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The Shetland blog: Why do you even need employment contracts?

Every month, lawyers from Harper Macleod - the biggest Scottish law firm with an office in Shetland - share their insights on issues which can affect local businesses and individuals.

Ewan Stafford, an Associate at Harper Macleod who specialises in advising on a wide-range of employment related matters, considers the importance of a property drafted contract.

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As an employment lawyer, I am often asked to provide advice to both individuals and businesses with regard to disputes. From my experience there is one simple piece of advice that goes before all others - having properly drafted employment contracts can save businesses money in the long run.

The internet is a vast resource which purports to hold plenty of employment contract templates. However, it is essential to make a contract which is adapted to suit the particular needs of a business and its goals. Even where contracts are already in place it may be sensible to have a periodic review of the terms to ensure that they are up to date to cover new developments. 

Under the law, an employer is obliged to provide an employee with a written statement setting out the main terms of employment within eight weeks of employment commencing.

If a business is found not to have issued an employment contract then it can be fined between 2-4 weeks' pay in the event that a dispute goes to an Employment Tribunal. However, an employee cannot simply bring a claim because their employer has failed to provide them with a contract - there must be another claim for the employment contract claim to be piggybacked onto.

What's in a contract?

An employment contract will state the many benefits to which employees are entitled, which may include; pay, overtime, sick pay and annual leave allowance.  The contract will often provide information on company procedures such as what is to happen if the employee is sick and how much notice the employee needs to give to end their employment.

While contracts are valuable for individuals, they are essential to the businesses that rely upon them. There are a number of clauses which can be inserted into a contract in order to protect the business's interest. Such clauses may include terms to prevent employees from setting up in competition or stealing valuable intellectual property, or even such mundane matters as providing a mechanism for reclaiming accidental overpayments. 

Where an employer is recruiting, a clause covering a probationary period can allow you to dismiss an employee on a shortened notice period in the first few months of employment.

In certain industries there may be some disciplinary rules which are so important that the employer will want to make them part of the written contract of employment. For example, a care home provider may wish to insert a term compelling their care staff to comply the standards expected from a regulatory body.

Get it right, and in writing!

With regards to employment contracts the message is clear – get it right, get it in writing and get it issued as soon as possible. A well drafted document lets everyone know where they stand and it will avoid costly disputes later on.


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This article originally appeared in the Shetland Times