Employment contracts FAQ

Give your staff fair and legal contracts

Employment contracts FAQ

Must an employer provide a reference for an employee?

There is no legal duty for an employer to provide a reference for an employee or ex-employee. However, if a reference is given, an employer has a duty to make sure that it is completed with reasonable skill and care, and that it is accurate.

As such, a reference should not make any negligent statements about someone. An individual can take action against former employers who give a false picture of their ability or character to prospective employers. So, for example, if a reference contains untrue statements then the employer may be liable to the employee for defamation.

If an employee has performed badly or has been dismissed for a reason casting doubt on their suitability for another job, their ex-employer will have the following options:

Further Information

For further information about general employment rights see the Department of Trade and Industry web site.

What are the main regulations applying to employment agencies and businesses?

Employment agencies arrange for businesses to hire workers on fixed, permanent or short-term contracts; employment businesses or ‘temp agencies’ also place people in work but the contractual relationship is between the worker and the temp agency. Employment agencies and businesses work under the Employment Agencies Act 1973 and the Conduct of Employment Agencies and Employment Business Regulations 2003. Agencies do not need to be licensed, with the exception of Nursing and Care agencies, which must be licensed by the National Care Standards Commission. An agency can be set up from home, and there is no need to form a company to run the business. The main areas covered by the regulations are fees, advertisements, records, and general standards of conduct.

Employment agencies and businesses cannot charge fees to workers for finding them work. The regulations do not regulate the fees charged to businesses using employment agencies, nor workers’ rates of pay. However, employment businesses are restricted (but not completely prevented) from charging so-called ‘transfer fees’.

When advertising, agencies are obliged to make it clear that they are employment agencies; and if advertising an information service about jobs, must state they do not have authority from an employer to find workers, if that is the case. Employment businesses must be similarly clear about the nature of their work; and must give full details of work, including rates of pay, qualifications and location in any advertisements.

Employment agencies and businesses must keep records of information about all their workers and employers.

General standards of conduct that agencies must follow include:

Standards for employment businesses include:

Further Information

The Employment Agency Standards Inspectorate at the Department of Trade and Industry runs a helpline answering questions about employment agency and business regulations: 0845 955 5105.

Who is covered by fixed-term contract regulations?

Rules that fixed-term employees should not be treated less favourably than comparable permanent employees apply to staff on contracts that last for a set time or for the duration of a particular task. Such fixed-term contracts might be arranged to cover maternity leave, a known period of heavy workload for a business, or to get specialist personnel in to, for example, help with an IT task.

Some groups of people are excluded from the regulations – these are employees on training schemes funded by the Government or through the European Union; employees completing work experience as part of a higher education course; employees employed through an employment agency; and apprentices.

Under the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations, fixed-term employees can only be treated less favourably if a business has an 'objective justification' - this means showing that such treatment is a necessary and appropriate way to achieve a real business aim. A business has to give a written statement explaining any less favourable treatment to a fixed-term employee if this is requested.

Fixed-term employees can compare their treatment to other employees in the business doing the same or similar work, and they should be able to show similar skills and qualifications if necessary. They should also get information about any permanent vacancies in their organisation.

Also under the Regulations, employees on fixed-term contracts of a year or more relating to a particular task have the right to a written statement of reasons why a contract has been terminated and the right not to be unfairly dismissed. If a contract is for two years or more and is not renewed because of redundancy, the employee has rights to statutory redundancy pay.

Employees on fixed term contracts of less than three months have a right to statutory sick pay, guarantee payments and the right to get and duty to give a weeks' notice after one month's service.

Cases of infringements of the Regulations can be taken to an industrial tribunal.

Further Information

See the Department of Trade and Industry web site for further information.

What rules govern using staff on successive fixed-term contracts?

The Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations limit the use of successive fixed-term contracts. Under the Regulations, if a fixed-term employee�s contract is renewed or a new fixed-term contract is drawn up when they already have a period of four or more years of continuous employment, then the renewed or new contract becomes a permanent contract.

A business would have to give an �objective justification� (a real business requirement) to continue giving fixed-term contracts beyond four years. Alternatively, this could be done if agreed collectively in the workplace. ACAS can help businesses set up such agreements.

