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Published 31 August 10
A 'Contract of Employment' is an agreement between an employer and an employee which broadly sets out their employment rights, responsibilities and duties.
Contracts need not necessarily be in writing, but an employee is entitled by law to receive a written statement of their main employment terms within two months of starting work. That statement, (known as a principle statement) should define:
- The legal name of the employer company.
- The name of the employee.
- The date the current employment began (and any earlier date upon which employment with a previous employer began which is treated as 'continuous' with the current employment).
- The employee's pay or how it is calculated, and the payment interval: for example weekly or monthly.
- The employee's hours of work
- Holiday entitlement, including public holidays, and holiday pay.
- The job title or a brief description of the work.
- The address of the employee's place of work.
Written details of other important information should also be provided. This should include:
- Terms and conditions relating to sickness or injury, including any sick pay provisions.
- The period of employment; for temporary positions it should define the period for which it is to continue; if a fixed-term contract, the date it is to end.
- The length of notice periods required from both parties.
- Details of any collective agreements with trade unions that may affect the terms and conditions of employment.
- Any terms relating to pensions and pension schemes including whether the employment is covered by a pensions contracting-out certificate.
- Dismissal, disciplinary and grievance rules and procedures; some details of which must be in the written statement itself. These are:
- The name or job title of the person the employee should apply to in order to resolve a grievance, and how this application should be made.
- The name or job title of the person the employee should apply to if they are dissatisfied with any disciplinary decision or decision to dismiss them, and how this application should be made.
- Any further steps an employee should take if they are dissatisfied with a grievance, disciplinary or dismissal decision.
The statement must also include certain details relevant to employment overseas, should the employee be expected to work outside the UK. Information which could apply across the company and its employees - such as disciplinary procedures - could alternatively be set out in a staff or company handbook.
The contract is made as soon as the employee accepts a job offer; by starting work an employee demonstrates that they accept the terms of the contract even if they are unaware of them.
Contracts may include terms that are not written down even if a written contract is agreed by employer and employee, for example when a particular arrangement that has never been clearly agreed but over time becomes part of the contract, or with terms that are assumed or so obvious they are not included in a written contract or with terms that have been agreed orally.
Despite oral contracts being bound by law, it may prove difficult to define the terms of such an agreement should a dispute arise at a later date. Therefore it may be wise to issue a written contract which covers these agreed points.
Both parties are bound to the employment contract until it ends, usually by giving notice, or until the terms are changed, usually in an agreement between employer and employee. In order to change an employee's terms and conditions of employment, their agreement is required, otherwise the employee may be entitled to sue for breach of contract, or resign and claim constructive dismissal. If an employee suffers a loss through an employer's failure to observe the terms of their contract of employment, they may make a claim for breach of contract.
Individuals who are not employees, for example independent contractors and agency workers, are not entitled to a written statement.
An example of a Contract of Employment