A contract of employment comes into existence once an employer puts an offer of work to an applicant and the offer is accepted. The contract that a director will enter into is referred to as a service agreement. Where shares or options are provided to the director the service agreement operates in conjunction with the corporate documentation.
The terms of the employment contract can be oral, written and implied and they define the relationship between the employer and employee. Many employers prefer that the parties sign up to a written contract – it gives them greater control over issues such as probationary period, holiday, sickness and notice of termination of employment.
Employers may wish to include post-termination restrictions in their employment contracts, so that if employees leave the business the employer is better protected from anti-competitive activity. It may seem counter-intuitive to consider post-termination issues before an individual has even been appointed, however where an employer has business interests to protect then advance planning is vital.
Staff handbooks and other policy documents typically sit alongside the employment contract. The employer may or may not give those documents contractual effect. If they have contractual effect, then a failure to attend to requirements could lead to a breach of contract claim by either party.
If an employer chooses not to use a contract of employment it still has a legal duty to provide a written statement of the main employment particulars within two months of the start of employment. The written statement is not a contract, however it evidences the employment relationship.
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