HR Services and Employment Law specialist
Menu
HR Services and Employment Law specialist
Call Us: 01491 598 600 Email Us: cw@gaphr.co.uk
  • Home
  • Services
  • Quiz
  • HR Information Centre
    • Redundancy
    • Disciplinaries
    • FAQs
  • Blog
  • About us
    • Hospitality HR
    • Client Case Studies
  • Contact us

Employers: Penalty For Not Issuing Contract Of Employment (3 Reasons)

Written by Carolyne Wahlen

contract of employmentMost employers think that they’re being clever by not issuing a contract of employment – what could the harm of that be? Is there even a penalty for not issuing a contract of employment? The answer is actually quite a lot of risk involved.  Here is a short guide as to why you must issue one, no matter how much you don’t want to…

  1.  It’s the law!
  2.  Notice periods
  3. Gardening leave in employment contracts

 

Reason 1 (but not the most important one!): Not Issuing A Contract Of Employment Is Against The Law!

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.

 

What is the penalty for not issuing an employment contract? Immediately, nothing. 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 money. 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. The penalty for not issuing a contract of employment could be as little of a few hundred pounds at tribunal to thousands of pounds and losing your case.

 

Even if you don’t issue them with a written contract, they 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.

 

The law is even more specific since April 2020. You now have to have all paid benefits, statutory or otherwise, written in the contract. If you used to pay company sick pay “at your discretion” that is no longer possible. 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 in there. This is to enable employees to potentially compare what they are paid, for equal pay purposes.

 

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 white men doing different jobs 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: gender, gender reassignment, marital status, pregnancy & maternity, age, race, religion, disability, sexual orientation) starts from the recruitment stage, with or without a contract. 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.

 

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!

 

Reason 2: Notice Periods

One of the most important reasons why an employer should issue an employment contract is the notice period. The penalty for not issuing a contract of employment is that the statutory minimum notice periods will automatically apply, and they are amazingly short.

 

In the first month of employment they are instantaneous on both sides.

 

After the first month of service, the minimum notice period for the employee to give you is just one week for every year of service. However, it doesn’t matter how long they’ve been with you, they only ever have to give you one week’s notice.  Even if they have been with you for ten years, they would still only need to give you one week’s notice.

 

This will obviously be a problem if they are a valued employee and decide after 10 years that they want to go, give you one week’s notice, and then take their outstanding holiday leave during that week. You would instantly be without your employee but there would be nothing legally you could do about it.

 

The statutory minimum notice periods are not the same for employers. You need to give them 1 week for every completed year of service up to a maximum of 12 weeks.

 

You cannot get an employee to sign away, in an employment contract, their legal rights. Whichever notice period is longer will apply, contractual vs statutory.

 

If you have your own contract you would normally say, after someone has completed their probationary period, that they would be on a month’s notice. If they are more senior you might even make it 3 months, so that if they decide to leave you could have some time to find a replacement.

 

The added silver lining is that if you have a longer notice period and an employee walks out and refuses to work it, you would not have to pay it at all.

 

So if you don’t want to be left in the lurch, you need to put an adequate notice period in the contract.  Also make sure that it says “in writing” to stop spur of the moment resignations/firings being treated as valid, which in the heat of the moment they were, but in the cold light of day (and having to pay mortgages) they aren’t.

 

Reason 3: Gardening Leave in Employment Contracts

There is no legal right, unless it is in the employment contract, to send an employee home instead of letting them work out their notice. This would apply when somebody has either resigned or you’ve given them notice. If you have a clause regulating this in your employment contract, you can then decide whether you are going to make them work their notice or whether you would rather send them home.

 

You might put them on gardening leave if you feel there could be problems with them being at work or you don’t think they’ll be motivated. They aren’t allowed to work for someone else, though they can look for work, but effectively they are being paid to sit at home in the garden.

 

We would normally recommend that if you have given them notice, that they are then put on gardening leave. If they have resigned, then do ask them to work their notice period.

 

As you have not issued a contract of employment, it means that you don’t have a paragraph in their contract saying you have the right to put the employee on gardening leave. If you do put them on gardening leave or pay them in lieu of notice, you will be removing their right to provide you with work, which is a breach of contract.

 

The cost of the penalty for not issuing a contract of employment? An extra 3-4 weeks pay awarded against you if it came to court.

 

You could also have an employee who insists on their right to come in and work – which could be at the best awkward and at worst damaging for the business, especially if the employee is acquiring information that they shouldn’t or bad-mouthing you, their employer, whilst in the office.

 

 

If you have any other queries about employment, visit our FAQs page or call us on 01491 598 600 for a FREE 15 minute phone call. Looking for Golf HR?


Click here to download

Gap HR is delighted to help all sizes of business, from start ups with one employee to those with up to 100 employees.

We can help you prevent unplanned surprises! So call us on 01491 598600 for a free consultation today!

Filed Under: Contracts of Employment, Top Post

About Carolyne Wahlen

Carolyne is the founder and owner of Gap HR. She's seen what works in HR and what doesn’t, and has practical answers to real problems that small businesses can apply with immediate effect.

Click here to download

Schedule a meeting with Carolyne

• We exist to help you stay legal, compliant and profitable, without shelling out for an in-house HR manager.

• Our founder Carolyne has worked in people management since 1995, which means you’ve got decades of experience you can rely on.

• Over 170 clients benefit from the experience and expertise of the Gap HR team.

 


Call Us: 01491 598 600

 


email us: cw@gaphr.co.uk

Click here to download

Where our clients are:

Mark Ghafoor, KCC Basildon

“Whether it’s a simple question or a more complex query, GAP HR have ensured that we have the most up to date knowledge of current legislation and processes to ensure we can offer the best support to our teams.
It is reassuring to know that expert advice is only a phone call or video conference away!”

Deb Green, Vermatech Pest Control

“We have been using Gap HR for several years now. Carolyne and her team are professional and efficient and we would not hesitate in recommending them for small businesses. It is a great relief to know we are supported by them for our HR advice and paperwork is kept up to date.”

Justin Wilkie, 2Excel Logistics

“I have been working with Carolyne and her team for 6 years now , when I first purchased 2Excel Logistics I found the HR scary as I wanted to do the right thing for my staff , with Gap HR on my side this all seemed easy and we have gone from 9 staff to 28 with no hassle what so ever , thank you to all at Gap HR”

Ashley Lewis, Wallingford Tiles and Bathrooms

“So pleased to be working with Gap HR. They’ve straightened us out in no time. Their pricing is clear and they really know what they are talking about.”

Helen Gordon, Kitecreative

“We are a growing company but do not have facilities in house yet for HR services in house. Gap HR is our go to service for all kinds of advice about HR for our business and we have found them very reliable, communicative and efficient. Would definitely recommend them”

“Carolyne and team continue to provide great support to our business, with quick and accurate responses to help with our various HR needs.”

“Gap HR have been at our side for a number of years now and are a great help in dealing with our HR needs”

Copyright © 2021 Name & Registered Office:

Gap HR Services Ltd.
Wallingford Road, Goring, Reading, RG8 0HN, UK
Phone: 01491 598 600

Company No. 08146299 | Contact us | Privacy & Cookies Policy | About this Website