As a vast majority of businesses need employees in order to expand, company directors, sooner or later, have to face the prospect of recruiting people and familiarising themselves with employment law. Employment law, together with discrimination and data protection legislation, all have major roles to play throughout the recruitment process.
A person can be an employee or self-employed. Both have different legal, tax and National Insurance contribution implications and employers must be aware of these differences to know which category suits their business best. For example, a person can be classified as self-employed for tax purposes but as an employee for purposes of employment rights.
Contract of employment
Usually an employment is offered in a letter although it is not uncommon for it to be offered verbally. It is important that the letter is made subject to the company’s standard employment terms and conditions. However, once an employment starts, the employer is obliged to give the employee a written statement of particulars of employment no later than two months after the employee has started work. The statement sets out the terms that have been agreed between the employer and the employee, such as job title and description, starting date, place of work, salary, benefits, required hours of work, holiday and sickness entitlement, notice periods, grievance arrangements and disciplinary procedures. Often, employers include in the contracts of employments provisions for confidentiality, restrictive covenants and other provisions.
It is also common practice to provide new employees with the company’s Health and Safety Policy, Equal Opportunities Policy, Data Protection Policy and other important company documents together with, and referred to in, their employment contracts
Contract to provide services
A contract to provide services is an agreement by which one person agrees to provide another with a service, but not necessarily undertaken by that person personally. A contract for services is typically used by a self employed person or between a temporary agency worker and the agency.
Directors as employees
A company directorship is an office and not an employment. However, the company can enter into a service contract with a director and then such a director would be an employee of the company. Where this is the case, the company must provide the director with an executive employment contract. It should be noted that the office of a director has different tax and National Insurance Contributions implications from that of an employee.
Contracts of employment exist to clarify both employment rights and obligations.They should detail benefits and entitlements due to the employee as well as set out what is expected from them.
It is a legal obligation in the UK for employers to provide employees with a contract of employment within two months of starting work. Despite their obligatory nature, employers should appreciate that they are hugely beneficial for a company. For example, they can be used as a mechanism to lock in highly skilled members of staff into a specific timeframe, by obliging them to offer a greater period of notice. Ultimately, employment contracts should not be perceived as another piece of paper work, but as a device to protect and strengthen a business.
See our employment consultancy services for more details.