Contract, Hours & Pay

Employment contracts form the basis of the employer-employee relationship, outlining the terms and conditions under which employees work, including working hours and pay.

 

A. Employment Contracts

 

Employment contracts are fundamental to the employer-employee relationship, providing a formal agreement that outlines the terms and conditions of employment. Contracts should specify essential details such as job responsibilities, working hours, pay, and benefits, ensuring clarity and mutual understanding between both parties.

Under UK employment law, employers are required to provide employees with a written statement of employment particulars within two months of their start date. This document serves as a basic contract, summarising the main terms of employment.

You can read our extensive guide to Employment Contracts for Employers here >>

Types of employment contracts include:

 

a. Permanent Contracts

Permanent contracts are the most common type of employment agreement, providing ongoing employment until either the employer or employee decides to terminate the arrangement. These contracts typically offer stability and long-term benefits, including a fixed salary, paid holidays, and other entitlements such as sick pay and pension contributions. Permanent contracts are ideal for roles that require a long-term commitment and consistent performance.

Read our extensive guide to Permanent Contracts for Employers here >>

 

b. Temporary Contracts

Temporary contracts are used for employment that is limited to a specific period or project. These contracts are often utilised to cover short-term needs, such as maternity leave, seasonal work, or special projects. Temporary contracts must clearly state the duration of employment and the conditions under which it may be extended or terminated. Employees on temporary contracts are entitled to the same rights as permanent employees, including holiday pay and protection against unfair dismissal after a qualifying period.

Read our extensive guide to Temporary Contracts for Employers here >>

 

c. Zero-Hours Contracts

Zero-hours contracts provide flexibility for both employers and employees, as they do not guarantee a minimum number of working hours. Instead, employees are called to work as needed, often at short notice. These contracts are beneficial for roles that require a flexible workforce, such as hospitality or retail. However, employers must ensure that employees on zero-hours contracts receive the same statutory rights as other workers, including the National Minimum Wage, holiday pay, and protection from discrimination.

Read our extensive guide to Zero Hour Contracts for Employers here >>

 

d. Fixed-Term Contracts

Fixed-term contracts are employment agreements that last for a specified period or until a particular task or project is completed. Unlike permanent contracts, fixed-term contracts have a defined end date, making them ideal for situations where the need for an employee is temporary. These contracts are commonly used in various industries to manage short-term projects, cover maternity leaves, or handle seasonal workloads.

Read our extensive guide to Fixed Term Contracts for Employers here >>

 

B. TUPE Transfers

 

The Transfer of Undertakings (Protection of Employment) Regulations 2006, commonly known as TUPE, are designed to protect employees’ rights when the business they work for changes ownership. This regulation applies during mergers, acquisitions, outsourcing, and insourcing of services, ensuring that employees are treated fairly and that their existing terms and conditions of employment are maintained.

The primary purpose of TUPE is to safeguard employees from unfair dismissal and to preserve their existing employment terms, including pay, holidays, and pensions, when their employer undergoes a business transfer. TUPE ensures that employees are not disadvantaged by the change in ownership and provides continuity of employment. This protection helps to prevent job losses and reduces the uncertainty that can accompany business transitions.

 

a. When does TUPE Apply?

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply during business transfers and service provision changes. Specifically, TUPE applies when a business or part of a business is sold or transferred to a new owner, when a service previously provided in-house is outsourced to a contractor, when an outsourced service is brought back in-house, or when a service contract is transferred to a new contractor.

For TUPE to apply, the identity of the employer must change, and the transferred entity must retain its identity post-transfer. This includes the transfer of tangible and intangible assets, customer base, and employees engaged in the transferred undertaking. TUPE ensures that employees’ terms and conditions of employment are preserved and that their employment is continuous despite the transfer.

Employers involved in such transfers must inform and consult with affected employees or their representatives, ensuring compliance with TUPE regulations.

 

b. TUPE Process

The TUPE process begins with identifying whether a transfer qualifies under the TUPE regulations. If so, the outgoing employer (transferor) and the incoming employer (transferee) must work together to ensure a smooth transition. Key steps include:

 

Step 1: Employee Information and Consultation
The transferor must inform and consult with employee representatives, such as trade unions or employee representatives, about the impending transfer, its reasons, the implications for employees, and any measures envisaged.

 

Step 2: Employee Information Transfer
The transferor must provide the transferee with written details of all transferring employees, including their employment terms and any existing grievances or legal actions. This information must be provided at least 28 days before the transfer.

