Whether or not formal terms are written down (the employment contract) the law implies certain terms of employment. These may not be the terms the employer wanted and so a formal written contract is strongly advised, and in any case written terms must be supplied by law after 2 months of employment. Failing to do so could result in the Company being made to pay up to 4 weeks’ pay per employee if the case finds its way to a tribunal, and an award would be a racing certainty if the employee ever had cause to take their employer to a tribunal in the future. In addition in the absence of written terms it is inevitable there will be disagreements about the terms and conditions of employment.
There are several types of commonly used ‘employment’ contracts:
Casual: Casual workers are not guaranteed hours in any week and don’t have to accept them if offered. As they are not employees they don’t have access to a range of employment rights, including the right to claim unfair dismissal and the right to redundancy pay. However, similar to zero hours contracts, if a person is in fact working regular hours each week, it may be that the contract is not casual at all. Casual workers will tend to be ‘workers’ not ’employees’. A worker is though entitled to certain statutory rights including the minimum wage, paid holidays and pension.
Employee Shareholder: Employee shareholders waive their rights to certain key employment laws in exchange for £2,000 – £50,000 of shares in the business. It applies to limited liability companies only and this type of contract hasn’t proved to be a popular choice for employers.
Fixed term: Usually covers a specific project or cover for an absent employee and has an end date with no further notice necessary. Legislation requires fixed term employees to be treated broadly the same as their permanent counterparts and mistakes can sometimes be made for example by paying maternity cover staff less than the person they are covering. Fixed term employees may be entitled to redundancy pay for assignments of more than 2 years.
Permanent: Permanent contracts are intended to be ongoing and normally denote ’employment’ status, under which employee will accrue employment rights including the right not to be unfairly dismissed. An employee may only be dismissed on one of 5 potentially fair grounds – redundancy, conduct, capability, legal reasons and some other substantial reason.
Temporary: Temporary contracts are usually for an expected duration e.g. up to 3 months after which the employment is expected to come to an end. These contracts can be quite handy for seasonal jobs or activity peaks. Some employers choose to engage staff on a ‘temp to perm’ route to test the employee before commiting to a permanent job and this type of arrangement is quite common when recruiting via employment agencies, where the agent will employ the worker (charging a margin) on an initial 12 week stint & will charge a further fee if the employer decides to take the person onto their own books. The ‘temp to perm’ route is less useful where an agency is not involved – in these circumstances a probation period achieves much the same aim.
Zero hours: Under a zero hours contract workers are not guaranteed any weekly hours at all, but if they are asked to work them they will do so under the terms of the contract. Holidays are calculated normally against hours actually worked. Whether the person is an ‘employee’ or ‘worker’ depends on the terms of the contract. Once engaged in a zero hours arrangement the worker may work one or more assignments with each assignment being discontinuous, i.e. the continuity of employment comes to an end once each assignment ends and accrued holiday pay is paid in lieu. Many ‘zero hours’ arrangments are not really zero hours – workers who work standard hours on an ongoing basis for example. Government guidance suggests employers should review zero hours contracts regularly to ensure they really are zero hours and replace them with e.g. permanent contracts if they’re not. To be lawful a zero hours contract is a free choice for worker and employer – the employer doesn’t have to offer work, the worker doesn’t have to accept work – in employment law terms, there is no mutuality of obligation.
Self employed: Not a contract of employment, but a contract for services. A genuine self employed arrangement means the person supplied to do the work is not an employee or worker (and therefore isn’t entitled to paid holidays etc.), and there are various tests of employment status which may be applied. This is a huge area of case law activity and many ‘self employed’ people have in fact been ruled to be workers. High profile cases have involved Uber, Pimlico Plumbers and Deliveroo. The courts are bound to be busy with this topic for decades to come as more and more ‘self employed’ people learn about the outcomes of these cases and what they stand to gain in holiday back pay etc.
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