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Category: Contracts
Employment contracts and the ‘3Cs’ – pt.4 | Contemporary
Did you know, fewer than 20% of employees actually read their employment contract before signing? That’s staggeringly low for such an important document, and why our last ‘C’, contemporary, is key to boosting engagement.
Here are my top tips for creating contracts that are engaging, practical…and actually read:
Stop writing in the third person – swapping ‘the Company’ for ‘we/us’ immediately creates a connection with your audience and creates a more personal, interesting and engaging read.
Cut out the jargon – if your reader is having to wade through little understood terminology you’re losing their attention, fast! Employment contracts should be user-friendly and easy to understand throughout.
Intuitive layout – create a ‘start, middle and end’ that corresponds with the employment journey to make it easier to navigate and find relevant detail.
Keep it simple – don’t worry about catering for every eventuality. From a legal perspective that can be unhelpful and means the length of the document will in itself switch off the reader.
This update is accurate on the date it was published, but may be subject to change which may or may not be notified to you. This update is not to be taken as advice and you should seek advice if anything contained within affects you or your business.
Employment contracts and the ‘3Cs’ – pt.3 | Commerciality – avoiding unnecessary costs
This is the second part of what ‘commerciality’ means for your employment contracts. You don’t need to include these provisions, but in doing so you’re giving yourself the potential opportunity to avoid unnecessary costs for your business.
Here are my top three ‘quick wins’ to help save some cash within your contracts:
Holidays – departing employees often lose their ‘mojo’ during their notice period – it’s human nature. By requiring them to take accrued unused holiday during their notice period, you save on paying them a lump sum in lieu of untaken holiday when they leave.
PILON – payment in lieu of notice clauses are important, but costly. You’re paying a lump sum for someone to avoid working for you! How can you minimise the cost of PILONs? You can stagger payments and require departing employees to start their job search immediately, and then to tell you when they’ve found a new job. If you add in that they must start their new job as soon as an offer is received, you can potentially end notice pay at that point (provided you’ve paid at least the statutory minimum).
Probationary periods – save unnecessary admin and cost by commencing pension contributions once the employee has successfully completed the first three months of employment. You can also limit notice periods during probation – that way, if you feel that the individual doesn’t have the skills for the role, or simply just doesn’t ‘get it’, you can limit notice costs during this period.
This update is accurate on the date it was published, but may be subject to change which may or may not be notified to you. This update is not to be taken as advice and you should seek advice if anything contained within affects you or your business.
Employment contracts and the ‘3Cs’ – pt.2 | Protecting business interests
What do we mean when talking about ‘commerciality’ in employment contracts? Well, it’s all the stuff that you don’t need to include but can choose to add in order to protect your business interests and what matters most to you.
There’s loads I could go into but my top tips would be:
Reflect reality – what’s important to your business will change over time. If you don’t think about updating your employment contracts as your business evolves, their value and effectiveness will dilute over time.
Protecting know-how – think about what makes your business unique. Your proposals, pitches, products, pricing…I could go on! They’re all capable of being protected, but you need to call them out in your contracts! Otherwise, they’re often fair game to departing employees.
Post-termination restrictions – “they’re not enforceable!”…if I had a pound for every time I’ve heard that! They’re definitely easy to get wrong, but are enforceable when drafted appropriately. Restrictions that aren’t specific or drafted tightly enough are highly unlikely to be upheld. You need to make sure the terms of the restrictions don’t go further than necessary to protect your legitimate business interests – stating an employee can’t ever work for a key competitor isn’t going to work unfortunately!
This update is accurate on the date it was published, but may be subject to change which may or may not be notified to you. This update is not to be taken as advice and you should seek advice if anything contained within affects you or your business.
Employment contracts and the ‘3Cs’ – pt.1 | Compliance
It’s safe to say I’ve seen a few employment contracts in my time! A non-compliant employment contract can be expensive – a tribunal can award up to four weeks’ pay for each out-of-date contract you’re using.
Key areas of compliance for employment contracts were introduced in 1996 by the Employment Rights Acts…there’s no excuse for getting those elements wrong! More recently in 2020, the Good Work Plan added more red tape with further compliance requirements which employers have been slow to adopt. Here are the top five areas I’ll see regularly missing from employment contracts:
- Any paid leave the employee benefits from (maternity or paternity leave, for example)
- Details of all remuneration and benefits (such as enhanced maternity pay or private medical insurance)
- Training requirements for the role, whether they’re mandatory, and who will pay for the training
- Whether working hours are variable (or not as the case may be)
- The correct statutory minimum notice employees are entitled to (one week for each complete year they’ve worked for you, up to a maximum of 12 weeks)
Reference to these areas needs to be included within the contract, even if they don’t apply. If there is no training requirement for example, you need to say as much.
This update is accurate on the date it was published, but may be subject to change which may or may not be notified to you. This update is not to be taken as advice and you should seek advice if anything contained within affects you or your business.
Changing employment terms – a new statutory code
If you’re looking to make changes to employment contracts and an employee refuses those changes, one approach you can take is to terminate their employment and rehire them on the new terms. A new statutory code of practice is to be introduced (date to be confirmed) providing greater governance over this approach.
What will the new code mean in practice? The detail is yet to be announced – all the government have said is that the intention is to provide practical steps for employers to follow to ensure they engage in meaningful consultation when changing terms and conditions are changed. If employers fail to follow the code tribunals will have more clout when issuing compensation. This will mean:
- Tribunals will need to take into account whether an employer has followed the code and employers should be ready to evidence that they have done so; and
- Tribunals may apply a 25% uplift in compensation if an employer unreasonably fails to comply with the code.
The new code will not be an outright ban on the use of ‘fire and rehire’ meaning it will remain an option for employers to change contractual terms where voluntary agreement is not possible or there is no other alternative.
There’s always lots to consider when making changes to contracts – getting the right advice can help to minimise as much risk as possible. Get in touch for our support.