A good employment contract isn’t an irritating legal requirement. In fact it’s not a legal requirement at all. But it is invaluable as a management tool to small business owners.
A well drafted contract will guide business owners in managing their staff effectively, avoid as far as possible problems arising in the employment relationship and deal with them quickly and effectively when they do.
The basics
As a minimum legal requirement you must issue employees with a written ‘statement of particulars’ containing information about some of the main terms of employment as follows:
name and employer’s name
job title or a brief job description
date when your employment began
pay rate and when payment is made
hours of work
holiday entitlement
location
sick pay arrangements
notice periods
disciplinary and grievance procedures
any collective agreements (terms and conditions negotiated with a union)
pensions and pension schemes
end date for temps and fixed term contracts
You also need a privacy notice and a health and safety policy (if you have at least five employees).
So technically you can meet your legal requirements by putting that information down on a bit of paper yourself, or by using a free template you could download from somewhere on the internet.
Why you need a bit more than that
Just meeting your legal requirements doesn’t get you any of the benefits a well-drafted contract can bring. You wouldn’t resort to the lowest common denominator in relation to any of the major commercial decisions of your business; why do it with your staff, your most valuable asset?
Here are five crucial reasons why it’s important for any employer to have more:
If you have only the pieces of information required by law set down in writing, what happens in a dispute about the other terms?
Your contract with your employee will extend far beyond the basic written statement, and established terms and conditions will evolve out of what’s known as ‘custom and practice’. Those terms and conditions might not evolve exactly how you want them to and will be very much open to dispute and confusion.
Define the relationship you want from the start
The contract (written or otherwise) will govern the relationship between you and your employees. If you draft it right to start with, you get to set the tone of that relationship exactly how you want it to be. You get to decide how you want things to work and you get to think ahead in terms of how a contract could work for you in the future, rather than just ticking a box.
Just because you can download something free doesn’t mean it’s a good idea to
It is of course perfectly possible to get free templates for contracts from the internet, or very cheap ones. But you have no idea of the quality of them, how up to date they are or how relevant the terms are to your business meaning it’s very much a false economy.
A well-drafted contract will enable, not restrict you
Many people think writing lots down will constrain you. In fact it will enable you to manage staff in the way you see fit and with clarity of expectations on both sides. It will support you when you need to make tough decisions by building your right to make those decisions into the contract.
Look to the future
Your staff might be with you a long time and you don’t know at the start how your relationship with them is going to develop or how the business might grow and change. The contract you issue at the start will remain in force for the duration of the employment and amending terms and conditions or imposing new ones isn’t straightforward and risks souring relationships with valued staff. A little forethought and some decent drafting at the beginning saves all that.
If you’d like further advice or help with drafting employment contracts in your business, do get in touch.