Contract of Employment

Contract of Employment and Section 1 Statement

What is the difference between a Contract of Employment and Section 1 Statement?

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 contract of employment is created when your employee agrees to work for you, even though there may be nothing in writing. The Section 1 Statement is evidence that the contract exists

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 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. This is 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. The details were amended in April 2020: see Section 1 Statement Of Terms And Conditions Of Employmentfor more information about the new rules.

What should the contract of employment contain?

As a general rule, an employer should only put in a contract of employment what it is strictly necessary to put in the contract of employment either by law or from a contractual point of view. Usually, the matters that should go in a contract of employment 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.

Thus, as an employer; only put in the contract of employment what you have to put in the employment contract and put everything else in the employee handbook.

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