What is required in a small business employment contract?
In this article, we'll cover:
Why is a small business employment contract necessary?
An employment contract is a legal document that outlines the rights, responsibilities and obligations of both you and the employee.
A small business employment contract is a legally binding document, and as a result, it reduces the risk that either side will take legal action due to something that is unclear.
What does a small business employment contract include?
An employment contract usually includes information about:
- Paid leave (PTO)
- Sickness entitlements, policies and processes
- Rates of pay and rules about overtime and unsociable hours work
- Potentially confidentiality clause too
As a business owner, the employment contract will help you to plan for your business practically and financially.
Who needs to sign an employment contract?
Full time, part-time and fixed term employees need to sign an employment contract.
If you’re using casual day labourours or independent contractors then they will not need to sign an employment contract.
You would be wise to still arrange a form of agreement with any labourer or subcontractor while they work with you.
What needs to be included in a simple employment contract?
An employment contract is made up of sets of terms. The set of written terms, or the ‘Written statement of employment particulars’, covers basic information.
Legally, a contract is a much broader document and incorporates more than just the written terms of their employment.
An employment contract is made up of:
- Specific terms that include the employee’s pay and working hours as above.
- Statutory terms that are part of employment law.
- Implied terms. These are terms that are too obvious to be written, such as a business closing on a public holiday.
- Incorporated terms. These are terms that are put into the contract from other sources such as a staff handbook.
Is there a standard template for an employee contract?
If you do an online search for a template for an employee contract, you will find many free guides or templates on offer.
As this is an important legal document, we always advise consulting with an employment lawyer. You can also get guidance from the Gov.UK website, or from specialist organisations such as ACAS.
As well as the terms outlined above, an employment contract must include:
- Names of the employee and employer
- Start date and continuous employment
- Job title or a brief description of the job
- Pay
- Place of work
- Working hours
- Holiday entitlement.
- Other benefits
- Absence and sick pay
- Other paid leave
- Pension arrangements
- Training
- Probationary period
- Notice period
- Collective agreements*
- Grievances
- Disciplinary rules and procedures
- Signature and date from both parties
*A ‘collective agreement’ is a type of agreement you as an employer have with any employees’ representatives (including trade unions) that allow terms and conditions such as pay or working hours to be negotiated on behalf of employees.
It isn’t essential, but we would always recommend consulting with an employment lawyer or HR consultant to ensure that your contract includes everything required and is compliant with current UK laws.
FAQ’s
How to write an employment contract
An employment contract is made up of sets of terms as we have covered above, so it is important to make sure that all necessary information is included.
You can find templates online, but we would always recommend seeking the advice of an employment contract specialist.
What should a contract of employment include?
In a small business employment contract, there is a list of required things, which we have outlined above.
These things include working hours, rates of pay, leave entitlement, as well as information about grievance and disciplinary procedures and notice period.
Why is a contract of employment important?
From our blog above, you can see that an employment contract includes a lot of important information for employees. As a business owner, it is important to get a written agreement from your employees. This confirms that they understand everything related to their employment. It also covers you legally.
It is also important for you as an employer to agree that you are aware of your duties and responsibilities to them.
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