how-to-run-a-small-business

Getting started with employment contracts

When it comes to employment contracts, the key mantra you’ll want to bear in mind is safe rather than sorry. If you’re a small business that’s just starting out, the need for official paperwork may seem like it should be a long way away. You’ve just got together to try and solve a problem, you might not even know if the company is a viable endeavour. But as soon as you have people working for you, you have to have that reflected in a contract.

Make it official by getting the paperwork signed. It’s all too easy to show someone a draft document and then just file it away, but this risks getting you into hot water later down the line. In an ideal world, if you’re a fair and open leader, your employees won’t ever look to take you to court—but we don’t live in an ideal world.

As well as avoiding any potential legal hazards, having a clear and official contract will make you appear more serious and trustworthy to any early employees you hire. It gives those who work with you the feeling that you know what it takes to run a business. Employee contracts signal stability, a belief in the future of the company and a sense that everything is under control. If you’re mostly dealing with remote and non-full time workers, then drawing up flexible employment contracts is also worth your time.

Contracts of employment don’t only guarantee employees that they have somewhere to work that will pay them a salary, they also guarantee that the business does not lose any work done in its name. So at the same time as drawing up your first employment contract, think about filing an intellectual property assignment. Without a signed contract of employment, it is very difficult for you to stop anyone from taking the work they create while working at your company away with them. Especially at an early stage, your company’s intellectual property is absolutely vital. Having an IP clause in a signed contract safeguards all of your business’ most important assets.

Contracts of employment also serve more than just a basic functional role. As well as guaranteeing the legal status of the employer/employee relationships, they will often be one of the very first internal documents that a new hire sees. If you write them too quickly or formally it can paint a misleading picture of how your company operates. In official terms, the contract of employment is the document that governs and outlines your relationship with an employee, so make sure it’s on-brand!

Employment contracts templates:

As a rule, you should consult with a solicitor or an HR specialist when drawing up your first contract of employment. There are also plenty of examples online that you can gain inspiration from. CharlieHR also has a leave policy catalogue for reference and use. If you do want to go ahead and draft it yourself, then be sure to include the following in all types of employment contracts:

  • The name of the employer and the employee
  • The job title and brief description of their role
  • The date when the employment starts and any previous employment which counts as continuous
  • The pay which the employee will receive and how often it will be paid
  • The hours which the employee will work, the place of work and end date if applicable
  • The holiday, sick pay and pension entitlement provisions
  • Details surrounding pension auto-enrolment
  • The length of notice required from the employer and the employee
  • Any collective agreements which form part of the employment

On top of the above essentials, before drafting the employment contract you should also be thinking about:

Probation periods:

if you want there to be a bedding-in period during which time a new employee has a reduced notice period, then include it in the contract of employment. Probation periods should ideally last about three months, and should always be seen as extended interviews.

Restrictive covenants:

a nightmare scenario for many business owners is hiring a talented employee, investing a lot of time and energy on watching them grow, only to lose them and all their insider knowledge to a rival company. Of course, there are many more issues with a company’s management style if this is a common occurrence but by including non-compete clauses, you can rest assured that no one will jump ship or expose company practises in such a painful manner.

Disciplinary procedures:

if your business is dealing with a lot of sensitive or valuable material, then think about what disciplinary procedures you might want to include in the contract. These might be safeguards to protect against breaches of contract, data theft, or any public misrepresentation of the organisation. Disciplinary procedures can also reinforce whatever restrictive covenants you have set up in your employment contracts.

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