Generally, standard employment contracts are not a key risk area for employers and can therefore for some time safely stay low down on areas to address. This means companies often wait to carry out a review. Although this is understandable, it is also inadvisable. Risks often arise in rushed amending and issuing, as well as surrounding communications that may be equally binding.
In order to carry out your own contract review, we would advise you to take a look at the following areas:
Step 1: ensure the contract is binding
Often, contracts are not signed and dated properly. This means they are not in force.
Step 2: ensure the contracts starts when the company wants them to
Contracts cannot commence until they are in force. They do not, however, automatically start when they come into force. Ensure therefore the date of commencement is clear. The date of commencement is the date when the employee starts being entitled to pay.
Step 3: ensure the term of the contract is clear and notice periods agreed
If the contract is permanent, it should state the notice period required to end it by both the employer and employee.
If the contract is fixed term, consider whether it can be terminated during the fixed term and if so, when that notice is permitted to expire. Often, there is confusion as to when the contract can be terminated. This can be critical to bonus and equity entitlements.
Step 4: ensure there is a PILON and garden leave clause
Without these clauses, the employer is in breach of contract if they decides that they want the employee away from work during the notice period or if they want to replace the employee immediately.
Step 5: ensure the offer letter clearly states that it is subject to the contract of employment and that the contract contains all the contract terms and a clause stating this to be the case
Often, the offer letter is friendlier and mentions benefits without any protections for the employer. Unless specifically stated, the employee can argue that the offer letter is binding. Similarly, promises in emails and conversations and bonus and share schemes should be excluded.
For further help with employment contracts , drop us a line on hello@tandonhildebrand.com.
