Written terms of employment – Why everyone should have them

Written terms of employment – Why everyone should have them

Lee Betchley of leading North East law firm Clarke Mairs explains the benefits of having written terms of employment and why they're essential to you as a business.

The employment relationship is primarily a contractual one. Like all contractual relationships, the parties should ensure that the terms of the contract are clear and recorded in writing. In the employment context, the law recognises this and requires employers to issue employees with certain written terms within a specified timeframe.

A written contract of employment ensures that both employer and employees are aware of their rights and obligations and of how the relationship will be regulated both during employment and after it has come to an end.

A written contract of employment is particularly important for an employer as it offers an opportunity to set-out the employer’s powers and any specific terms designed to protect the organisation if the relationship turns sour. The importance is amplified when employing a senior employee or executive director.

Against this background, it may be surprising to learn that a significant number of employees do not have written terms, or have written terms that are not fit for purpose or are not legally compliant.

The absence of written terms inevitably leads to uncertainty and often disappointment, and even financial loss when an employer becomes aware that it is exposed to risks that could have been protected against had appropriate written terms been prepared at the outset.

A stark example concerns restrictive covenants which, if properly drafted, can protect an employer’s business against the competitive actions of a former employee. Ideally restrictive covenants should be dealt with on commencement of the employment relationship, although it is not uncommon for them to be entered into during the employment relationship, particularly where the employee has been promoted. 

A further example concerns the employer’s power to keep the employee away from work in circumstances where the employee has resigned on notice.

This power should be included in the written terms. A failure to retain such a contractual power could result in an employee continuing to have day-to-day contact with key employees and clients right up to the point where he or she joins a competitor business.

The beauty of this so-called “garden leave” clause is that it enables the employer to side-line the employee for several months with the effect that the employee’s relations with colleagues and clients “cools off” enabling the employer to reaffirm its relations via other employees.

There are many more examples that could be cited concerning, amongst other things, holidays, sickness absence, and disciplinary suspension.

The key messages for employers are that written terms should be provided, and as a minimum must include the basic terms, and, more often than not, should include a variety of specific terms suited to the particular employment relationship in question.     

For further information please contact Lee Betchley on 0191 245 4817 or by email at leb@clarkemairs.com