d like assistance preparing a contract, or would like your current contacts reviewed, do get in touch.