What employment rights do agency workers have?

Agency workers have employment rights under regulations specific to the industry – The Employment Agencies Act 1973 – and rights shared with other workers under the law relating to, for example, pay and working time.

A basic principle of employment agency law is that workers cannot be charged by agencies for finding work (restrictions on ‘transfer fees’ were introduced in April 2004). A worker can register with as many agencies as they like. The law stops an agency from restricting a worker working directly for a company that has previously employed them as a ‘temp’, but hirers who do want to take someone on to their payroll permanently may have to pay a fee to an agency.

Most workers are entitled to the National Minimum Wage, and Working Time Regulations also apply to agency workers. Also, since April 2004, payments to workers may not be withheld either because there is no signed timesheet or the Employment Business has not been paid by the business using it (although an Employment Business is allowed to delay payment while it makes reasonable enquiries about time worked).

Further Information

The Employment Agency Standards Inspectorate at the Department of Trade and Industry runs a helpline answering questions about employment agency and business regulations: 0845 955 5105.

What notice must a business give when terminating an employee's contract?

In most circumstances employees should be given either notice of dismissal or payment in lieu of notice. The period of notice is variable, and usually set out in the contract.

If there is no contractual clause covering this, the statutory minimum limits are:
Less than one month - None
1 month-2 years - 1 week
2 years-12 years - 1 week for each year of service
More than 12 years - 12 weeks

Exceptions to these periods of notice are when a fixed-term contract has expired and when someone is given a summary dismissal because of extreme behaviour such as fighting or theft.

Further Information

See the Department for Trade and Industry web site.

What are the Working Time Regulations?

The Working Time Regulations 1998 (SI 1998 No.1833) implement the EU Working Time Directive 94/104. Introduced to ensure the health and safety of workers, they stipulate minimum rest periods and a maximum limit on working hours. The regulations apply to all employees over the minimum school-leaving age with a contract of employment, and to agency and freelance workers who are under contract. On 1 August 2003 the Regulations were extended to include all non mobile workers in road, sea, inland waterways and lake transport, to all workers in the railway and offshore sectors, and to all workers in aviation who are not covered by the Aviation Directive (ground staff and baggage handlers). The Regulations were applied to junior doctors from 1 August 2004. Mobile workers in road transport have more limited protections.

The regulations state that there should a be minimum daily rest period of 11 consecutive hours out of every 24 hour period. In addition, there should also be a rest break every six hours, of 20 minutes, during the working day, and a rest of 24 consecutive hours per week. Work force agreements may be made between workers and employers, varying the rights to rest periods and rest breaks, with workers receiving 'compensatory rest'.

The regulations set a maximum average working week of 48 hours, but under certain circumstances the average can be extended if an agreement is made between workers and employers – this is recognised as the UK’s ’partial exemption’ from the Regulations, and is currently under review.

The average working time of a night worker is set at eight hours in each 24 hour period, over an average of four months. Workers are entitled to a health check before performing night work, and further checks thereafter.

There are additional special rules for young workers (16 and 17 year olds), who may not ordinarily work more than 8 hours a day or 40 hours a week, although there are certain permitted exceptions. There is no opt-out available from the ‘Young Workers’ limits.

Further Information

Further information see the Department of Trade and Industry web site.

What must a business do if it receives an application from an employee for flexible working?

Under flexible working rights introduced in April 2003, an employer must follow a set procedure if an eligible employee requests flexible working hours.

Within 28 days of receiving a written application, a meeting with the employee must be arranged to talk about the application. Fourteen days after this, a formal written notice of a decision must be given to the employee, and any new working arrangements agreed. If the request is rejected, then business grounds must be given, which include the burden of additional costs, and detrimental effects on quality or meeting customer demand or performance.

Employees have the right to appeal against a rejected request, but must appeal in writing within 14 days of receiving a formal rejection. A further meeting must then be arranged within 14 days, and there is another 14 days after this for the employer to give a written response to the appeal.

In some circumstances, employees can pursue rejected requests to ACAS or an employment tribunal. At a tribunal, an employer will need to show they have followed the flexible working application procedure and have rejected any applications for business reasons they have explained to the employee.

What best practice and legal guidance is there on teleworking?

