Employment Contracts and Section 1 Statements
What is the difference between Employment Contracts and Section 1 Statements? There is no legal obligation on an employer to give an employee a written contract of employment unless the employee is an apprentice (an apprenticeship is a distinct and protected status in law). There is however a legal obligation to give all employees a section 1 statement on or before the first day of employment. Regardless of how long you are expecting the employee to work for you.
The employment contract is created when your employee agrees to work for you, even though there may be nothing in writing.
What does an employment contract consist of?
An employment contract is comprised of both ‘express’ and ‘implied’ terms.
- An express term is something you have agreed with your employee, for example, an hourly rate of pay. Some may be agreed verbally and others may be agreed and then confirmed in writing.
- An implied term is something you and your employee have not discussed or agreed or even thought about but is implied by law to exist as a term in the employment contract. For example, in every employment contract there is an implied term which is called ‘mutual trust and confidence’. This just means that it is implied in the employment contract that the employer and employee will act behave fairly towards each other.
An employment contract will usually have a combination of express and implied terms.
How should the contract be worded?
An employment contract is like any other contract between two parties; once agreed, the contract can only be changed if both parties agree to the change. Otherwise, the party changing the contract will be in breach of contract.
If an employer is in breach of an employment contract the employee could claim compensation, or, assuming they qualify to claim unfair dismissal, resign and claim ‘constructive’ dismissal.
Because an employment contract can only be changed if an employee agrees the employer should try and ensure that the employment contract is worded to be as flexible as possible so that, within reason, the employer can require the employee to be flexible. For example, if an employment contract says that the employee’s place of work is in Sheffield it would be potentially a breach of the employee’s contract of employment to require the employee to work in Doncaster, unless the paragraph in the employment contract regarding the place of work said something like “… your normal place of work is at our office in Sheffield but you may be required to work within a reasonable distance of your normal place of work “. Of course, there might be an argument as to whether Doncaster was within a reasonable distance of Sheffield. What is reasonable in one set of circumstances might not be reasonable in another.
What’s the difference between an employment contract and a section 1 statement?
The essential difference between an employment contract and a section 1 statement is that an employment contract came into existence, even though it may not be in writing, the minute the employee agreed to work for the employer.
The section 1 statement has to be given to the employee on or before their first day of employment, and is merely evidence of what the contractual terms of the employment probably are.
When there is uncertainty in the terms and conditions of employment, as a general rule, an employment tribunal or a court will give judgement in favour of the employee, on the basis that the onus should be on the employer to make sure that the employee’s terms and conditions of employment are clear and unambiguous.
Therefore, the essential difference is that an employment contract is a contract whereas a section 1 statement is merely evidence pointing to a term in the contract.
Because a court or an employment tribunal will probably find in favour of an employee if there is a dispute as to an unclear term in the employment contract it follows that an employer should make sure that the employment contract is as clearly worded as possible and gives as much flexibility for change as possible.
What should the section 1 statement cover?
What has to go in a section 1 statement is laid down by law, that is to say, by s.1 of the Employment Rights Act 1996, as amended. The following information must be contained in a single written statement:
- Names of employer and employee
- Address of the employer
- Date employment and continuous employment started
- Job description / job title
- Probationary Period: including its duration and any conditions that apply (such as a shorter notice period) during the probation;
- Job location;
- Pay: including how pay is calculated, how it is paid i.e. bank transfer, cash or cheque and the frequency of payment i.e. weekly, monthly etc;
- Benefits: such as pension scheme, death in service benefits etc, both contractual and non-contractual benefits should be included;
- Working Hours: specifically, normal working hours, normal working days of the week, whether such working days are variable and if so, the basis on how that variation is determined and whether the employee is expected to work overtime or unsocial hours;
- Holiday Entitlement: including bank and public holidays and how holiday pay is calculated;
- Training Entitlements: including details of any compulsory training, including whether the employer will pay for it;
- Details of any collective agreement that directly affect the employee’s conditions of employment; and
If the worker is required to work outside the UK for over a month: arrangements for working outside the UK (including period, currency of pay, additional pay and benefits and return terms)
This second list of information must be provided on or before day one of employment but can be provided in a second document, such as an employee handbook:
- Sick Pay and Absence Reporting Procedures
- Other Paid Leave including maternity, adoption and paternity leave, shared parental leave and the new right to paid parental bereavement leave
- Notice Periods: length of notice of termination required from employer and worker.
What should the employment contract contain?
As a general rule, an employer should only put in an employment contract what it is strictly necessary to put in the employment contract either by law or from a contractual point of view. Usually, the matters that should go in an employment contract should be the same as has to go in a written statement. Everything else should go in another document which is deemed to be non-contractual such as an employee handbook.
As stated above, an employer should only put in an employment contract what it is necessary to put in an employment contract because of statute or from a contractual point of view, in order to have maximum flexibility in the contractual relationship of employer and employee.
An employee handbook should contain ‘work rules’ for the efficient day to day running of the business. ‘Work rules’ should not be expressed as – or considered to be – contractual, but simply rules with which the employee must comply. Providing the ‘work rules’ are reasonable and the employer imposes the work rules in a reasonable way, the employer can change the work rules in the general interests of the business and after due consultation with employees even though the employee might not be happy with the change.
Thus, as an employer; only put in the employment contract what you have to put in the employment contract and put everything else in the employee handbook.