Changes to employment contracts – are you ready?

Employment contracts

Currently, employers are required to give employees a statement of their key terms and conditions (“statement of terms”) within 2 months of their employment commencing. Most employers comply with this obligation by issuing an employment contract.

As a result of the Government’s “Good Work Plan”, from 6 April 2020, the legislative requirements will change. The changes are aimed at increasing transparency between workers and employers as well as improving the enforcement of employment rights.

Who is entitled to a statement?

At the moment, only employees are entitled to a statement of terms. From 6 April, new workers will also be entitled to one.

Existing workers will only be entitled to a statement of terms if they are re-engaged after 6 April. Existing employees will not need to be issued with a new statement of terms unless they request one or details of their terms change.

Contact our Employers Support team now.

Timing

Most employers already issue the statement of terms before employment starts. The statement of terms will contain key information like salary and hours, so it makes sense practically for it to be issued prior to joining. For employers issuing more detailed contracts, it is also important to have provisions like confidentiality restrictions in place from day one.

However, at present the law does give employers a two month period to issue the statement of terms and removes the obligation entirely if the employment is for less than a month. From 6 April, both these exemptions are removed. Statements of terms will have to be issued by the first day, and for everyone.

What additional items must be included in the statement of terms?

The law already requires that the statement of terms contains a list of key information, such as salary and holiday entitlement. The new law expands this list to include:

• The days of the week the worker is required to work and whether working hours or days may be variable, with details of how any variation will be determined.
• Any entitlement to paid leave, including maternity leave and paternity leave.
• Any other remuneration or benefits provided by the employer (including non-contractual benefits).
• Any probationary period, including any conditions and its duration.
• Any training provided by the employer which the worker is required to complete and any other required training with respect to which the employer will not bear the cost.

Many items on this list are already included in statements of terms/contracts as best practice. For example, probationary periods are almost always set out in the employment contract (though for the few employers who currently only reference it in the offer letter, this will need to change). Other items will only require minor changes – the requirement to reference various paid leave can be complied with simply by referencing the existence of a staff handbook or statutory rules.

The need to list all benefits will be the biggest change for employers used to explaining these through a benefits portal, handbook or intranet. The law technically requires the benefits to be listed in the statement of terms itself, although it is anticipated that many employers will instead choose to insert a clause explaining how benefits information can be accessed.

Training

Employers who offer formal training opportunities to staff will have to consider their contracts most carefully.

The new law requires employers to set out details of any training that they will not pay for. It is not yet clear whether this is intended to cover situations where the employer will pay initially but may require repayment if the employee leaves employment or fails the exam. It is best practice to have a stand-alone training policy which the employee agrees to be bound by prior to each item of expenditure. This new rule will require the policy to also be explained in the statement of terms. We expect that failure to do so will be used by employees seeking to argue that a repayment policy is unenforceable.

Penalties

The penalties for not issuing an appropriate statement of terms are not changing. For a straightforward failure, the employee or worker can simply apply to the tribunal for an order setting out their terms. This is very rare, as there is no financial benefit to the individual.

If the individual is bringing another tribunal claim (such as unfair dismissal, discrimination or deduction from wages) then the tribunal can make an additional award for failure to issue a complete statement of terms. This award is between two to four weeks’ pay, capped at the statutory maximum (currently £525 per week, making a total potential award of £2,100).

Top Tips

• Identify whether you engage any ‘workers’. For some businesses, this will be a tricky process due to the continuing litigation on where the dividing line between a worker and an independent contractor lies.
• If you have workers, develop a statement of terms specific to workers (for example, you should not refer to employment or provide any benefits which are only offered to employees).
• Review your employment contracts. Do they require any updating?
• Consider any positions in your organisation which require mandatory training, in particular, if you will require employees to bear the cost of any training. You will need to revise the statements of terms for these employees and dovetail the contract wording with any policy on repayment of training costs.
• Develop a process to deal with requests from existing employees for new contracts.

For more information, please contact our Employment and Immigration team now.