Why it's Important to Have a Contract of Employment in Place

Despite it being a legal obligation, many business owners think that it’s in their interests to delay giving an employee a contract, or not bothering at all, but this article will explain the importance of having employment contracts in place.

Clarity and avoids disputes

Even without anything written down, when an employee turns up for work and gets paid, there is a basic employment contract agreement between the two parties. 

Without any written terms then it’s either statutory rights that are in place (which often benefit the employee), or oral agreements which can be open to interpretation, misunderstanding and scope creep (when you end up paying far more for work than initially intended.)

Dealing with disputed oral terms is at best time-consuming and at worst can also be financially costly. 

Control – you decide the terms that work for your business

By offering a job with terms and conditions that you have set, you are not only presenting a professional image and setting the tone for the employment relationship but giving clear guidelines what the employee can expect when working with you.

You can specify working hours, any overtime payments (or not), any requirement to travel and if this will be paid, the notice period you require from them, how much sick pay they can expect, how much holiday they are due, and when they can or cannot take holiday, amongst many other things.

Protect the business

If an employee leaves your employment, you can put restrictions in place (within reason) so that your business is not detrimentally affected if their next role is in competition with your business.

You also need to put in place protection for your business regarding critical, confidential information.  

If it’s not specified in the contract, you may be taking a risk if you decide to put someone on gardening leave, or pay them in lieu of notice, if your rights to do this are not detailed in the employment contract.

Removes "I didn’t know" from the equation

Adding in expectations to the employment contract such as appropriate behaviour on social media and not bringing the company into disrepute are important not only to set standards in the first place, but to rely on if an employee ever falls out of line in this way.

It’s the law

You probably know that it’s a legal requirement to have an employment contract in place within two months of taking on an employee but if you didn’t, act now.

And finally, given this is a contractual agreement you are putting in place between you and the employee, I would advise that you take professional advise so that you can clearly articulate what you want the contract to say, and that you fully understand what you as the employer are committing to. 

It is best to use any internet templates or old contracts with caution – they are often not fit for purpose.