As with many aspects of employment, there are myths about contracts of employment which persist. These can be dangerous for any employer to believe. Here are three of the common misconceptions we hear about employment contracts, together with useful information about the reality.
1. There isn’t a contract of employment
This is the biggest one. Sometimes the employer just hasn’t issued a contract, either deliberately or in error, so there is no written document in place. This can lead to the belief that there is no contract between the parties. But once an offer of employment has been made and the person has started working, there is a contract.
When the employee then continues to turn up at the workplace and do the job they are employed to do, has been paid, and has been subject to any rules or procedures the employer has in place, that contract is further cemented. There are also various statutory entitlements that apply.
The contract is therefore in place. The only difference is that the terms aren’t in writing. This makes a dispute more likely, and also more difficult to handle.
2. If a contract hasn’t been signed, the terms don’t apply
This is also a common misconception. We sometimes hear it from an employer who doesn’t want to be bound by one of the terms in the contract. Or they have an employee claiming, for example, that a contractual notice period doesn’t apply as they never signed the contract with the relevant clause in it.
However, it is not necessary for an employee to have physically signed a contract for the terms and conditions of employment within it to be enforceable by either party. If the employee has been with issued the contract, has not made clear any objections to the terms contained within it, and has continued to come to work and fulfil other terms and conditions involved in the employment, such as working hours, then that contract will be applicable.
The employee will be deemed to have accepted the terms they have been issued with. They can therefore be held to those terms. Likewise, if an employer would like to avoid being held to one of the terms within it, it is not possible to do so on the basis that the employee never signed the contract in the first place.
Obviously, seeking a physical signature, or at least some proof that the contract has been received and accepted, is sensible. But if, for whatever reason, this didn’t happen, that doesn’t mean the terms and conditions within it are not enforceable.
3. An employer can vary terms and conditions just by giving notice
Obviously, sometimes employers find themselves wanting to change elements of a contract of employment. This might be practical, logistical factors, such as working hours. Or it might be a generous contractual benefit they either can no longer afford or would like to withdraw for other reasons. Many people still believe that an employer can vary the terms and conditions of employment simply by giving sufficient notice. But it’s not that easy.
How terms and conditions can be changed
How difficult it is to vary terms and conditions of employment, and what procedures would be involved, will depend on a number of factors. If someone has been with you less than two years, it is usually easier. You can normally terminate their employment with sufficient notice and offer them employment on the new terms.
It is also more straightforward to change terms and conditions if you have a clause in the contract permitting this. But, even then, it depends on what you’re trying to vary and how reasonable the clause is in the circumstances.
For example, if you have a low-paid administrative assistant in your business, and there is a clause in their contract allowing you to vary the location they work at, that doesn’t mean you can up sticks and force them to move three hundred miles. That wouldn’t be considered reasonable for that type of role. But you might be able to move their workplace to the other side of town without it being a problem.
Without a (reasonable, enforceable) contractual right to vary terms, you generally need the agreement of the employee to do so. If there is a genuine business need for the change, you may be able to force it through after a process of seeking agreement, consulting staff, and considering alternatives.
But if there’s not a strong business need for the change, and you aren’t prepared to compensate staff in return for their agreement, you’ll probably find it’s not worth bothering. Instead, you should use your preferred terms for new staff as they enter the business. Then, as longer-serving staff leave, the new terms will gradually apply to all your team consistently.
Do you need our help?
We offer an HR Check Up service, which is a free audit of your current HR policies and procedures. As part of the audit, we will look at any employment contracts you’re using and any written policies you have. We’ll also find out about how you work. We’ll then report back on any areas of concern, for example where you may not be meeting employment law or other legal requirements. We’ll also help you to understand and address any HR vulnerabilities.
HR Check-up is aimed at small and medium-sized companies and is free of charge to those without in-hour HR support.
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