Whether a seasoned employer, or taking on your first employee, it can be easy to overlook what employment documents you must have in place, and by when.
Must I always provide a contract of employment?
When employing someone for more than a month, you are required to provide them with a written statement of certain terms within two months of their employment beginning. Often referred to as a section 1 statement, the terms can be provided in the form of a statement, or as a letter of engagement or contract of employment. They can also be given in more than one document (and at different times provided it is still within the two-month time limit), although certain terms must be given in a single document (the ‘principal statement’). Other terms can be referred to as being set out in a reasonably accessible document (e.g. a Staff Handbook).
A section 1 statement and a contract of employment are not necessarily the same thing and the latter will always take precedence. However, where no separate contract exists, a section 1 statement will be persuasive in relation to the terms of the contract of employment between the parties.
What must be included in the ‘principal statement’?
The ‘principal statement’ must include:
- Names of the employer and employee;
- The date the employment starts and the date the employee’s period of continuous service began (which may be different if any employment with another employer needs to be taken into account);
- Pay (or method of calculating it) and interval of payment;
- Hours of work;
- Holiday entitlement and holiday pay;
- The employee’s job title or a brief description of the work; and
- Place of work.
When can I just refer the employee to another document?
The following can be set out in another reasonably accessible document, or a supplementary statement:
- Terms relating to absence due to incapacity and sick pay;
- The notice periods for either side to terminate the employment;
- Information about disciplinary and grievance procedures;
- Terms as to pensions and pension schemes;
What terms can be given in a supplementary statement?
It makes sense, where possible, to include all relevant terms within the principal statement. However, this is not always possible (perhaps because some terms are still being negotiated) and the following terms can be given in a supplementary statement provided it is still within the two-month time limit:
- Terms related to work outside the UK for a period of more than one month;
- Terms as to length of temporary or fixed-term work;
- A note giving certain information about disciplinary and grievance procedures;
- A note stating whether there is a contracting-out certificate in force; and
- Details of any collective agreement directly affecting the employment.
If you only want to meet your minimum legal obligations, or know that you will struggle to finalise a contract of employment within the first two months, then providing a section 1 statement rather than a complete contract of employment can be advantageous. However, many employers find that, in the long-term, it is beneficial to provide a contract of employment rather than just relying upon a section 1 statement because a contract sets out a much more complete framework for the employment, and therefore helps to avoid confusion – thus providing more protection to an employer.
Employers will also often find it invaluable to include additional terms that are not required to be included in a section 1 statements, such as post-termination restrictive covenants that will help curb competition immediately after an employee leaves your business, protection for your confidential information, copyright materials and intellectual property, and the right to put an employee on garden leave. So, in many cases it will be advisable to have a comprehensive contract of employment in place.
Finally, whether it is a section 1 statement, or a contract of employment, it is imperative this it is correctly drafted, as badly drafted, or out of date, employment documents can be detrimental. If you need assistance with your employment documents then we can assist by reviewing and advising upon existing documents, providing template documents, and helping with updates or re-drafts.