A code of practice on teleworking - workers using information technology to work away from the office - was published in September 2003 and sets out best practice and legal requirements in several areas, namely employment conditions, data protection, privacy, equipment, health and safety, organisation of work, training, tax and collective rights. The code was drawn up by government, employers and trade unions.

Employment conditions

Teleworkers have the same general employment rights as other workers, but a business may want to make specific amendments to a teleworker's contract - for instance, establishing procedures for reporting work done to the office and confirming core hours of work.

Data protection

Teleworkers and their employers are subject to data protection law under the Data Protection Act 1998.

Privacy

The code states that employers should respect the privacy of teleworkers, making sure that a clear distinction is made between business and home life, and suggests a separate business telephone line can help achieve this.

Equipment

Under the code, employers should provide, install and maintain equipment used by a teleworker unless the teleworker is happy to use their own equipment; the costs of regular telework should be met by the employer, who should also give technical support where it is needed. Under UK law, the employer has liability for costs incurred if equipment or data is lost or damaged by a teleworker; in turn, a teleworker must look after equipment and must not use the internet to collect or distribute illegal material.

Health and Safety

Employers have the same responsibilities towards teleworkers as to other workers in providing healthy and safe working conditions - the rules for businesses using computers in offices will particularly apply (for example, the Health and Safety Display Screen Equipment Regulations).

Organisation of work

The code suggests that a business establish various aspects of teleworking; for instance, core hours, contact times, using telephones, email and videoconferencing, and access to company news and information, in advance of a teleworking arrangement being made.

Training

Teleworkers must be trained and appraised in the same way as comparable workers at a business's main premises, and must have the same career opportunities.

Taxation

Employers can pay up to �104 a year to an employee for additional work-related household costs (for example, electricity) without incurring a tax charge or National Insurance liability - they can pay more than �104, but must then produce proper evidence that additional costs are wholly related to work done by a teleworker.

Collective rights

Teleworkers have rights to communicate with colleagues, deal with workers representatives, and participate in elections to trade unions.

In addition to the guidance given in the code, the law on flexible working means that parents with disabled children or children under six have the right to apply for flexible working arrangements - this might include a request to telework, although there is no automatic right to telework under the flexible working legislation since a business can refuse requests on certain business grounds.

What must a business do to ensure it is not employing illegal workers?

The Asylum and Immigration Act 1996 makes it a criminal offence to employ someone who has no right to work in the UK and makes businesses check certain documents to ensure they do not. Since May 2004 businesses need to check and copy one or more of the following to comply with the law:

The Home Office can help with the exact requirements.

Are there financial or other benefits employing and training New Deal staff?

Businesses can sometimes get subsidies and training grants for employing people on one of the government's New Deal programmes. The programmes cover 18-24 year olds looking for work and over 25s claiming Jobseeker's Allowance, and there are also voluntary programmes for people over 50, disabled people, lone parents and partners. A New Deal recruit can help tackle a skills shortage, perhaps one that recurs because the business is in a high-turnover sector. Candidates are pre-screened and prepared (each goes through a skills assessment process and will have been trained where appropriate) and a business can use Jobcentres' free recruitment services when employing New Deal staff - the ultimate decision to take someone on remains with the business involved.

The subsidies for employers taking on staff from the non-voluntary New Deal programmes are (for the first six months):

There is a direct line number for employers thinking about employing New Deal staff: 0845 601 2001.

How can Home Computing Initiatives help a business?

Home Computing Initiatives (HCI) are schemes enabled by government that allow businesses to take advantage of special tax exemptions to loan their employees computers free of tax liability for use at home. Most employers can use the scheme, including small businesses in the private sector. The scheme usually works by an employee agreeing to take a reduction in their salary (called a 'salary sacrifice', or the loan of computer equipment can be build into a job offer as a benefit) in return for the use of loaned computer equipment.

The benefits to a business include boosting productivity by having employees familiar with information and communication technology through their home use; and there are operational savings generated through reduced employer National Insurance Contributions.

To implement a HCI, a business can choose an established commercial HCI provider with knowledge of the relevant income tax, VAT and 'salary sacrifice' regulations. The Department of Trade and Industry has list of providers, including Microsoft.

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