Is it time for a contract spring clean?

As businesses emerge from the pandemic, Pam Dosanjh Phillips provides tips for employers looking to refresh their employment contracts

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It is challenging to keep abreast of all the changes in employment law, especially as businesses are trying to make their way out of the pandemic and making sense of the more contentious or ‘juicy’ changes which unsurprisingly take centre stage. 

With so much going on, it is easy to overlook some of the more mundane ‘housekeeping’ matters such as updating employment contracts and staff handbooks. But this is always time well spent, as these documents are an incredibly useful tool for employers to understand the basis of the employment relationship or resolve a potential dispute and avoid protracted correspondence or a grievance. 

What has changed? 

Firstly, new staff (employees and workers) employed on or after 6 April 2020 are entitled to a written statement of terms from day one of their employment (previously this was within two months of commencement of employment).  

In addition, mandatory information that should be included in the written statement of terms has been extended to include details of any probationary period and details of paid leave entitlements. For staff working variable hours or days, details of how they vary should be included. Details of benefits should also be included (if none, this needs to be stated) and any training which is to be provided. 

What is the risk?

If you do not provide an appropriate written statement of terms, an employee may add a claim for failure to provide a written statement onto other successful claims (it is not a standalone claim). Compensation for a successful claim (depending on the circumstances) could be up to four weeks’ basic pay (subject to the statutory cap).

It is worth noting that the absence of a written statement or signed statement is unlikely to succeed in a defence that the employee was not employed. In such cases, the employment tribunal would look at what is happening in practice.   

Why do businesses need to spring clean their trusted suite of contracts and handbooks?

Most businesses will have contracts and staff handbooks in place. You may have put these in place during the infancy of your business, when you were trying to keep expenses to the minimum and focus on business operations and productivity. It is likely that your organisation has grown, changed, evolved, and become more agile over time and this is not necessarily reflected in your suite of documents.

It is a good idea to review your suite of documents. A review of policies can minimise the risk of protracted disputes with staff and save you management time and expense, and can free you up to focus on more productivity and business development.  

Best practice includes separate contracts for junior and senior managers; senior managers should have more specific clauses to protect the business’s confidential information, business relationships with key clients/customers, exit terms, non-compete clauses that are fit for your industry risks. 

Your review should also ensure contracts are legally compliant. It is also advisable to update and align contractual terms to create some business uniformity (subject to any legal restrictions) and reduce confusion.  

Job descriptions should be updated to reflect any changes to duties/tasks as the role has evolved and any staff/pay structure changes.  

You should also review separate HR policies in your non-contractual handbook. Contracts should refer staff to disciplinary and grievance policies within the staff handbook to allow the business to adapt, update or review policies from time to time without the need for staff agreement (which would be required if they are set out in the contracts, as this makes them contractual).      

Spring cleaning your employment contracts and handbooks may seem like a daunting task, but it is always time well spent.

Pam Dosanjh Phillips is an employment partner at Spencer West