Contract of Employment

Why You Must Have have A Service Agreement?

A service agreement is an employment contract for senior employees and executives in a business. All employers must provide their employees with written terms of employment. In reality it is important that terms and conditions are put in place before the employment starts as it is vital that both parties understand and agree what each of their duties and responsibilities are. This is even more important if the employee the business wishes to take on will be in a senior position looking after critical parts of the business, if not even the whole business.

A well drafted service agreement sets out very clearly what is expected from both parties – what the employee can expect from the company in terms of salary, support and compensation package and what the employer can expect in terms of duties and responsibilities of the employee.

Below we list some of the key clauses you should expect to see in a properly drafted service agreement (you should note that all these clauses should in fact be in any employment agreement):

Employment Contract Start Date

This is vital as it clarifies that the employees previous employment does not count towards the various rights that employees acquire after one and two years of employment. The employees “clock” for bringing a claim is effectively set to zero again (there are exceptions to this rule where a business is acquired by another – in this case any employment rights are kept by the employee).

Employee’s Job Title and Description

This clause is key. It sets out exactly what the employee will be doing. For senior employees this should be kept reasonably flexible so that the business can employ the skills of the employee as it wishes.

Term

This clause sets out whether the contract will be for set period of years or whether it will run until proper notice is served to terminate.

Place of Work

This clause allows the employer to state from what location(s) the employee will work. It should allow for the employer to change the location where the employee works in the future. Think the BBC when it moved its whole television centre from London to Manchester. In these circumstances you want to make sure that the employee will follow any business relocation.

Hours of Work

Under the Working Time Regulations employees cannot work more than a 48-hour per week. For senior employees this is of course probably not enough so you will need to make sure that the employee has  voluntarily opted out of these regulations in the proper way.

Probation Period

Even senior staff need probationary periods in case they do not live up to expectations. This period will provide for a short notice period at the end of the probationary period.

Salary and Bonus

This sets out the employee’s gross salary before tax and any deductions. It will also set out when payment should be made. This clause will also deal with any bonus payments to be made. Ideally it should clearly set out what performance targets need to be met in order to trigger when such bonus payments should be made.

Expenses

Here we can set out which work related expenses the employer will pay out for and when the employee will be reimbursed. For example if travelling a lot then should agree whether employee can travel by business class or better.

Holidays

This clause is fairly self explanatory. Major issue to provide for is how many days in any one go the employee can take off and whose permission does he need to seek to take the holiday.

Pension

This clause sets out whether the employee will be part of the employer’s company pension scheme, a stakeholder pension scheme or whether the position does not have any pension benefits.

Notice

This is the notice period to be given by either party to terminate the agreement. The clause will also provide for a list of behaviour that constitute gross misconduct allowing the employer to dismiss without giving notice.

Restrictive Covenants

This clause is vital. It protects all the employer’s confidential and commercial information being exploited by the employee during and after employment (for a certain period). These clauses can also prevents an employee from setting up a competing business whilst still employed and for a certain time period and in a specific geographical location after employment if that is what is required. Finally last restriction normally sought is non poaching of staff clauses to work in a competing business.

Whether you are an employer or senior executive we can expertly draft service agreements to look after your interests.

FAQs about:
Contract of Employment

What is an employment contract ?

Employment contracts set out the mutual obligations and rights of both employer and employee.  The terms of a contract can be both written and verbal and can change over time according to the circumstances.  Both employer and employee are bound by the contract until the end of the contract term.

Do I need an employment contract ?

Your employer is legally obliged to provide you with a written contract within two months of commencing your employment.  As a bare minimum, the contract should state the main terms of employment, such as the hours you work, where you work, pay etc.

What are the terms of the contract ?

The terms of the contract state your rights and obligations as an employee.  They come in many forms and can be: verbal, contained within a written contract or statement, included in an employee handbook, part of collective agreements negotiated by trade unions, within the offer of employment or implied into the contract by law.

What are implied contract terms in the context of employment ?

Implied contract terms are terms which are presumed to be included in any employment contract and guarantee minimum levels of rights.  If the contract provides less than these guaranteed rights, then that term will be invalid.  Terms can be implied either by custom or legislation, and as well as protecting employees can create duties between both employer and employee.  There is, for example, an implied term imposing a “duty of mutual trust and confidence” between employee and employer.

What minimum levels of rights does the law seek to uphold ?

Employment rights are complex and numerous.  As a guide, every worker is entitled to a minimum wage (which varies according to ages up to 21 and employment status), the right to a safe working environment, the right to join a trade union, the right to work up to 48 hours per week (any more is voluntary).

Can changes to employment contracts be made ?

Both employee and employer are entitled to negotiate changes to employment contracts.  However, changes can only be made by a mutual agreement or through any collective agreement between a trade union and employer.  Changes do not necessarily have to be made in writing, although a new written contract must be provided for any changes to the written terms in the original contract.

My employer has breached the employment contract.  What remedies are available ?

Standard legal remedies would be in damages for breach of contract.  However, to preserve existing employment arrangements and avoid expensive fees, many employees will try to negotiate with their employers through a trade union or exhaust any existing internal complaints procedures.  If the issue is not resolved and/or any complaint’s procedures used are unfair, you can make an application to an employment tribunal.  If your application is accepted, you will be encouraged to try and mediate the issue with your employer through the Acas (Advisory, Conciliation and Arbitration Service).  If this proves fruitless, the final stage will be a tribunal hearing.

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