Small businesses, like large businesses, need to provide their staff with employment contracts. Most terms will remain the same for both but with a few key differences. In this article, we’ll highlight what these differences are while discussing contract requirements and best practice.
Employment contracts – the statutory requirements
A contract is a legal obligation as well as a practical one. From an employment law perspective, it is unlawful not to have a contract of some form when employing an individual.
From a practical point of view, contracts of employment lay out what you expect from your staff. They also state your obligations as an employer. They’ll help you run your business more effectively, and allow employees to work more efficiently. If HR issues do occur, you’ll always have your contract to back you up.
An employment contract is made up of terms. Some of these are express terms and others are implied.
Express terms are those relating to employment law and statutory requirements. They are stated directly in the employment contract and include areas such as:
- Wage / Salary
- Working hours
- Duties of the role
- Staff benefits
- Holiday entitlement & pay
Implied terms are those that aren’t written down in contracts of employment, but implied by other terms of the contract or the law. They are presumed to be agreed to if the employee enters into the contract. Examples of implied terms include:
- Duty of mutual trust and confidence between employer and employee
- Right to receive at least the national minimum wage
- Right to a minimum period of notice
To make sure your documentation is airtight, you should include as many terms as possible in writing. This means everyone is clear on what is expected from them, and the employee knows their rights and obligations.
Small business employee contract
The main differences in contracts don’t come from the size of the business, but the type of employee they’re engaging with. For example, you could utilise:
- Full-time contracts
- Part-time contracts
- Fixed-term contracts
- Temporary contracts
- Agency contracts
- Zero-hour contracts
When do I need to provide a contract of employment?
It’s best practice to provide an employment contract from day one of employment. You must provide a statement of main terms (SMT) from day one, otherwise you’ll be breaking employment law.
If you want to see a template of what to include in the SMT, click here.
As for the contract itself, technically you don’t have to provide a full written contract. However, if you have employed an individual, then there is already a verbal contract in place.
Having only a verbal contract is risky for many reasons. One of the reasons is that if an issue occurs, it is essentially your word against theirs. If taken to tribunal, this can get very messy and may well rule in the employee’s favour. To avoid this we would always recommend a full written contract from day one of employment.
I have less than 25 employees – do I still need to provide a contract?
Yes, everyone needs a contract, regardless of how many staff you employ. Remember, a contract exists so long as you employ staff. For this reason, it’s better to have a written contract than a verbal one. Employment contracts for small businesses are no different.
If you need support writing, changing, or updating your employment contracts, or if you need advice and support with any other HR issue then speak to Croner, details can be found in the APHC members area.