 

Step 3: Transfer of Employment
On the transfer date, employees automatically move to the transferee under their existing terms and conditions of employment. The transferee inherits all rights, powers, duties, and liabilities in relation to the employees.

 

Step 4: Protection Against Dismissal
Employees are protected from dismissal if the sole or principal reason for the dismissal is the transfer itself. Any dismissal deemed unfair can be contested through employment tribunals.

 

C. Recruitment and Job Applications

 

Recruitment and job application processes are critical components of employment, governed by various laws designed to ensure fairness, transparency, and non-discrimination. Employers must be aware of these regulations to conduct their hiring processes legally and ethically.

 

a. Non-Discrimination and Equal Opportunity


The Equality Act 2010 prohibits discrimination based on protected characteristics like age, disability, and race. Employers must ensure job advertisements, application forms, and interview processes focus on skills and qualifications, and provide reasonable adjustments for disabled applicants.

 

b. Advertising Jobs


Advertisements must be clear, accurate, and non-discriminatory, detailing the role, responsibilities, and required qualifications. Preferences for certain characteristics are permissible only if justified by a genuine occupational requirement.

 

c. Application Forms and Interviews


Application forms should collect relevant qualifications and experience, avoiding unnecessary personal data. Interviews should be structured and consistent, with job-related questions asked uniformly to ensure fair comparison and avoid bias.

 

d. Right to Work and Background Checks


Employers must verify employees’ legal right to work in the UK by checking original documents. References and background checks, especially for roles involving vulnerable individuals, should be conducted with candidate consent and confidentiality.

 


e  Employment Offers and Contracts

Employers should issue a written offer detailing job terms and provide a written contract within two months of the start date, as required by the Employment Rights Act 1996.

 

D. Pay and Wages

 

Ensuring fair and transparent pay practices is essential for maintaining legal compliance and fostering a positive workplace environment.

Not only is pay a legal requirement, it directly impacts employee satisfaction, motivation, and financial wellbeing.

 

a. National Minimum Wage and National Living Wage

The UK has established minimum wage laws to ensure that employees receive fair compensation for their work. These rates are reviewed annually and vary based on age and employment status.

The National Minimum Wage (NMW) is applicable to employees aged 16 to 22 and apprentices. The rates differ for each age group and are adjusted yearly.

The National Living Wage (NLW) was introduced in 2016, and applies to employees aged 23 and over. It is higher than the NMW and is also subject to annual review.

Employers must ensure they pay at least the applicable minimum wage to all eligible employees. Failure to do so can result in significant penalties, including fines and back-pay orders.

 

b. Deductions from Pay

Employers may make certain deductions from an employee’s wages, but these must comply with legal requirements. Deductions can be categorised as lawful or unlawful.

Employers must provide clear communication about any deductions and ensure they are lawful and transparent.

 

c. Pay Slips and Record-Keeping

Employers are legally required to provide employees with itemised pay slips each pay period, detailing their earnings and any deductions.
In addition to providing pay slips, employers must maintain accurate payroll records for each employee. Employers must keep these records for at least three years, as they may be required for inspections or audits by HM Revenue and Customs (HMRC) or in the event of a dispute.

 

E. Flexible Working

 

All employees have the right to request flexible working arrangements from their first day of employment. This can include changes to working hours, times, or the place of work (e.g., remote working).

They can make up to two statutory requests for flexible working arrangements in any 12-month period.

Employees must submit a written request detailing the proposed change, the date they wish it to commence, and how it might impact the business and colleagues.

Employers are legally obligated to consider all flexible working requests seriously. They have a maximum of two months to make a decision on a flexible working request and inform the employee of the outcome. This includes any appeals made by the employee after an initial rejection.

If they cannot grant the initial request, the employer must discuss alternative options with the employee.
Employees have the right to appeal the decision internally.

 

F. Working from Home and Hybrid Working

 

Introducing, requesting, and managing working from home and hybrid working require clear policies and communication.

Employers should outline expectations, provide necessary resources, and ensure health and safety compliance. Employees can request to work from home or in a hybrid model, and employers must consider these requests reasonably. Clear guidelines on work hours, availability, and performance expectations are essential.

Employers should also ensure that remote workers have access to the same support and development opportunities as office-based employees. Regular check-ins and maintaining team cohesion are crucial for effective remote and hybrid working arrangements.

 

G. Working Hours and Rest

 

Working hours are governed by specific regulations to ensure fair treatment and the wellbeing of employees.

