Every now and again I take a look at the most popular pages on our website.
And pretty much every time I do, the same answer comes up, which is an article on the penalty for not issuing an employment contract.
Since it’s proved very popular online, it’s clearly an important topic, so I thought I’d dedicate an email to explaining the answer, to ensure you’ve got absolute clarity on where you stand.
So here goes…
Since April 2020 the law has become a lot stricter about issuing written contracts of employment.
You now HAVE to give employees a contract of employment by the end of their first day of working for you. It used to be within two months of them starting.
“If I don’t do that, what is the penalty for me the employer?”
Nothing automatic.
But if they take you to tribunal for any other reason (unfair dismissal, discrimination, etc) then it WILL be added on to their claim and will cost an extra 3 or 4 weeks of their salary. It will also be a sign, for the Court, that you are not “fulfilling your obligations under employment law” and will be a black mark against you.
Even if you don’t issue them with a written contract, they automatically have a verbal one: you have offered them a job, they have accepted, they turn up to work for you in the expectation of getting paid, and you pay them.
“What needs to be in the contract?”
The law has become even more specific since April 2020.
You now have to have all paid benefits, statutory or otherwise, written in the contract. You used to be able to pay company sick pay “at your discretion”; you can’t do that anymore.
Holidays, pensions, medical insurance, etc have to be in there.
Even statutory benefits that you have no influence over such as statutory sick pay and maternity pay have to be mentioned. This is to enable employees to potentially compare what they are paid, for equal pay purposes.
“Can my employees compare their contracts?”
You cannot stop employees from comparing their contracts and benefits for equal pay purposes, but you can if it is unrelated to discrimination.
For example a woman and man, doing the same job, can compare contracts and benefits. Two women, with the same race and age and no protected characteristics, could not without you being able to discipline them for breach of confidentiality.
If you don’t issue an employment contract, other legal protections still start.
For example, protection from discrimination on the basis of the protected characteristics (gender, gender reassignment, marital status, pregnancy & maternity, age, race, religion, disability, sexual orientation) starts from the recruitment stage, with or without a contract.
“Can I use the contract to override statutory rights?”
Employees also accrue annual leave, with or without a contract.
You also should be aware that you cannot get an employee to sign away, in an employment contract, their legal rights.
For example, you can’t get them to agree that if they are sick, that they do not need to be paid anything.
If you try and impose less than the statutory minimum, they will always apply in any dispute, so what’s the point of trying to do so? Employees have access to a lot of free legal advice, so they will find out what you are trying to do fairly easily and then your business will be in trouble.
Save yourself the hassle and at least stick to the legal requirements, for your safety and bank balance!
