Staff Employment Contracts: Definition, Types & Benefits

Staff Employment Contracts: Definition, Types & Benefits

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What is a contract of employment?

A staff employment contract is a legally binding agreement between an employer and an employee.

It outlines the terms and conditions of the relationship, including the role, responsibilities, work hours, compensation, benefits, and other working conditions.

Why staff employment contracts are essential

An employment contract protects both parties by clearly defining their rights and obligations, reducing the potential for misunderstandings and disputes.

Furthermore, staff employment contracts build trust and security within the employment relationship.

  • For employees: a well-defined contract offers assurance regarding job security, compensation, and benefits, which can lead to increased satisfaction and loyalty.
  • For employers: the presence of a comprehensive employment contract can enhance the overall stability and productivity of an organisation.

Staff employment contracts also provide a solid framework for resolving potential conflicts.

By explicitly outlining procedures for addressing grievances, disciplinary actions, and termination, the employer and employee clearly understand how to handle disputes in a structured and fair manner.

Types of staff employment contracts

There are several types of staff employment contracts designed to suit various working arrangements and employment relationships, including: 

  • Permanent full-time contracts
  • Permanent part-time contracts
  • Fixed-term contracts 
  • Temporary contracts
  • Casual contracts/zero-hours contracts 
  • Freelancers and consultancy contracts 
  • Apprenticeship contracts
  • Internships and work experience contracts 
  • Remote work agreements.

All UK contracts must comply with relevant employment laws and regulations.

What should an employment contract include?

To create a comprehensive and effective employment contract, certain key elements should be included to cover all necessary aspects of the employment relationship.

Crucial elements often found in a staff employment contract are:

  • Job description: Specifies the duties and responsibilities of the employee.
  • Compensation: Details the salary, wage, or pay rate, including any bonuses or incentives.
  • Work hours: Defines the expected working hours, including any overtime requirements.
  • Duration: States whether the employment is for a fixed term or indefinite period.
  • Benefits: Outlines the benefits provided by the employer, such as private health care, retirement plans, and vacation time.
  • Confidentiality: Includes clauses to protect the employer’s confidential information.
  • Termination: Specifies the conditions under which the employment can be terminated by either party.
  • Non-compete clause: May include restrictions on the employee’s ability to work in similar industries or with competitors after leaving the company.

The risks of DIY employment contracts

While DIY employment contracts might seem cost-effective, they can lead to significant legal and financial repercussions, ultimately proving more harmful than beneficial.

Below are four common pitfalls associated with DIY staff employment contracts:

  1. Don’t comply with relevant employment law legislation
    In the UK, several laws and regulations govern employment contracts to ensure fair treatment of employees. These include:

    These laws collectively ensure that staff employment contracts in the UK are fair, transparent, and legally compliant. Often, DIY employment contracts fail to comply with all relevant legislation, leading to serious legal disputes and hefty penalties.

  2. A lack of clarity in DIY employment contracts
    Generic employment contracts often lack clarity and specificity. Such ambiguity can result in misunderstandings and potential legal issues, which can be costly and time-consuming.

    For instance, vague language regarding job responsibilities can lead to disputes over what is expected of the employee, causing friction and dissatisfaction.

  3. No customisation or understanding of specific roles
    Generic templates often fail to address the unique needs and circumstances of individual employment relationships.

    For example, a DIY template may not adequately cover industry-specific regulations or the particular duties associated with a specialised role.

    Also, one-size-fits-all generic staff employment contracts often include irrelevant clauses that do not apply to a specific employment context.

  4. Not up to date with current legislation
    As employment laws and regulations evolve, DIY contracts may quickly become outdated, increasing the risk of non-compliance.

The role of the staff handbook in the workplace

An employee handbook typically includes essential information to help employees understand their rights, responsibilities, and the standards of behaviour expected in the workplace. 

The staff handbook and employment contract serve distinct but complementary roles. 

While both documents are essential for managing the employment relationship, the employment contract is a legally binding agreement specific to an individual employee, whereas the staff handbook is a general guide for all.

Key elements found in a staff handbook often include:

  • Company overview: Introduction to the company’s history, mission, values, and culture.
  • Employment policies: Details about hiring practices, equal opportunity employment, anti-discrimination policies, and diversity initiatives.
  • Code of conduct: Guidelines on professional behaviour, dress code, workplace etiquette, and the use of company property.
  • Compensation and benefits: Information on salary structure, pay periods, bonuses, health insurance, retirement plans, and other benefits.
  • Work hours and attendance: Policies regarding working hours, flexible working, remote working, overtime, attendance, punctuality, and procedures for requesting time off.
  • Leave policies: Details on holidays, sick leave, maternity/paternity leave, and other types of leave.
  • Health and safety: Information on workplace safety practices, emergency procedures, and employee health and wellness programs.
  • Performance and development: Guidelines on performance reviews, promotions, training, and career development opportunities.
  • Disciplinary procedures: Steps for addressing misconduct, including warnings, disciplinary actions, and the process for handling grievances.
  • Confidentiality and data protection: Policies on protecting company and client information, data privacy, and the use of electronic communications.
  • Termination of employment: Procedures for resignation, retirement, layoffs, and dismissal.

Creating a staff handbook that reflects your organisation’s culture is vital. However, employment legislation evolves over time, so you should regularly review and update the manual to reflect changes in policies or organisational culture.

Restrictive covenants in employment contracts

Restrictive covenants in staff employment contracts help to protect an employer’s legitimate business interests by placing certain limitations on an employee’s actions during and after employment.

The main types of restrictive covenants are:

  • Non-compete clause: To prevent an employee from working for a competitor or starting a competing business for a specified period after leaving the company.
  • Non-solicitation clause: To prevent an employee from soliciting or poaching the company’s clients, customers, or other employees after leaving the organisation.
  • Non-dealing clause: To prohibit an employee from engaging in business with the company’s clients or customers, even if the client or customer initiates the contact.
  • Confidentiality clause: To ensure that the employee does not disclose or use any confidential information or trade secrets belonging to the company during and after their employment.

Enforceability of restrictive covenants

For restrictive covenants to be enforceable, they must be reasonable and protect a legitimate business interest.

Courts generally consider the following factors when assessing the reasonableness of these clauses:

  • The employer must demonstrate that the restrictive covenant protects a legitimate business interest.
  • The restriction must apply for a reasonable period of time. Shorter durations are generally more likely to be enforceable.
  • The geographical scope of the restriction must be appropriate to the business’s area of operation.
  • The restricted activities must be clearly defined and not overly broad.
  • The covenant must balance between protecting the employer’s interests and not unduly restricting the employee’s ability to earn a livelihood.

Confidentiality and non-disclosure agreements

Confidentiality clauses and non-disclosure agreements (NDAs) can be used to ensure employees do not reveal proprietary and confidential information to unauthorised parties during and after their employment.

Key elements of a confidentiality clause include: 

  • Definition of confidential information: This can include trade secrets, business plans, financial data, customer lists, marketing strategies, product development information, and other proprietary data.
  • Obligations of the employee: For example, employees must agree not to disclose, use, or allow unauthorised access to confidential information, during and after employment.
  • Permitted disclosures: The circumstances under which confidential information can be disclosed. This might include disclosures required by law, or where it is necessary to perform job duties (provided proper authorisation is obtained).
  • Duration of confidentiality obligations: While some obligations last indefinitely, others might be limited to a certain number of years after employee leaves the company.
  • Return or destruction of information: Whether employees have to return or destroy all confidential information upon termination of employment. 
  • Exclusions from confidential information: This could include information that is publicly available, already known to the employee before joining the company, or independently developed without using the employer’s confidential information.
  • Consequences of breach: For example, disciplinary action, termination of employment, legal action, and financial penalties to compensate for any damages incurred by the employer.

Enforceability of NDAs

For an NDA to be enforceable, it must meet specific legal standards that ensure fairness and clarity for both parties involved.

Employers must carefully draft these agreements to withstand legal scrutiny and to avoid being overly restrictive or vague. Here are the key elements that contribute to the enforceability of an NDA:

  • The terms of the NDA must be reasonable in scope, duration, and geographical area. Overly broad or indefinite terms may be unenforceable.
  • There must be valid consideration for the NDA, meaning the employee must receive something of value in exchange for agreeing to the terms, such as employment, promotion, or access to confidential information.
  • The NDA should be written in clear and precise language without ambiguity 
  • The NDA must comply with relevant laws and regulations. Employers should regularly review and update their NDAs to align with current legal standards.

Terminating a contract of employment

Terminating a contract of employment must be handled carefully to ensure compliance with legal requirements and to minimise potential disputes. 

Grounds for termination

Terminating an employment contract can occur for various reasons, each with its own legal and procedural considerations.

Understanding the grounds for termination is crucial for both employers and employees to ensure that the process is handled fairly and in compliance with employment laws.

Here are the primary grounds for terminating a staff employment contract:

  • Both the employer and employee agree to terminate the contract. This can occur through a negotiated settlement agreement.
  • The employee voluntarily decides to leave the company (resignation). Employees are typically required to provide a notice period as specified in their employment contract.
  • The employer terminates the employment for reasons such as poor performance, misconduct, redundancy, or other valid grounds. Dismissal must be carried out following fair procedures and in accordance with employment laws. 
  • The employment contract ends on a pre-agreed date or upon the completion of a specific project. 

Notice period

Both parties are usually required to give a notice period as outlined in the employment contract or by statutory requirements. The notice period allows for a smooth transition and adequate time for both parties to make necessary arrangements.

Unfair dismissal

Employers must ensure that termination is fair and justifiable. Unfair dismissal claims can arise if the employee believes they were terminated without a valid reason or without following due process. Legal advice and adherence to employment laws can help mitigate this risk.

Staff Employment Contracts - FAQs

An employer can make changes to an employment contract, but there are specific legal considerations and processes that must be followed to ensure the changes are fair and lawful.

An employer cannot usually make unilateral changes to a contract without the employee’s agreement. Doing so can be considered a breach of employment contract, potentially leading to legal claims.

A fixed-term contract of employment is a type of employment contract that lasts for a specific duration or until a particular task or project is completed.

Unlike permanent contracts, fixed-term contracts have a predefined end date or condition upon which the contract will automatically terminate.

Employees on fixed-term contracts are entitled to the same rights and benefits as permanent employees, including holiday pay and sick pay.

There is no law stating that employees must receive a written contract from their employer. However, employers must provide employees with a written statement of employment particulars.

This document outlines the main terms and conditions of employment, including job title, pay, working hours, and holiday entitlement. Moreover, even if there is no written contract, an employment contract may still exist through implied terms.

A restraint period in an employment contract refers to a specific time frame during which certain restrictions are placed on the employee after their employment has ended. The restraint period is typically associated with restrictive covenants.

Employment contracts are legally binding, and should an employer or employee fail to meet the terms of an agreement, the contract could be in breach.

If this happens, depending on the type and severity of the violation, the aggrieved party can either raise concerns, make an official complaint/warning, or pursue legal action.

Yes, while most employment contracts are in writing, verbal agreements are still legally binding. However, a written contract is recommended to ensure everyone understands what is expected of them and to avoid disputes.

Yes, an employer can cancel a contract before it starts, but legal considerations need to be taken into account.

Once a job offer is accepted and an employment contract is signed, both parties are bound by its terms, even if the start date is in the future. Cancelling the contract can be seen as a breach of contract.

Including a probationary period or a clause that allows for termination before the start date under certain conditions provides some legal protection for employers.

Contact our employment contract lawyers today

Need expert support with a staff employment contract? Our partner-level employment contract solicitors are here to help.

We support and advise employers and senior employees with their contracts of employment, and we help our clients to pursue and defend employment contract claims.

For your free consultation, contact our employment lawyers today on 020 7467 3980 or complete the enquiry form on this page.