Considerations for a contract of employment

A contract of employment is a legally binding agreement between an employer and an employee. The employee agrees to provide their skills and labour in exchange for remuneration from the employer. For a contract of employment to take effect there must be an offer, an acceptance and an agreement between both parties. The agreement which is the contract of employment may either be in writing or agreed orally.

Key reasons why businesses should protect themselves by ensuring that all contracts of employment are in writing are outlined below: 

There is a legal obligation to provide a written statement of terms of employment which is detailed in the Terms of Employment (Information) Act 1994-2014 

Every employer is legally obliged to provide a written statement of terms of employment within the first five days of an employee starting work and it must include the following information: 

1. The full names of the employer and employee

2. The address of the employer

3. The expected duration of the contract (where the contract is temporary or fixed term)

4. The rate or method of calculating pay and the pay reference period for the purposes of the National Minimum Wage Act 2000 (for example, a week, a fortnight or a month) – see ‘Pay reference period’ below

5. What the employer reasonably expects the normal length of your working day and week to be, in a normal working day and in a normal working week

You must receive a written statement of the remaining terms of employment (your contract) within two months of starting work, in accordance with the Terms of Employment (Information) Acts 1994–2014. This must include:

1. The place of work

2. The title of the job or the nature of the work

3. The date the employment started

4. Pay intervals (for example, weekly or monthly)

5. Any terms or conditions relating to hours of work (including overtime)

6. Paid leave (other than sick leave), including annual leave and public holiday entitlement

7. Terms and conditions for illness/injury and pensions schemes – if you have a sick pay scheme this should be detailed in this section

8. Pension and pension schemes

9. Period of notice to be given by employer or employee

10. Details of any collective agreements that may affect your terms of employment

The written statement of terms of employment must be signed and dated by the employer and ideally it should be signed by the employee as well. If they refuse to sign the contract but still come in to work on an ongoing basis, they are signaling that they have agreed to the terms and conditions of the contract.  

If it is not written in the contract of employment, it is difficult to implement 

For example, if a retirement age is not written in a contract of employment, you cannot terminate an employee’s employment purely on the grounds of age as this could discriminatory under equality legislation. In the case of using lay-off, again if it is not written down it is harder to implement. You could rely on custom and practice which means if it has happened previously on a regular basis, you could use that option in a lay-of scenario. If it is written down, however, there is no room for any misunderstandings. 
Businesses might want to consider including the following in a contract of employment if it applies: 

• Probationary period with the right to extend it up to one year but not over a year
• Short time/lay off/redundancy
• Flexibility
• Sick pay scheme including right to refer employee to an Occupational Health Physician
• Right to search
• Data protection/GDPR post-25 May 2018
• Retirement age
• Bullying and harassment procedures
• Grievance and disciplinary procedures
• Company car
• Confidentiality 
• Restrictive covenant clauses
• Email/internet and social media use

It is important to note that all businesses must advise employees of the disciplinary procedures within one month of them starting work. Many businesses choose to include their disciplinary procedures in the contract of employment.  

In the case of a dispute, it provides clarity and security for both parties 

If a dispute arises between the employer and employee, the contract of employment can provide clarity to clear up any disputes that take place internally or externally. For instance, if an employee lodges a grievance internally and it is in writing, the grievance procedures make it clear to both parties what the process is. If a claim to the Workplace Relations Commission is made, for example a payment of wages claim, the contract of employment is usually the first reference point that will be used to defend a case.  

Finally, it provides security for both parties as a contract of employment cannot be changed without the agreement from both sides. For example, an employer cannot suddenly change the hours of work without an agreement from the employee. Equally the employee cannot suddenly decide to work Monday to Thursday if their employment contract states they are required to work Monday to Friday.  

SFA have a number of sample contracts of employment available for permanent, temporary and casual employments which you can avail of here. 

If you would like more information on contracts of employment or any other HR issues your business may have, please contact Emma at SFA on 01 605 1668 or at emma.crowley@sfa.ie