As an employer, you are obliged by law to provide your employees with a Statement of Terms and Conditions of employment within two months of them starting work. In most cases, the most appropriate way to do this is via a Contract of Employment or, for senior staff or company directors, a Service Agreement. To have the terms of employment set out in writing gives both parties a clear idea of their rights and obligations and reduces the scope for dispute if there is ever a question over the terms.
Contracts of Employment must, by law, contain certain information including the date the employment commences, the remuneration and the notice period. Such information should be included in any good contract template. However, there are other terms that you may want to add to the contract to protect your business:
- Probationary Period
The probationary period is a good opportunity for the employer and the employee to decide if they are right for the job, and vice versa. The Contract of Employment should, therefore, include a probationary period (usually 3 to 6 months), during which time the employee’s performance is monitored. At the end of the probationary period, the employer can decide to terminate employment, extend the probationary period or make the employee permanent. Generally, the notice period during the probationary period should be one week, and this should be narrated in the Contract.
- 48 hour weekly working limit
European legislation adopted by the UK means that employees must not work more than 48 hours per week unless they have voluntarily signed an “Opt Out” of the 48-hour weekly limit. To validly opt out, the employee must sign a statement saying that the 48-hour weekly limit does not apply to them. The statement must also say that the employee can terminate the opt out by giving at least 7 days’ notice (up to a maximum of three months’ notice). Such a statement can be signed at the same time as the Contract of Employment.
- Intellectual Property
Many businesses, especially those working in the technology field or life sciences, rely heavily on their intellectual property. If IP is important to your business you should ensure that you protect it from departing employees by stating in the Contract of Employment that any IP developed by employees at the company during working time belongs to the company and that any rights accrued by the employee in relation to the IP will be automatically assigned to the employer.
- Confidential Information
It is also important for employers to protect the confidential information relating to their business (e.g. pricing structures, trade secrets, customer data). It is an implied term of any Contract of Employment that the employee should keep the employer’s confidential information confidential, but a clause in the Contract stating this will put the employer in a much stronger legal position should the employee disclose such information and also means that the employer can protect confidential information not only during employment but afterwards, by including this obligation in the contract.
- Post-termination Restrictions/Restrictive Covenants
If your business employs senior staff and/or directors, it’s crucial that their Contracts of Employment or Service Agreements contain provisions to protect your business after their employment terminates.So, for example, you may want to prevent departing employees from soliciting your clients, suppliers and/or employees or setting up in competition with you within a certain sector or geographical area. You can help protect the business by putting post-termination restrictions (also known as Restrictive Covenants) in the Contracts of Employment or Service Agreements. In order to have the best possible chance of being enforceable, such restrictions have to be very carefully drafted, and it is important to take specific legal advice on this.
The information above is for guidance only and is not intended to replace specialist legal advice.
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