Are you unsure about how to update contracts of employment and when? This article looks at how often you should update employment contracts and the critical issues you will need to consider.
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Why Update Contracts of Employment?
Before you update contracts of employment, it may be helpful to review what you think about them.
Do you feel your employment contract should help you attract new talent and keep the best people for your business?
In other words, should you, in effect, be partnering with the people who will contribute to and help your business?
Perhaps contracts of employment seem to be just another one of those mandatory legal problems, causing you, the employer, an unwanted burden.
You have existing contracts but you dislike the thought of having to update contracts of employment.
Suppose Example 1 above is an uncomfortable shift of mindset for you. While it may be true that you have legal responsibilities, a comprehensive and professionally prepared contract of employment can also protect you, your company and your employees.
In addition, two-way trust, values, and purpose are essential for good employer-employee relationships in the new world of work. This is known as the psychological contract.
Trust is earnt but can quickly be broken if employees feel that their employer is being dishonest. Be transparent. Be fair. Be legally compliant. Therefore, you may want to consider a review to update contracts of employment.
A Test of Compliance and Self-Preservation
Undoubtedly, since recruiting and retaining the best talent has become even more challenging, adopting Example 1 above is considered best practice.
To illustrate the points above, we are asking you to think about this because of the feedback we receive. For example, when we first meet with a new HR client to better understand their business, one of our first questions is about when they last reviewed their Contract of Employment.
Our HR specialists discover many answers to this question. Generally, the response is mixed. For example:
- "Yes, we did this not too long ago, perhaps in the last five to ten years."
- "Oh, we have never reviewed them; we didn't realise we had to."
- "No, we don't have a contract of employment. Do we need one, we are only a small business?"
Interestingly, the response provides a good insight into where that client is at with their employment practices. In this case, response number 3 is very concerning; unfortunately, we hear this often.
The Legal Requirement
Contracts of Employment are legally binding agreements between employers and employees.
In the UK, 'employee' is defined as:
It is compulsory for details of certain terms to be provided to the employee in writing. A Contract of Employment consists of a mixture of 'express' and 'implied' terms. Furthermore, contractual clauses must be correct as the employment contract is legally binding. Therefore it may be referred to and relied upon throughout the employment relationship.
Your employment contracts must contain essential information required by law, which is a minimum requirement. However, beyond that, you have the opportunity to include information that establishes a framework for the future working relationship between your business and individual employees.
Use Best Practice to Update Contracts of Employment
It is best practice and it makes a great deal of sense for an experienced HR professional to draft and update contracts of employment for you. Conversely, a poorly prepared document can cause many detrimental problems within your business, and to your employee(s).
Also, a contract of employment should be reviewed by a specialist such as an HR professional at least on an annual basis. In this case, the review can capture any commercial or operational changes which may have occurred to your business. Thereafter, you can update contracts of employment to help protect your company, retain and attract talent, plus keeping it legal.
Commercial Reasons to Update Contracts of Employment
Over time your business will probably develop, grow, and your processes and structure may change. What’s more, the commercial landscape is continuously evolving and affecting competitiveness and profitability.
As a business leader, you know that "the only constant is change", and there are times when you have to adapt. Indeed since the global health pandemic, we have seen more than our fair share of challenges.
In the light of Covid-19, there have been considerable changes in how businesses operate. Subsequently, you may have made fundamental changes to your working practices without realising their impact and the need to continually adhere to your obligations as an employer.
To clarify, you may be able to change some working practices and policies with no (or limited) consultation. Be aware that contractual adjustments will require a period of consultation before the changes can be implemented. If you are in any doubt what changes you can make, and how you can do this, this is when you need your HR professional on hand. when it comes to the impact on your employment contracts, this is not straightforward. So, whilst changing an employee's contract is possible, you will likely need their agreement, and it might not always be easy to gain this consent.
External Reasons to Update Contracts of Employment.
In addition to any commercial or operational changes you may need to consider, there are frequent changes to employment law. Of course, employment legislation covers the acts of parliament that set out the legal entitlements that employees have and employment rights from their employer.
Therefore, any Contract of Employment must be legally compliant, reflecting current employment law.
The Complexity of Updating Contracts of Employment
You may have legitimate reasons why you want to change what your employees must do to meet your company's changing needs. However, in most circumstances, the employer and the employee must agree on changes to the employment contract. Specifically, a contract of employment is, after all, a legal contract covered by the Employment Rights Act 1996.
Changing an existing employment contract means consulting with your employee(s) and negotiating the changes. Therefore, if you require an employee's agreement, you will need to explain the reasoning for the change.
Also, be prepared to consider a compromise if any of your employees disagree with the proposed changes. Of course, if you have a recognised trade union representing your employees, you may have a collective bargaining arrangement to consider.
Partnership working, collaboration and trust are all vital to reaching a satisfactory solution.
The Advisory, Conciliation and Arbitration Service (ACAS) states that a simple misunderstanding is one of the leading causes of employment tribunals. Ineffective, poor quality or non-compliant employment contracts would be classified as leading to simple misunderstandings. So it is crucial to have your employment contract produced by qualified experts.
Why would you take any risk when an HR professional can help you before it becomes a problem?
It is best to seek specialist advice to minimise the risk of employment tribunal claims and manage the process carefully. Furthermore, a specialist will help you comply with employment law and any potential employment tribunal claims later down the line.
Use HR Professionals, You Can Trust
At SVC, we have a team of qualified HR Professionals who have extensive experience producing employment critical documentation inclusive of contracts of employment, and contractual and non-contractual policies. All our retained HR clients have an annual review of their contract of employment, as our clients like to have the peace of mind that they reflect their business and that their contract complies with current employment law legislation and HR best practice.
Annual Reviews Help You to Update Contracts of Employment
An annual review is an excellent opportunity to discuss with an HR professional what is happening in your business and how to incorporate any relevant business changes. Of course, your SVC HR Professionals will advise, support and guide you through the employment law minefield and relate what it means to you and your company.
The Easy Way to Update Contracts of Employment
If you would like further information on creating or how to update contracts of employment with an SVC HR Professional, let's talk. Call 01206 262117, or message us below, and one of the team will be happy to speak to you.
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