 

a. Maximum Working Hours and the Working Time Regulations 1998

The Working Time Regulations 1998 (WTR) set out the legal requirements for working hours in the UK, aiming to protect employees from excessive work and promote a healthy work-life balance.

Employees should not work more than 48 hours per week on average, calculated over a 17-week reference period. Employees can opt out of this limit by signing a voluntary agreement, but they cannot be forced to do so.

Night workers (those who work at least three hours during the night period) should not work more than an average of 8 hours in any 24-hour period. Regular health assessments must be offered to night workers.

Certain sectors and roles, such as emergency services, security, and transport, may have different rules due to the nature of the work. Specific regulations apply to young workers (under 18), limiting their working hours to a maximum of 8 hours a day and 40 hours a week.

 

b. Break Entitlements and Rest Periods

The WTR also specify minimum rest breaks and periods to ensure employees have sufficient time to rest and recuperate.
Employees are entitled to a minimum 20-minute uninterrupted break if their working day exceeds 6 hours. This break should not be taken at the beginning or end of the work period.

Employees must have at least 11 consecutive hours of rest in every 24-hour period. This means there should be 11 hours between finishing work one day and starting work the next.

Employees are entitled to either an uninterrupted 24 hours without any work each week, or an uninterrupted 48 hours without any work each fortnight.

Employers must ensure these rest periods are adhered to and cannot force employees to forgo their breaks.

 

c. Overtime Policies and Pay

Overtime refers to any hours worked beyond the standard working hours as defined in an employment contract. While the WTR do not set specific rules for overtime, employers should establish clear policies regarding its management and compensation.

Overtime should generally be voluntary unless the employment contract specifies compulsory overtime as a condition.
There is no legal requirement to pay employees at a higher rate for overtime; however, the rate must not fall below the National Minimum Wage. Employers should clearly state the overtime pay rate in the employment contract or company policy.

Instead of paying for overtime, some employers offer TOIL, allowing employees to take equivalent time off. This should be agreed upon in advance and documented in the employment policies.

Employers can set limits on the amount of overtime an employee can work to prevent excessive hours and ensure compliance with the maximum weekly working hours.

H. Redundancy

 

Employers must follow a fair process when making redundancies, including providing appropriate notice, consulting with affected employees, and offering redundancy pay. The process should be transparent, with clear criteria for selecting employees for redundancy.

 

a. Definition and Genuine Redundancy

A redundancy situation arises when an employer needs to reduce the workforce due to business closure, workplace closure, or diminished need for employees to carry out work of a particular kind. It is crucial for the redundancy to be genuine. If an employer is found to be using redundancy as a pretext for dismissing employees unfairly, they could face legal repercussions.

 


b. Consultation Requirements


Employers have a legal obligation to consult with employees before making them redundant. The consultation process differs based on the number of employees affected:

For fewer than 20 redundancies, employers must consult individually with each affected employee. This involves explaining the reasons for redundancy, exploring alternatives, and considering the employee’s suggestions.

For 20 or more redundancies within a 90-day period at one establishment, employers must conduct collective consultation with employee representatives or trade unions. This process must begin at least 30 days before the first dismissal (for 20-99 redundancies) or 45 days before the first dismissal (for 100 or more redundancies).

During consultations, employers must provide detailed information, including the reasons for redundancy, the number and categories of employees at risk, and the proposed method for selecting employees for redundancy.

 


c. Fair Selection Process


Employers must adopt a fair and transparent selection process when deciding which employees to make redundant. The criteria should be objective, measurable, and non-discriminatory. Common criteria include length of service, attendance records, performance, and skills. Employers should avoid using criteria that could be considered discriminatory, such as age, gender, or disability. Employees have the right to challenge the selection criteria if they believe they have been unfairly chosen.

 

d. Suitable Alternative Employment


Employers must seek to offer suitable alternative employment within the organisation to those at risk of redundancy. This involves identifying available roles that match the skills and experience of the affected employees. If suitable alternative employment is offered and unreasonably refused, the employee may lose their right to redundancy pay.

 

e. Redundancy Pay


Employees with at least two years of continuous service are entitled to statutory redundancy pay, calculated based on age, length of service, and weekly pay. The statutory redundancy pay is capped at a maximum weekly amount, which is subject to annual review. Employers can offer enhanced redundancy pay, but it must be clearly outlined in the employment contract or redundancy policy.

