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CONTRACTS OF EMPLOYMENT

Legally all employees and workers must have an employment contract which sets out key terms and conditions of employment from day 1. A failure to comply with this requirement could result in an award of up to 4 weeks’ pay to an employee who had cause to bring an employment tribunal claim against the employer.

It is always advisable that the employment contract contains not just the information which is legally required but all the terms and conditions which apply to the employment so that both parties have clarity over their duties and responsibilities and, hopefully, to avoid disputes in the future.

There are several types of commonly used ‘employment’ contracts:

Casual:  Casual workers are not guaranteed a set number of hours in any week or a set working pattern and, when they are offered hours, don’t have to accept them. As they are “workers” rather than employees they don’t have access to the full range of employment rights, including the right to claim unfair dismissal and the right to redundancy pay.

Fixed term:  Usually covers a specific project or cover for an absent employee e.g., maternity cover, 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 will gain the same rights as other employees after 2 years and therefore may be entitled to redundancy pay if their assignment ends after a period of more than 2 years. If an individual is employed on 1 or more fixed term contracts for a continuous period of 4 years their contract will be automatically convert to a permanent contract.

Permanent:  Permanent contracts are intended to be ongoing and normally denote ’employment’ status, under which an 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 (i.e., to continue to employ them would mean breaking the law) 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 committing 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’ arrangements 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 more appropriate 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.

Since the change in the law relating to IR35 it is additionally important that employers are aware of the factors which will determine the employment status of contractors for tax purposes. Many employers are now required to undertake an assessment and to issue a Status Determination Certificate (SDC) to the contractors working for them. Employers who fall within the remit of the legislation, and who fail to comply, may find themselves liable for a substantial tax bill in the event that HMRC decide that the contractors are in fact “off-payroll workers” who should have been paying tax through PAYE.

If you’re thinking of outsourcing your HR, payroll or employment law needs, why not contact myHRdept? Call us on 01628 820515, email us at enquiries@myhrdept.co.uk to discuss your requirements, or contact us via our website and we’ll call you back.

 

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