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Having the right contracts – tips for SMEs

Whether your business employs only a handful of employees or thousands, employment contracts are a legal obligation all employers must comply with.

Having these contracts in place allows you and your staff to know exactly where you stand in terms of obligations and rights, whilst also providing legal protection should issues arise down the line.

When should contracts be introduced?

Contracts should be provided from the first day of employment.

Legally, you do not have to provide a written contract but instead a statement of main terms.

However, if you do not provide a written contract, that does not mean that there is no contract in place.

Taking on an employee automatically generates a verbal contract, which could be misconstrued should things go wrong. It is for this reason that it is recommended for both employers and employees to have a written contract in place.

What to include

Employment contracts are made up of both express and implied terms.

Express terms are stated directly in the employment contract. They refer to employment laws and statutory requirements such as:

Wage and salary
Working hours
Duties
Staff benefits
Holiday entitlement and pay
Sick pay

On the other hand, implied terms are not written in contracts but implied by other terms. They are presumed to be agreed to if the employer enters into the contract. They include:

Duty of mutual trust and confidence between employer and employee
Right to receive at least the National Minimum Wage
Right to a minimum period of notice

It is best to include all of the terms in writing when drafting a contract. This ensures that there are no misunderstandings with what is expected of both employees and employers.

Different types of contracts

The main difference between employment contracts is the type of employee they are engaging with and their working hours.

Whilst many larger businesses may be employing more full-time or fixed-term staff, smaller businesses may opt for part-time, temporary, or zero hour contracts.

It is important to state the expected working hours of employees to avoid legal or financial obligations should you deviate from an employee’s agreed hours.

Updating contracts

It is important to keep contracts up to date to reflect any changes that could affect employees, from alterations to employment laws, company policies, working hours and pay.

For example, employment contracts will need to be updated to reflect the recently announced increase to the National Minimum Wage in April 2024.

Keeping your contracts up to date ensures that they are as airtight as when they were first drafted.

If you need help with employment contracts, get in touch with one of our experts today.

Amanda Hyam

Head of Dispute Resolution and Employment

I have specialised in Dispute Resolution, Civil Litigation and Employment law for more than 15 years. I understand how daunting the prospect of litigation can be and because of this I am always available to discuss concerns.