Employment Contracts
What you need to look for as an employee
What is an employment contract?
An employment contract is the legal relationship between you and your employer. Every employee has an employment contract, even if it is not in writing. For the majority of employees that do have an employment contract in writing, that document is unlikely to cover the full relationship terms – aspects of the employment contract will not be written but can instead be implied into the contract by a court. The contents of an offer letter, any verbal promises made by the employer, parts of the employer’s staff handbook, and any customary practices that the employer has (such as paying Christmas bonuses) may also form part of the employment contract. Employment laws also form part of the employment contract.
The following must also be provided within the first two months of work:
- (in cases of temporary employment) when it will end
- terms and conditions relating to sickness or injury and sick pay
- terms and conditions relating to pensions
- the length of notice required from both parties
- details of any collective agreements that might affect you
- information about any requirement to work abroad
- the procedure for dealing with grievances (or where it can be found)
- the disciplinary procedure and any disciplinary rules (or where they can be found)
What must an employer provide in writing?
What is written into your employment contract is a matter for agreement between you and your employer and is not specified by law. Your employer must however provide the following information to you in a document within two months of you starting work:
- the parties to the agreement;
- the date employment began;
- the date continuous employment began, including service with any predecessor organisation;
- the rate of pay, the method of calculating it and when it will be paid;
- terms and conditions relating to the hours of work;
- holiday entitlement and holiday pay;
- the job title or a brief description;
- the place of work and any mobility requirement.
Implied Terms
Implied terms are terms that have not been expressly agreed with your employer but may be implied into your employment contract by a court. These terms may be implied into your contract on the basis of:
- the intention of the parties when the contract was entered into;
- custom and practice within the employer’s business or the wider industry in which it operates;
- previous courses of dealing between you and your employer;
- a term being necessary for the contract to operate properly or would have obviously been included in the contract had the parties thought of it at the time.
Universal implied terms in your employment contract include:
- Mutual trust and confidence (see below) (applies to you and your employer);
- Good faith and fidelity (applies to you and your employer);
- Employer not to act arbitrarily, capriciously or inequitably;
- Employer to provide a safe working environment;
- You agree to obey reasonable and lawful orders;
- You agree not to disclose trade secrets or breach confidentiality.
Implied Term of Mutual Trust and Confidence
This is the most influential and most often cited implied term in constructive dismissal claims, where employees say their employer has acted in breach of the employment contract. The implied term is that both employer and employee must not, without reasonable cause, do anything that is likely to destroy or seriously damage the relationship of trust and confidence between them. For example, your employer imposing a disciplinary or poor performance sanction on you which is unjustified or without following a fair process.
Employment contract reviews
It is important when starting a new job to thoroughly review the employment contract to make sure that it meets your requirements and properly reflects your understanding of what the role and package would be. Alternatively, your initial review of the draft employment contract may be the first time certain aspects of the role or package are raised, and this may be the trigger for you to have further discussions or negotiations with your future employer. It is common in a recruitment process for employees to just focus on negotiating their salary, or in the excitement of a job offer, overlook aspects of an employment contract that can be just important as salary, such as work-life balance provisions, responsibilities, progression opportunities, incentives or what will happen at the end of the employment relationship, including any post-termination restrictions (restrictive covenants).
We can assist you to review any contract of employment you receive and, where appropriate, help you to negotiate improved terms.