Essential Elements of an Employment Contract

by Alan Hickey, Service and Operations Director, Peninsula Ireland

In an ideal world, an employer would review their contracts of employment on a yearly basis. However, the reality is that’s not always possible as the day-to-day running of a business leaves little time for anything else.

That’s not to say time shouldn’t be set aside to ensure contracts are up to date and represent the way a business and its employees work. After all, legislative changes often go under the radar and can expose a business that’s missed an important update.

Below, we look at the essential elements of an employment contract and what you should do when updating yours.

What is a contract of employment?

A contract of employment is an agreement between an employer and employee that stipulates the terms and conditions of employment.

You can think of it as a set of promises made between two or more parties that have the intention of being legally binding. This means that there’s a clear objective that, should either party not keep to their promise, the other party may take enforcement action.

When must employees receive their contract?

Certain terms of employment must be provided to employees by writing in law. Employers have only five days from the commencement of employment to provide employees with five core terms of employment in writing under the Employment (Miscellaneous Provisions) Act.

The core terms that must be provided are:

• The full names of the employer and employee.
• The address of the employer.
• The expected duration of the contract (where the contract is temporary or fixed-term).
• The rate or method of calculating pay and the pay reference period for the purposes of the National Minimum Wage Act 2000 (for example, a week, a fortnight, or a month).
• What the employer reasonably expects the normal length of your working day and week to be, in a normal working day and in a normal working week.

The written statement of main terms of employment under the Terms of Employment (Information) Act must be provided within two months of employment commencing.

The required information includes:

• The full names of the employer and the employee.
• The address or registered office of the employer in the State or, where appropriate, the address of the principal place of business of the employer in the State.
• The place of work or, where there’s no fixed or main place of work, a statement specifying that the employee is required or permitted to work at various places.
• The title of the job or nature of the work for which the employee is employed.
• The date of commencement of the employee’s contract of employment.
• For temporary contracts of employment, the expected duration thereof or, if the contract of employment is for a fixed term, the date on which the contract expires.
• The rate or calculation of the employee’s remuneration, the pay reference period, and that the employee may request from the employer a written statement of their average hourly rate of pay for any pay reference period.
• The length of the intervals between the times at which remuneration is paid, whether a week, a month, or any other interval.
• Any terms or conditions relating to hours of work (including overtime).
• Any terms or conditions relating to paid leave (other than paid sick leave).
• Any terms or conditions relating to incapacity for work due to sickness or injury and
• paid sick leave and
• pensions and pension schemes.
• The period of notice which the employee must give and entitled to receive.
• A reference to any collective agreements which directly affects the terms and conditions of the employee including, where the employer is not a party to such agreements, particulars of the bodies or institutions by whom they were made.

What are the three types of contractual terms?

Three types of contractual terms exist. These are statutory, express, and implied terms.

Express terms

Express terms of a contract are specifically drawn to the attention of the employee. Confusingly, an express term can be included in an employment contract in writing or orally i.e., it doesn’t have to be written down to be an express term.

Implied terms

Implied terms have never been written down or communicated to the employee. However, they may be implied into the employment relationship through custom and practice.

A term can be implied into a contract because it’s so obvious that it doesn’t need to be directly mentioned. Or it may be because it’s needed to make the contract work properly. In other words, to give the contract business efficacy.

Statutory terms

Some terms are inserted into a contract because the law prevents anything to the contrary. This means that if a term is included in the contract which is below the statutory minimum that must be provided, the statutory minimum will override it and make the contractual term void. Examples include minimum notice periods and the national minimum wage.

It’s possible that terms, whilst not expressly written in any contractual document, may become part of an employee’s terms and conditions through workplace custom and practice.

Can employers update employment contracts at their will?

Updating an employment contract can be tricky. That’s because you need to notify an employee of any change to their contract unless that change arises from a legislative update, administrative provisions, or collective agreements referred to in the contract. In order to be on the safe side and legitimately add, remove, or make any changes to the terms of an employee’s contract, it’s best to first receive agreement from the employee in writing.

If you want to change either an express term or an implied term, without employee consent, the question then becomes one of reasonableness. For instance, was it reasonable for you to request the change and was it reasonable for the employee to refuse the change?

So, even in situations where an employee hasn’t agreed to a change, it may be possible for you to implement a change where the employee’s refusal was unreasonable.