Employment Contracts

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1. Employment status

Employees are people who have and are bound by a contract of employment. If you are an employer

  • You are bound by the terms of the contract of employment
  • You may be vicariously responsible for your employee’s actions
  • You must deduct income tax and National Insurance
  • You have various legal duties

2. Workers and self-employed staff

Employees work under a contract of service. Workers in the wider sense work under a contract for services. In certain circumstances, a contract of employment may come into being where the contract was originally a contract for services. Ultimately, only an employment tribunal or court can give a definitive answer, but you can ask yourself:

  • To what extent does the employer decide what tasks the worker does and how he does them?
  • To what extent is the worker part of the organisation?
  • To what extent is the employer is required to offer the worker work and to what extent is the worker is required to do it?
  • How much financial risk does the worker bear?

Agency staff are generally workers who have a contract of some sort – but not an employment contract – with the employment agency. The Agency Workers Regulations 2010 comes into force in October 2011 and gives agency workers improved rights.

Self-employed people are those engaged in running their own businesses and some of those who describe themselves as ‘self-employed’ may fall within the statutory definition of ‘worker’ and have a worker’s entitlements.

3. Terms and conditions of employment

The relationship between employer and employee is governed by a contract of employment (see written statement template).

  • It is quite possible to have a valid and binding employment contract even if nothing has been put into writing.
  • If you fail to provide an employee with a set of written terms of employment, plus a complete or accurate statement or notification of any change to the written statement, the employee can complain to tribunal.