Are you thinking about employing people? Or have you already got your first few employees? 
 
Have they all got written contracts of employment?  
 
In this blog I'm going to tell you why you really should have written contracts for all your employees, and sub-contractors, and how I can help you with these if you don't already have them. 
 
Taking on your first few employees is an expensive business. Costs seem to come at you from all directions: 
 
Costs of attracting applicants (producing adverts, job descriptions etc and posting online) 
Time to sift applications, interview candidates and make offers 
Salary and on costs (such as Pensions, Employers National Insurance) 
Employer's liability insurance 
Office space - especially if you’ve previously operated your business from home 
Desks, chairs and office storage 
IT equipment 
User licences for IT software 
Company mobile phones 
Tea, coffee, milk, sugar... 
 
It never seems to end. 
 
So, it can be very tempting to look for ways of cutting some of the costs or at the very least deferring them to a later date. 
 
And that is a big reason why many small business owners find themselves with employees, but no contracts of employment. 
 
“That’s ok,” you might think. “If there is no contract of employment, we can do what we like.” 
 
But you would be wrong. Very wrong. 
 

Why are contracts of employment important? 

A contract sets out the responsibilities and expectations of the employer and the employee for the duration of the employee’s time working with you. 
 
They’re important because they lay out, in black and white, the terms and conditions of the job. By signing the contract, you both agree that these will be the terms on which you will work together. So, if there are any queries in the future about holiday entitlements, reclaiming overpayments or whether a mobility or flexibility change can be enforced, you can both refer back to the contract to see what you originally both agreed. 
 
And it’s a legal requirement to ensure all employees have a written statement of the main terms and conditions of their employment, given to them on or before their first day of employment, and which must include: 
 
The date their employment starts 
Their hours and days of work, and how these may vary 
How often, and how much they will be paid 
How long any probation period is, and any conditions attached to it 
Paid holiday and sick pay entitlements 
Any benefits they are entitled to 
How much notice they will get on termination 
Where they will work, and whether they could be required to relocate 
The end date if it is a fixed term contract 
 
You don’t have to put all of these into one document – you can put them in a handbook, policy manual, or in letters to your employee. But it’s really helpful to have them in one place so that you, and your employees, know exactly where to find them, and whether you are using the most up to date version. And if these terms are in one document that is signed by both parties, you have proof that the terms have been agreed between you – which saves arguments later. 
 
A contract of employment will contain all the above, plus clauses around confidentiality and other company policies that are relevant to the employee and the role. 
 
 

What happens if there is no written contract of employment? 

You might be thinking that having no written contract must mean you can make up terms and conditions as you go along. 
 
But that isn't the case. 
 
Because a verbal contract exists – you have offered a job, the employee accepted it and you are paying them for their time. 
 
And if there is no written statement of the terms on which the job was offered, then statutory terms and conditions apply. 
 
 
 

Statutory terms and conditions? How bad can they be? 

Well of course that does depend on how you run your business, but let’s say your employee decides they want to leave their job and move on to somewhere else. 
 
And let’s say that it takes at least a month to find a replacement. 
 
If there is no written agreement, then no matter how long they have worked, an employee only has to give you a week’s notice to leave their job. 
 
Yes, you read that right. One week's notice. 
 
And you cannot ask for more notice without a written contract. 
 
If they are off sick during that week’s notice, you will still have to pay them a full week’s notice pay…because the law also states that where statutory notice applies, it must be paid in full when someone leaves, regardless of whether they are able to attend work during their notice period or not. 
 
So, you have to foot the cost of paying notice, and a month without someone in the role. 
 
What impact might that have on your business? 
 
That is just one example of how statutory terms might not be in the best interests of your business. 
 
But you should be aware that there are lots of areas of employment where statutory terms will apply in the absence of a contract, including minimum wage, paid holidays, sick pay, time off for emergencies, flexible working requests, maternity and paternity leave and pay, and redundancy to name just a few. 
 
 

I'm still not convinced - any other reasons? 

Well, looking like a professional organisation that cares about doing things correctly is likely to make you a more attractive employer to applicants and your existing employees. Written contracts show everyone that you are applying company rules and policies fairly, and that you are not hiding any important terms and conditions that you might pull out of the hat at a later date. They help build trust early on in the employment relationship. 
 
Written contracts will also avoid wasting time arguing with your employees about whether they have to do overtime or work in a different location or take their holidays at particular times – you can point to the clause in the contract that they agreed when they started working for you. Or if there was no clause, you know you will need to find another way to get something done, such as finding volunteers or using agency temps. 
 
And finally, but in many ways most importantly, written contracts give you confidence, as a manager and a business owner, that you are saying and doing the right things. That yes, it is OK for you to ask someone to work on a bank holiday, because their contract says this is part of the job. But no, you can’t enforce weekend working because their contract says they will only work Monday to Friday, so you will need to find volunteers. 
 
You look more credible to your team if you choose your battles based on what your contracts do say, rather than what they don’t say. 
 
And you gain back your power, because you know exactly what battles you can - or shouldn't - fight. 
 
And of course, if you need to build more flexibility into your contracts, there is always the option of revising your contracts and agreeing new terms with your team. 
 
 
 

It’s fine – I only use self-employed contractors or zero hours. 

Your zero hours staff are either workers or employees. Either way, they still need a contract of employment for all the reasons set out above. 
 
Self-employed contractors are not your employees, but you should still have a written agreement with them that sets out how you will work together, payment rates, and how the agreement will be ended.  
 
