A contract of employment is a legally binding agreement between an employer and an employee. The employee agrees to provide their skills and labour in exchange for remuneration from the employer. For a contract of employment to take effect there must be an offer, an acceptance and an agreement between both parties. The agreement which forms the contract of employment can either be in writing or agreed orally.
This article will look at three key reasons why businesses should protect themselves by ensuring that all contracts of employment are in writing.
1) There is a legal obligation to provide a written statement of terms of employment which is detailed in the Terms of Employment (Information) Act 1994-2014
Every employer is legally obliged to provide a written statement of terms of employment within two months of an employee starting work and it must include the following information:
•The full name of the employer and employee
•The address of the employer
•The place of work. If there is no fixed or main place of work, it should state that the employee is required to work in various locations
•The job title or the nature of the work
•The start date of the contract
•Temporary contracts must include either the expected duration of the contract or if it is a fixed term contact it must specify the date that the contract ends
•The rate of pay or method of calculation for remuneration – the remuneration package should provide a breakdown of basic salary, commission, bonuses, allowances etc. if they apply. If the employee is required to work on Sundays they must be paid a premium for this and the amount should be included under the pay section of the contract.
•How often the employee will be paid, i.e. weekly or monthly
•Hours of work including overtime. This section should also detail work breaks both daily and weekly as well as any shifts if they apply
•Terms and conditions for paid leave, for example annual leave and public holidays but not paid sick leave
•Terms and conditions for illness/injury and pensions schemes – if you have a sick pay scheme it should be detailed in this section
•The period of notice obliged to be given by both parties
•If any collective agreement affects the contract this should also be included. An example of a collective agreement would be an industry-specific sectoral employment order
The written statement of terms of employment must be signed and dated by the employer and ideally it should be signed by the employee as well.
What it the employee refuses to sign the contract of employment?
If they refuse to sign the contract but still come in to work on an ongoing basis, they are signaling that they have agreed to the terms and conditions of the contract of employment. However, it is crucial that the employer signs the contract and has a record of when the employee received it.
2) If something is not written in the contract of employment it is difficult to implement
For example, if a retirement age is not written in a contract of employment, you cannot terminate an employee’s employment purely on the grounds of age as this is discrimination under the equality legislation. In the case of using lay-off, again if it is not written down it is harder to implement as you would need to get the employee’s agreement to bring in lay off or short-time working.
Businesses might want to include some or all of the following in a contract of employment if they apply:
•Probationary period, with the right to extend it up to one year but not over a year
•Sick pay scheme
•Right to search
•Bullying and harassment procedures
•Grievance and disciplinary procedures
•Restrictive covenant clauses
•Email/internet and social media use
It is important to note that all businesses must advise employees of the disciplinary procedures within one month of them starting work. Many businesses choose to include their disciplinary procedures in the contract of employment.
3) In the case of disputes, the contract provides clarity and security for both parties
If a dispute arises between the employer and employee, the contract of employment can provide clarity on issues that take place internally or externally. For instance, if an employee lodges a grievance internally and it is in writing, the grievance procedures make it clear to both parties what the process is. If a claim to the Workplace Relations Commission is made, for example a payment of wages claim, the contract of employment is usually the first reference point that will be used to defend a case.
Finally, it provides security for both parties as a contract of employment cannot be changed without agreement from both sides. For example, an employer cannot suddenly change the hours of work without an agreement from the employee. Equally the employee cannot suddenly decide to work Monday to Thursday if their employment contract states they are required to work Monday to Friday.
SFA have a number of sample contracts of employment available for permanent, temporary and casual employments which you can avail of here.
If you would like more information on contracts of employment or any other HR issues your business may have, please contact SFA on 01 605 1668 or visit the advice section on our website www.sfa.ie/advice