Contract of employment – key terms explained and your rights

Contract of employment – key terms explained and your rights
Contract of employment – key terms explained and your rights

31 July, 2015

Contract of employment – key terms explained and your rights

Get to grips with your employment contract and ensure you stay in the know when it comes to signing on the dotted line...

If you’re starting a new job, you’ve probably been given an employment contract. But what does it all actually mean?

The length of (and often the jargon within) employment contracts can be enough to put anyone off fully getting to grips with its content. However, it’s vital that you understand what you’re committing to.

We spoke with the Money Advice Service for some simple tips to help you crack your contract and be confident in signing on the dotted line. Find out what to expect from your employment contract, and what to do if you think something doesn’t add up…

Your employee rights

An employment contract establishes the respective rights, responsibilities and duties of an employer and an employee.

Any rights you have under a contract of employment, such as for medical insurance, are in addition to the rights you have in law. Further, certain employment contracts may seek to limit certain rights you have in law.

Legal rights include the right to be paid the National Minimum Wage, the right to paid holidays and, for most people, the obligation for an employer to enrol you in a pension scheme.

You and your employer can agree to any terms you want. However, certain terms that could be seen to limit your legal rights won’t be effective. An example of this would be agreeing to be paid less than the minimum wage.

Your employment status

There are three kinds of employment status – employee, worker or self-employed. It is very important that you understand your employment status as you have different legal rights depending on which category you fall into.

Here is a guide to what the different definitions mean –

  • A worker will have, as a minimum, core employment rights like rest breaks and minimum wage, may be entitled to sick pay and maternity leave, and the employer will be responsible for deducting tax and National Insurance. The work could, nevertheless, be casual.
  • Employees are workers who have more than just basic rights and more responsibilities, such as a requirement to give notice if you want to leave. If your employer tells you when and where the work has to be done, supplies the tools and equipment, and can subject you to a disciplinary procedure, then you are likely to be an employee and will have an employment contract.
  • If you can decide when you want to work, and can substitute yourself with a replacement, make your own sickness and holiday arrangements, pay your own tax and National Insurance, you are more likely to be a self-employed person contracted to provide a service to your clients or customers. Your contract will be a contract for services.

You need to be clear about your status to know what your entitlements are. If there is a dispute, only a court or employment tribunal can make a final decision as to your employment status.

What will your employment contract include?

Most employment contracts are in writing – but they don’t have to be.

An oral contract is just as binding but is much harder to prove. It’s a better idea to have a written contract whenever possible, as it provides clarity and can help prevent or resolve disputes with your employer in the future.

A written contract is usually made up of a mix of two types of contractual terms:

  • Express terms
  • Implied terms

Express terms

Express terms are elements of your contract that have been specifically mentioned, either in writing or agreed orally, by both employer and employee. These may include:

  • How much you will be paid (including overtime and bonus pay)
  • Hours of work, including overtime hours
  • Holiday pay, as well as how much time you are entitled to take off (most full-time workers are entitled to 28 days and part-time workers get the same amount, in proportion to the number of days/hours they work)

Implied terms

Implied terms are not written, but can be implied into most contracts of employment, for example that you won’t steal from your employer or that you won’t give away confidential information.

Your employer must, in turn, provide a safe working environment and shouldn’t ask you to do anything illegal, such as drive a vehicle that is uninsured.

An important element in an employment contract is this concept of mutual trust and confidence between employer and employee.

I think there is a problem with my employment contract, what should I do?

It is very important to read your contract carefully before signing it, because by signing it you are agreeing to the terms of the contract.

You should discuss anything that worries you, or you are unclear of, with your employer.  There are also other places you can get advice. These include advice from a solicitor; a trade union if you are a member of one; ACAS (the Advisory, Conciliation and Arbitration Service) in England, Scotland and Wales or the Labour Relations Agency (LRA) in Northern Ireland.

If the contract with your employer is broken, for example they don’t pay you for something which they should, you should first try to sort it out informally with your employer. If you aren’t successful you could try raising a grievance. If the issue is still not resolved you can try mediation through ACAS or the LRA, if your employer agrees.

You can contact the ACAS helpline on 08457 474 747 and the LRA helpline on 028 9032 1442.

If you can’t sort out the problem, you could use an employment tribunal (industrial tribunal in Northern Ireland).

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