Why contracts are most likely to land you in hot water (and a tribunal)

From a failure to issue a contract to an employee not knowing legal changes surrounding what they must stipulate, there are numerous potentially costly mistakes golf clubs can and do make in this area. Carolyne Wahlen from Golf HR details the key measures that should be followed.

Contracts – probably the area of employment law where I see most mistakes.

Not issuing them, issuing them at the wrong time, issuing them with illegal clauses, there’s a litany of mistakes you could make when it comes to contracts, and this article is designed to help you avoid them.

Not issuing a contract on day one? You’re breaking the law

I’ve come across clients who’ve said that – as a matter of course – they don’t issue contracts until the employee has been there for six months.

Not only is this illegal, it also provides no advantage to the employer.

Lots of the employee’s rights exist from day one, including discrimination protection and annual holiday accrual.

They’ve got the rights, whether they’ve got a written contract or not.

Since April 2020, the law has become a lot stricter about issuing written contracts of employment in mainland UK. You now must give employees a contract of employment by the end of their first day of working for you (used to be within the first two months).

Do I need to state the benefits? (Yes)

You also have to state all paid benefits in the contract. Holidays, pensions, medical insurance and so on have to be in there. Even statutory benefits that you have no influence over, such as statutory sick pay (SSP) and paternity pay, have to be in there.

(If you used to pay enhanced sick pay “at your discretion,” that is no longer possible.)

And just to drum the point home, even if you don’t issue them with a written contract, they have a verbal one: you’ve offered them a job, they have accepted.

They turn up to work for you in the expectation of getting paid, and you pay them. And they still have the right to annual leave, SSP, protection from discrimination and so on, even without anything in writing.

What’s the deal with the notice period?

One of the most important reasons why you should issue an employment contract is the notice period. Without a written contract, the statutory minimum notice periods will automatically apply, and that’s likely to be advantageous to the employee, and not to you.

After the first month of service, the minimum statutory notice period for the employee to give you, no matter how long they have been with you, is just a week.

In some circumstances, that’ll be okay, but I’m sure you’ll be able to think of occasions where it won’t, that is, if they’re a valued employee and decide after 10 years that they want to go, give you one week’s notice, and then take their outstanding holiday leave during that week.

What about gardening leave?

If you have a clause regulating this in your employment contract, you can decide whether you are going to make them work their notice or send them home. If there is no clause in your contract, or even worse, no contract, then you have to let them work their notice, as it would be a breach of contract if you do put them on gardening leave.

Can I just pay them, and they leave straight away?

This is called “payment in lieu of notice” (PILON). This means that you terminate their employment immediately, issue their P45, and pay them for their notice period, although they are not working it and are not accruing holiday leave. Unfortunately, you always have to pay the notice if you, the employer, are asking them not to work it.

Most employees are usually happy to leave immediately, but you still need to have that in the contract; otherwise, some troublesome employees may, yet again, insist on working their notice.

Contracts bring clarity

If your employees don’t know what they’re entitled to, there’ll invariably be questions at the coffee machine: “How much sick pay do you get?” and so on.

This can understandably lead to unpleasant conversations where you try to justify differences in staff benefits, which can disrupt a stable work environment.

A lack of clarity can also result in staff accidentally doing the wrong thing, simply because it’s not documented – reporting sickness absence, requesting and recording holidays and so on.

If you have put down in writing what they are entitled to and the procedures that you would like them to follow, it removes the need for ‘office myths’ among employees. It also ensures that admin tasks (which are not earning revenue) are done as quickly and efficiently as possible without a lot of unnecessary chat.

What about holiday pay?

In a recent case, a tribunal ruled that the ‘oral’ contract didn’t prevent holidays from being carried over or limit the payment in lieu of holiday accrued in the final year. As the employee had nothing in writing from the employer, she didn’t know she had to “use it or lose it”, therefore, those normal rules did not apply.

This meant that the employer had to pay her ALL the outstanding holiday accrued over the 10 years of working for him = 131.5 days’ holiday pay (c. £13,500)! Plus, solicitors’ costs! Don’t fall foul of the same thing.

What happens if you DON’T issue an employment contract?

Right off the bat, nothing.

But if they take you to a tribunal for any other reason (unfair dismissal, discrimination and so on), it will be added to their claim and will cost an extra three or four weeks’ money. It will also be a sign to the court that you are not ‘fulfilling your obligations under employment law’ and will be a black mark against you. The penalty for not issuing a contract of employment could be as little as a few hundred pounds to thousands of pounds and losing your case.

Simply put, contracts aren’t something to mess around with. Get them written, get them right and you’re a long way towards your organisation being protected.

For further advice on this matter or any other staff or member issue affecting your golf club, please contact Carolyne Wahlen, Golf HR, on cw@golfhr.co.uk or 01491 598 700