Why employment contract reviews are crucials

It is easy to assume that because you have an employment contract in place with your employee(s), you have fulfilled your legal obligations as an employer. But you do need to regularly carry out an employment contract review.

However, employment law is fast-moving. Changes usually take place at least twice a year in April and October. Unfortunately, it’s also not unusual for further changes to be made throughout the year. This means that it’s a real challenge for employers to keep up to date. But it is important to recognise that such changes to employment law are likely to need addressing in terms of the contents of your contracts of employment or, more easily, your staff handbooks.

Any errors in applying the correct law can result in costly consequences for an employer but on a more practical level, being aware of the law makes life easier for both employees and employers as they know where they stand, and issues can be dealt with quickly and easily.

Whether you have a single employee or a large workforce, there are a multitude of reasons to ensure your employment contracts and staff handbooks are full updated and legally compliant. Here are just a few reasons to carry out a regular employment contract review:…

Employment contract review implications due to Brexit

When the UK left the EU, it agreed to what is known as a ‘non-regression clause’. This involves is a commitment by both sides not to reduce or weaken employment law rights that were in place as at the 31st December 2020, in a manner that would have a detrimental impact upon trade and investment. Nevertheless, a new Employment Bill was announced in the 2019 Queens Speech.

This was delayed due to the coronavirus pandemic and is now anticipated to be introduced sometime in 2022. Whilst it is unlikely that workers’ rights will be weakened, the bill is expected to introduce new provisions such as a new right for employees with caring responsibilities to take a week’s unpaid leave per year and a new right for workers to request a more stable contract after 26 weeks service.

The Good Work Plan Changes

Most employers are familiar with the requirement to provide a written statement of terms of employment to an employee who has been continuously employed for a period of more than one month, within 8 weeks of commencing employment. This was covered by Section 1 of the Employment Rights Act 1996. In April 2020, these requirements changed as a result of the Good Work Plan 2018.

It is now necessary to provide greater detail within those Section 1 terms which will now also apply to workers and employees from day one of their employment. This means that an employer will have a duty to provide an employee or worker with a written statement of terms of employment covering the extended list of section 1 terms from the first day of their employment. For those of you not in the know, those terms must now cover (in addition to the usual section 1 terms):

  • The hours and days of the week the worker or employee is required to work and whether they may be varied and how.
  • Entitlement to any benefits.
  • Entitlement to any training.
  • Any probationary period.
  • Entitlement to any paid leave.

Review of existing terms and custom & practice

Whilst your employee may have started out on the terms contained within their contract of employment, it is often the case that things change, and the reality becomes different from what the contract states. After the last 18 months, the working environment has changed for many and flexibility and working from home are now accepted practices. It is however always important to update the employment contract to reflect accurately what is happening in reality. This reduces the risk of there being any misunderstanding between the employer and employee and should there be any need for the Employment Tribunal to be involved in the future, the employer will be in a stronger position if they have their terms and conditions clearly and correctly set out (subject of course to those terms and conditions being legally compliant and non-discriminatory!).

For example, if an administrator was engaged to carry out administrative duties but during the course of time, incorporates office management duties into his / her role on a regular basis, it is likely to be determined that this would be an implied term in the contract due to custom and practice (that he/ she is doing this regularly as part of their day-to-day duties). This is important to be aware of from the employer’s point of view; just because it isn’t set out in the contract, does not mean it is not enforceable and does not become an implied right.

The same rule can be applied throughout employment law rights. Another prime example is the topic of bonuses. Perhaps a contract of employment is silent on the subject of bonuses but over the course of time, the employee has regularly received a bonus. In that situation, the tribunal might reasonably take the view that the bonus became an implied right within the contract through custom and practice of the employer. it is therefore imperative always to set out in the contract any terms which are happening in reality but have not been clearly identified in the contract – because if they are considered to be implied, they may not be the terms the employer would have wanted to incorporate.

Salary increases and changes in work pattern

Whilst it is not absolutely necessary to update a contract of employment due to a salary increase or change in work pattern as this can be confirmed via a letter, it is advisable to ensure any changes are fully documented and agreed upon and most importantly that they are legally compliant. The National Minimum Wage is usually increased in April of each year and the Working Time Regulations 1998 impose limits on the numbers of hours worked, along with providing other rights relating to annual leave.

Outdated law

As already mentioned, changes to employment law are regular and usually at least twice a year. It can be easy not to notice these changes or even to ignore them. B that’s a risky position to be in because the contract of employment issued to a worker or employee should accurately comply with the law because if it does not, it can have adverse and material financial consequences for the employer.

These are just examples of the ways in which an employer may fall short of complying with their legal obligations but a review of your employee’s contract and what is happening in reality will allow the employer to ensure they are meeting all of their legal obligations. Farringford Legal is here to help.