You can’t use your HR policies with self-employed contractors because HR policies are only for employees, so your agreement needs to include what will happen if the self-employed contractor is negligent, behaves inappropriately, or doesn’t complete the work you have agreed to the standard you expect. 
 
You should normally expect a self-employed contractor to provide you with their written terms and conditions of business, but if they do not, you should look to protect your business by having an Associate Agreement you can both work to. 
 
 

But having contracts drafted is expensive, isn’t it? 

It’s a cost, of course. But there are a lot of costs involved if you don’t have a written contract of employment. 
 
Did you know, for example, that without a specific term in your written statement of terms and conditions, employers cannot: 
 
Reclaim any overpayments from an employee’s salary 
Put someone on gardening leave (pay in lieu of notice) 
Prevent an employee having a second job while working with you 
Prevent a leaver from setting up in competition with you, or going to work with a competitor 
Put an employee on short time working, or lay them off work temporarily. 
 
You might be able to do these things if the employee agrees, but if the employee doesn’t agree then the courts will tend to back the employee. 
 
These are just a few examples of some of the real and genuine costs of not having written terms and conditions of employment. You might also have problems retrieving company phones, laptops and vehicles, or ensuring leavers don’t depart with your client lists or important company documentation. What would that cost your business? 
 
And also, if you are unlucky enough to end up in an employment tribunal and your employee (or ex-employee) wins their case, there is an extra sting in the tail. Any financial award made to your employee (which you have to pay) is automatically increased by 25% if there were no written employment terms and conditions in place. 
 
 
Compare all this to my fee of £350 to draft a contract that you can use for all your employees, with a £75 fee for each variation (such as a fixed term or zero hours version) and I think you might agree that a professionally constructed contract that is bespoke to your business needs sounds like an absolute bargain. 
 
 
 

Can I just download an employment contract from the internet? 

Well, you can, of course, but would you be absolutely sure that: 
 
The contract is up to date and complies with current UK employment law? 
 
It was written for a business that is the same size as yours, and operates in the same way as your business? 
 
It meets all your needs, and covers every “quirk” in the way your employees have to work, such as shift patterns, out of hours working, when they can take holidays and all the other little (and big) rules you have created to meet your customer needs? 
 
Where there are gaps for you to complete, you understand exactly what you should be writing in each one? And you do, actually, complete each gap? 
 
You understand the clauses in the contract, and what they mean for you and your employee? Because one day you might have to rely on the contract to enforce your rights, or disprove the employee’s claims. 
 
I once helped a client who asked me to check a contract they had downloaded for free and filled in themselves. The contract itself was over 20 pages long and, although I have been writing contracts for 30 years, there were clauses I wasn’t entirely sure I understood. 
 
Worse still, my client did not understand the difference between inclusive and exclusive. So instead of giving 28 days holiday inclusive of bank holidays, they were going to give their employees 28 days exclusive of bank holidays. 
 
That meant, if they had issued that contract, they would have had to give an extra 8 days of paid holiday, per employee, that the employer hadn’t intended or budgeted for. 
 
It made the £350 the employer paid me to draft their replacement contract look like an absolute bargain! 
 
I do understand that keeping your expenses to a minimum when employing people is really important, but please make sure you know the true cost of cutting corners with your contracts of employment. 
 
 
 

What’s involved in having a contract written professionally? 

If you have read this far and now realise your business really needs a written contract of employment, or you would like a no-obligation, free of charge review of your existing contracts (which I recommend if your contracts were written before a number of employment law changes occurred in April 2024) please get in touch and I will be happy to help you.  
 
Here’s what will happen next: 
 
 

If you don’t currently have any written contracts   

When we agree to work together, I will send you a questionnaire which covers the key information I need to write your contract or associate agreement, and an invoice. 
 
You need to complete the questionnaire (which should take you 10-15 minutes) and return it to me, along with your payment. 
 
If you have any questions or there is anything you don’t understand you can contact me before you return your questionnaire – it’s really important that we get your contract right, so no question is a silly question. 
 
I will then produce a first draft of your contract, normally within 5 working days. 
 
 
 

If you already have written contracts 

I offer a free review of your existing contracts of employment and associate agreements. If they are fully compliant with current legislation I will tell you, and there will be no charge. 
 
If your contract is out of date I will tell you the reasons why, and quote a price for updating it or replacing it if this would be more cost effective for you. 
 
If you agree to go ahead with an update/replacement, I will then work with you to gather the information needed to complete the work. 
 
I will invoice you before starting the updates/creation of your contract. 
 
I will send you a first draft of your revised/new contract within 5 working days of receipt of all the information needed, and your payment. 
 
 
 

And in both cases... 

You will have the opportunity to review your draft contract, and ask any questions or request any changes. 
 
I will send you a final version as a fully editable Word document. This will then be yours to use as many times as you wish. 
 
I will normally produce your main contract first (this is usually the one for permanent full- and part-time employees). When we have agreed the final version of this document, I will then produce any additional versions you have requested, such as for fixed term or zero hours employees. 
 
If you need help to introduce new or revised contracts to your existing team, I can talk you through the consultation process and/or provide a free guide for you to refer to as you go through the consultation process with them. 
 
If you need other HR documentation, such as an Employee Handbook or HR policies, I would be happy to quote for these. 
 
 
 
All you need to do to get the ball rolling is to get in touch.  
 
Contact me on 07902 903086 or email marion@marionparrish.com and let’s get started. 
 
 
 
Tagged as: Better HR, Legal, Policies
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