Welcome to the first of your 12 weekly HR Tips for the SAB 12 Weeks to Make a Difference to Your Business. This week, for those of you who have employees, freelancers and subcontractors, we recommend that you take time to review their contracts of employment and service agreements.
Outdated Clauses and Terms
It isn’t unusual for SMEs to have a wide variety of employment agreements and contracts in place, to allow for growth and changes in staffing requirements. It also isn’t unusual for contracts to contain clauses and terms which very quickly become outdated. New laws are passed and updates occur – therefore it’s always a good idea to have a regular review, e.g when there are changes to National Minimum Wage awards, pension or data protection law.
You won’t be able to make any changes to contracts of employment that are already in place without first consulting with your employees, so always get expert advice from a specialist first. We can provide a free review of your different contracts, and outline any actions you may need to take.
Employment Law vs Tax Law
There are many different types of employment. For example, you will have heard of employee, worker, self-employed, freelancer, temporary worker, fixed term contractor, part time and zero hours contracts, and so on. However, under UK tax law the definition will be either an “employed” worker, or “self-employed”. As yet, there aren’t any other definitions, though that may change following the Taylor Review and recent case law on Uber, Addison Lee, City Sprint and others.
Employment law and tax law don’t always match in the case of employment contracts. It is important to get your classifications correct right at the start for anyone who will be performing any kind of work for your business! If you are not sure you have the right kind of contracts for your workers, give us a call.
Be Clear on What’s Expected
There are different rights for workers compared to self-employed people who provide a service to your business via their own registered company or sole trader arrangement. All workers have a right to at least a written statement of particulars, and it is a good idea to have agreed statements of works for your freelancers and contractors too.
Additionally, a contract doesn’t need to be written down in order for it to be legally binding; in dispute cases the courts will look at what has become custom and practice to define the terms of employment. So, not issuing contracts won’t mean your workers don’t have rights!
Being clear on what is expected of someone carrying out work for you is good common sense as well being a basic right. It should be easy to adhere to this. However, in our experience often contracts are missing key elements that could have meant avoiding costly and time-consuming misunderstandings further down the line.
Written Statement of Particulars
A written statement of particulars isn’t meant to replace a contract of employment, and we always advise our clients of this. Often an employment contract will include the same details as outlined below. At the very least all workers have the right to receive a statement of particulars within 2 months of starting work. Check that you have this in place for each of your employees:
- The names of all the parties involved (employer and employee), the job title and a job description;
- The employment start date – be clear on any probation periods, and if the job depends on satisfactory references or right to work documentation being provided. Also be clear whether you reserve the right to extend probation periods, to avoid any confusion;
- Notice periods, including whether there are any differences for probationary notice periods. Generally, notice periods should be the same for employee and employer;
- The location of the work, especially if any work will be carried out outside of the UK;
- Details of pay, salary scales, rates, commission, bonus, overtime etc., what the criteria for these payments will be and, when the payments will be made (e.g. monthly, weekly);
- What the normal hours of work will be – this is important, as many disputes start over misunderstandings or miscommunications around hours, shift patterns and overtime;
- Holiday entitlement, how it’s calculated or accrued and how it is paid. Remember to include whether overtime or commission payments will be included when calculating holiday pay;
- Details of sickness absence reporting processes and any sick pay the company allows;
- Details of the company grievance and disciplinary processes (these should be non-contractual policies, and you will need them even if you only have one employee);
- Details of the company pension options;
- Where applicable, details of any collective agreements, although this is unusual for most SMEs.
Statement of Work
For subcontractors and the hiring of sole trader or freelancers, in addition to a service agreement (instead of an employment contract, which could make them a worker!) you can use a statement of work, or SOW, to help clarify the details of the work that needs carrying out. These are often used in project or procurement work, but they are perfect for ensuring clarity on expectations.
An SOW differs to the Statement of Particulars in some key areas, but typically includes:
- A purpose statement for the work, including the scope of what needs to be done, and what the end result or outcome should be;
- The location of the work, again including any details of overseas or multiple locations;
- When the work is to start, and if a project or contract, when it will end – include any criteria for early finish or extension, to avoid confusion;
- The hours to be worked, or during which work is expected, including start and finish times, any limitations on hours or any other schedule details;
- Details of any applicable standards that have to be adhered to, or any special requirements that are expected as part of the skillset of the person(s) delivering the work;
- Full details of payment, including any invoicing criteria, phased or milestone delivery payments, and when / how payment will be made. It’s a good idea to include any terms about late payment penalties here;
- Save an area for miscellaneous items that may need listing, as it usually pays to cover all bases rather than overlooking or forgetting essential items.
If your review of your contracts brings you out in a cold sweat, never fear! Sphere HR can help – just give us a call to arrange a free review of the contracts you have in place. We can then advise you what, if anything, needs to be done, and can provide you a quote if you prefer not to take the DIY route. Call us on 01442 345398 or email email@example.com.