 

f. Notice Periods


Employees selected for redundancy are entitled to a notice period or pay in lieu of notice. The minimum notice period is determined by the length of service: one week’s notice for each year of service up to a maximum of 12 weeks. Employers can offer longer notice periods if specified in the employment contract.

 

g. Right to Appeal


Employees have the right to appeal against their redundancy if they believe the process was unfair or if they have been unfairly selected. Employers should have an appeals process in place, allowing employees to present their case to an impartial decision-maker.

 


h. Documentation and Record Keeping


Employers must keep detailed records of the redundancy process, including consultation notes, selection criteria, and any correspondence with employees. This documentation is crucial for defending the redundancy process if it is challenged.

 

i. Avoiding Unfair Dismissal Claims


To avoid unfair dismissal claims, employers must ensure the redundancy process is conducted fairly and transparently. This includes adhering to consultation requirements, using fair selection criteria, offering suitable alternative employment, and providing appropriate redundancy pay and notice periods. Failure to comply with these requirements can lead to legal action and financial penalties.

 

I. Consulting Employees and Representatives

 

Employers are required to consult employees or their representatives in various situations, such as during redundancies, business transfers, or changes to employment contracts.

The requirement to consult employees and their representatives is enshrined in several pieces of legislation, including the Employment Rights Act 1996, the Trade Union and Labour Relations (Consolidation) Act 1992, and the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). These laws outline the circumstances in which consultation is required and the procedures that must be followed.

Consultation should be meaningful, providing employees with relevant information and considering their input before making decisions. Effective consultation helps prevent disputes and fosters a collaborative work environment.

Employers should ensure that consultation processes are clear, documented, and comply with legal requirements.

The aim of consultation is to reach an agreement on the proposed changes. While there is no legal obligation for employers to reach an agreement, they must demonstrate that they have genuinely considered the views and suggestions of employees and their representatives. If an agreement cannot be reached, employers must explain the reasons for their final decision.

Employers should keep detailed records of the consultation process, including meeting notes, correspondence, and the information provided to representatives. These records can be crucial in defending against any legal challenges or claims of unfair treatment.

 

J. Informing and Consulting Employees (ICE Agreements)

 

Employees in organisations with 50 or more staff can request a formal ICE agreement to discuss significant workplace matters. These agreements ensure that employees are informed and consulted about business changes, promoting transparency and collaboration.

The request for an ICE agreement must be made in writing, and employers must respond appropriately. ICE agreements can cover topics such as organisational changes, employment conditions, and health and safety issues.

ICE agreements benefit both employers and employees by fostering a culture of transparency and collaboration. They help build trust, improve employee morale, and enhance decision-making processes. By keeping employees informed and engaged, employers can create a more resilient and adaptable workforce.

 

K. Suspension from Work

 

Suspension from work is a serious matter that must be handled carefully to ensure compliance with employment laws and to protect both the employer and the employee. Importantly, suspension should be a neutral act, used only when necessary to investigate allegations or protect the interests of the business and employees.

 

a. Grounds for Suspension


Employers must have reasonable grounds to suspend an employee. Common reasons include gross misconduct, health and safety, and cases where the employee’s presence might hinder a fair investigation into alleged misconduct.

Suspension should not be used as a punitive measure but rather as a precautionary step.

 

b. Process of Suspension


Before suspending an employee, the employer should conduct a preliminary investigation to establish whether suspension is necessary.

The employee should be informed of the suspension in person, if possible, followed by written confirmation. The communication should include the reason for suspension, its duration, and the conditions attached to it.

Suspension should be as brief as possible. Employers must regularly review the necessity of the suspension and keep the employee informed of any developments.

 

c. Rights of the Employee During Suspension


Suspended employees should receive their full pay and benefits unless their contract explicitly states otherwise. Unpaid suspension can only occur if it is explicitly stated in the employment contract and agreed upon by the employee.

The suspension should be kept confidential, and employers should communicate the suspension to other employees on a need-to-know basis only.

Employers should provide support to the suspended employee, including access to Employee Assistance Programmes (EAPs) and regular communication updates.

 

d. Documentation and Record Keeping

Employers must document the suspension process thoroughly, including the reasons for suspension, communications with the employee, and any steps taken during the investigation. This documentation is crucial if the suspension is challenged later.

Employers must handle suspensions fairly and consistently to avoid claims of unfair treatment or constructive dismissal. Following the ACAS Code of Practice and seeking legal advice when necessary can help mitigate these risks.