Employer's guide to drafting effective employment contracts.

Kira Okumu, Senior Associate

Employment | Corporate Commercial | Arbitration & Disputes

When drafting an employment contract, it is vital to understand the steps to take to ensure you protect your company’s interest and provide clarity to your employees. An employment contract is legally binding agreement and should set out an employee’s rights and responsibilities.

What to include in a contract of employment:

The Basics

You will need to include information such as:

• Particulars: names and addresses of both parties to the contract
• The job title and a description of the work the employee can expect to carry out during their employment.
• Place of work (this can be flexible depending on the needs of the business).
• A start date of employment (known as the ‘date of commencement’) and if a previous role counts towards a period of continuous employment, this date should also be included (known as the ‘date of continuous employment’).
• Details of any training being provided to the employee.

Salary & Benefits

When covering the salary clause, it is key to ensure you have stated how much the employee will be paid and when the payment dates will occur. Many employees rely on knowing their payment dates to determine when certain bills or rent is debited from their account so clarity on the payment date is important. Any benefits the employee will be entitled to can also be noted here, for example company car, private healthcare, etc

Employment type

Here you should outline various key details about the job itself such as whether the role is on a full or part time basis and/or on a fixed term. Information should be provided on how many hours the employee is expected to work and over which days this is split. Any information regarding flexible working hours should be noted. You can also include information about any probationary periods you want the employee to be subject to.

Holiday entitlement

This should cover how many days of annual leave the employee is entitled to and whether bank holidays and national holidays are included. Employees are entitled to 5.6 weeks of paid holiday each year.

Sickness

A sickness clause should include details of the method of notification the employee should use if they are sick and who they should inform. You can also note sick pay entitlements.

Termination of employment

Here there should be a list of situations which would cause the contract to be terminated, with and without notice. You should also include the notice period itself.

Confidentiality

Although this does not apply to every role, some contracts may include a confidentiality clause to prevent employees disclosing confidential information during their employment and/or after their employment has been terminated.

Optional Clauses

The clauses such as Restrictive covenants can be used to protect the interests of your business after an employer leaves. For example, a non-competition clause can be used to restrict the employee working for a potential competitor for a specified time after they leave. There are various other types of restrictive covenant clauses such as non-solicitation clauses and non-dealing clauses. Each company may benefit from different clauses and this should be tailored to you.

Garden leave clause – this clause means you are able to ensure the employee is not at work during their notice period. This can be beneficial if there is a disagreement between the employer and the employee.

Payment in Lieu of Notice (PILON) clauses – these clauses apply when notice has been served on an employee to end their employment and will give employers the option to end their employment sooner, by paying the employee the salary which would have been due during their notice.

Bonuses – careful attention must be paid if you intend to include a bonus payment clause. Covering how, when and what, are the key factors to take into account.

Things to avoid in a contract of employment:

1. Avoid including any outdated laws. Always ensure that the legislation you are referring to is up to date as laws are often revised and changes may have been made.
2. Avoid failing to protect your interests as a business owner. Keep your own goals in mind when drafting a contract for an employee.
3. Avoid rigid clauses which do not allow for flexibility. You don’t want to have to rewrite the contract with small changes and adaptations to your company so think ahead.

Alternative Dispute Resolution

Disputes, although avoidable in most circumstances will eventually arise in others. It is therefore advisable to go for a dispute resolution method that is least expensive and time effective to boss employer and employee.

Please note that this is not an exhaustive list of things to include in your employment contract. Our team of Employment Lawyers would be happy to assist and advise on your contract of employment.

This article is for general information purposes only. It does not constitute technical, financial, legal advice or any other type of professional advice and is no substitute for specific advice based on your individual circumstances. We do not accept responsibility or liability for any actions taken based on the information in this article. For more information, please click here.