Issue contracts of employment to staff as soon as they join you – or risk a Tribunal fine

In a recent case (Stefanko v The Maritime Hotel Ltd) the Employment Appeal Tribunal fined an employer who had failed to provide an employee with a contract, even though she had left their employment within six weeks of starting work. This case heralds an important change to the generally held view that an employer has two months’ grace in which to provide its employees with a contract.

Most employers know that under the Employment Rights Act 1996 (Section 1) we have to provide employees with a Statement of Terms and Conditions of Employment (including all the required information) within two months’ of the employee starting work. It is less well-known that Tribunals will generally award up to four weeks’ pay on top of any damages for any other claim brought, as a penalty to an employer who has failed to comply with this requirement.

In the Stefanko case, the first Tribunal did not order a penalty payment against the employer because the employee had been employed for less than two months before she was dismissed. The Employment Appeal Tribunal overturned this decision, however, and fined the employer, stating that employees who have at least one month’s service have all the rights required by the legislation.

In practical terms, therefore, if a new employee is dismissed after a month, without having received a contract, then an employer can expect to receive another bill for up to four weeks’ pay if the employee is successful in an Employment Tribunal in a related claim.

The obvious moral of the story is to issue contracts of employment on or before day 1. It is surprising how many employers still have staff who do not have up-to-date or any contracts (often the senior and long-serving ones), and the lack of basic protection that this affords employers when things do not go to plan is worrying.

If the New Year is prompting you to audit and review your contracts of employment, feel free to give us a call. It’s less demanding than increasing your aerobic exercise and we have a range of services designed for employers of all sizes, from start-ups and micro-employers through to SMEs and FTSE 100 companies with more complex needs including internationally based workforces.

Please contact Jenny Okafor-Jones, our Head of Employment and Immigration and a Director of our sister company, Eagle HR, on 01242 216259 or mobile – 07816 969492 or email: [email protected] with any queries.