For many employees, the new year is a time for a career reset and the opportunity to start a new role.
Under Section 1 of the Employment Rights Act 1996, employers must provide a written statement setting out the main conditions of employment when someone starts work, including the commencement date, place of work, hours and days of work, and paid leave entitlements.
Many employers go further and provide a full employment contract containing more detailed provisions.
Before accepting a new role, employees should carefully review the contract to understand their rights and obligations, both during and, in some cases, after employment.
In this article, our employment lawyers provide a summary of the key provisions that employees should look out for when reviewing an employment contract.
Employees should generally ensure that there are no discrepancies between the employment contract and any previous offers made by the employer.
Given the potential for future dispute, it is important that employees carefully review their employment contracts before signing them and seek legal advice in relation to any clauses of concern.
Pay, bonuses and benefits
The employment contract should specify the employee’s salary and the frequency of any salary payments.
Whilst many employees will naturally focus on the salary figure, employees should also carefully consider any additional benefits being offered, including enhanced annual leave entitlement, enhanced sick pay, bonuses, allowances and other benefits schemes which often form a key part of an employee’s ‘overall package’.
Employees should be mindful of any benefits, such as bonuses, being referred to as ‘discretionary’, since this may not guarantee an employee’s entitlement.
Probationary periods
Employment contracts are increasingly providing for probationary periods, during which the employer assesses an employee’s performance and general suitability for the role.
Employees should consider the length of the probationary period and the notice that is required if either party wishes to end the employment (which is often shorter than the notice required outside of the probationary period, as outlined below).
Furthermore, employees should be mindful of any provisions in the employment contract that may allow the employer to extend the probationary period.
Confidentiality and intellectual property obligations
Most employment contracts contain standard clauses that prohibit the sharing of confidential information during and after employment.
Employees should ensure that confidential information is clearly defined and that the clauses are reasonable.
An intellectual property clause typically states that any work the employee creates during employment belongs to the employer.
In creative or technical roles, employees should carefully check this, as it could affect side projects.
Notice periods
If an employer elects to terminate the employment, employees are entitled to a minimum of one week’s statutory notice if they have worked between one month and two years.
After working two years in employment, employees are entitled to one week’s notice for each full year completed in employment, up to a maximum of 12 weeks’ notice (after 12 years’ service).
Where an employee chooses to end the employment, they are required to provide one month’s notice if they have been employed for one month or more.
The contract may provide for enhanced notice periods, and employees will need to consider whether this is appropriate.
Employees should also consider whether the employment contract provides for payment in lieu of notice (PILON) or whether they may be placed on garden leave for some or all of their notice period.
Summary dismissal clauses
The employment contract will also typically set out the circumstances under which the employment relationship can be terminated without notice.
These are usually limited to circumstances relating to serious misconduct or serious negligence, and employees should ensure that the relevant circumstances set out in the contract are not unlimited or ambiguous.
Restrictive covenants
Restrictive covenants are clauses in an employment contract that restrict what an employee can do after their employment ends and are especially common in employment contracts for senior employees.
Common restrictive covenants include:
- