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An introduction to employment contracts

Employment Contracts.

Introduction

Within the UK, any person who enters into an employment position with another individual or firm has automatically entered an contract with the employer, whether the details of that contract has been provided in written, verbally agreed or implied (DTI 2007), or a combination of the three modes.

However, irrespective of whether a formal contract has been produced, under the terms of the Employment Rights Act (1996) employers are legally bound to provide employees with a written statement within two months of date they started their employment.

Terms and conditions

The terms and conditions of the employment contract or written statement are required to cover a number of employment factors. These will include the following: -

  • Basic details – Employer and employee personal details, including name and address and the date when the employment began and the relevant date for the period of continuous employment if these differ. Normally these dates will be the same. They will only differ if there is a change of contract. Details of the notice period, which must not be less than the statutory minimum, for termination of the employment are required to be given by both parties.

If the employment is not full time or expected to be continuous, then specific information relating to the length of the term needs to be included.

  • Pay details – Within this section will be detailed the hours of work, together with amount of remuneration. The pay details must show the rates of pay and the payment schedule. For example, the pay might be calculated on an hourly, weekly or monthly basis, in which case the relevant calculation should be shown together with frequency of payment. Overtime rates should also be included here if applicable, such as time and a half.

Where there are agreements that will affect the terms and conditions of the contract, for example with trade union negotiations, these must also be detailed within the contract.

  • Incapacity - Details of what happens when the employee is off work due to illness or injury must explain the employer’s policy in this respect, and include sick pay arrangements.
  • Holidays – Employees must be given details of holiday entitlement and the pay that this attracts; including holiday pay entitlement should their employment cease.
  • Other benefits – Other benefits included with the employment package may include such items as motor vehicle allowance or participation in a pension scheme
  • Work details – A job description outlining the required duties and position that the employee will be undertaking, together with their place(s) of work is required. If it is intended that the employee will be working outside of the UK for more than a month, full details of this situation, including pay etc., must be provided within the statement.
  • Disciplinary procedures – To ensure the employee is aware of the internal procedures of the employer in the event of a grievance, disciplinary or dismissal issue, these must be clearly outlined within the written statement or contract.

Note: - Where details of any item cannot be included within the written statement or contract, details of the location of this information, such as an “employees handbook” must be shown.

Implied Terms

There are certain terms and conditions that are implied, even though not documented. These will include the fact that the employer and employee are committed to observing any other legislation that is relevant to an act of employment. For example, these would include health and safety, discrimination and minimum wage regulations. From the employee’s aspect, implied terms will include acting honestly and with loyalty (DTI 2007).

Contracts of employment cannot be altered without the express agreement of both parties. Therefore, an employer cannot vary the hours or any other condition unless these alterations have been agreed with the employee.

Breach of employment contract

The terms and conditions of an employment contract, as with any other contract, are enforceable by both the employer and employee. Should either party to the contract breach the conditions that have been agreed upon, there are a number of ways in which these breaches to be remedied.

Beaches of employment contract.

A breach of employment can be any act that destroys the relationship that exists between employer and employee. This relationship is built on trust and confidence that mutually exists between the two parties. The following are some examples of a breach of contract.

  • Change of employment contract – If an employer changes the employee’s job or other terms of the contract, including a major change of location, rates of pay, hours of working or holiday entitlements without discussion and agreement, this would be viewed as a breach of contract. An example might occur if a firm operating in South East England decides to re-locate to Scotland and expects the employee to make a similar move.
  • Harassment – Any form of harassment against an employee, either by the employer or by other members of the staff where the employer has not intervened to prevent it, is deemed to be a breach of contract. This would include any form of discrimination, such as racial or sexual incidents.
  • Unfair dismissal – Where an employee is dismissed without good reason, there is a breach of the contract. An employee cannot normally be dismissed without the formal notice procedure has been adhered to, or without good reason. For example, an employer cannot sack someone because they would prefer to have someone else in the position. Similarly, it is not possible to dismiss an employee who informs outside bodies about wrongful activities that are occurring within the business. This specific activity is covered within the Public Interest Disclosure Act 1998 (Editorial 2001).
  • Refusal – If an employee refuses to perform any of the tasks that have been agreed to within the contract, providing these tasks are safe and legal, then they would have been in breach of their contract (Freedland 2003, p.207).

For any breach of an employment, the offended party is entitled to seek redress, either for any financial loss incurred or any other damage that has been suffered as a result of the breach or by seeking for the issue to be rectified. The initial step for a breach is that the employee or employer has to follow the grievance procedures as outline within the contract of employment. If this does not resolve the issue further action can be taken as outlined below.

Redress for a breach can be sought through the civil or county courts or the employment tribunal systems. However, one has to look at the facts of the case to decide which is the most appropriate avenue. For example, the tribunal system is designed to be a cheaper and easier option, but the limitations are that the claim has to be made within three months of the event and the maximum amount of the claim cannot exceed £25,000. Additionally, there are some specific areas that cannot be dealt with by the tribunals, such as personal injury cases. Unlike the tribunal, actions through the courts can be lodged up to six years after the event and there is no limitation to the amounts that may be involved.

Bibliography

Freedland, Mark (2003). The Personal Employment. Oxford University Press. Oxford, UK.

DTI (2007). Employment Matters. Department of Trade and Industry. London, UK. Retrieved 14 April 2007 from http://www.dti.gov.uk/employment/employment-legislation/employment-guidance/page16161.html#contracts.

Employment Rights Act (1996). HMSO. London, UK. Retrieved 14 April 2007 from http://www.opsi.gov.uk/acts/acts1996/96018--a.htm#1

Editorial (2001). Staff asserting contract breaches get new rights. Personnel Today. London, UK.


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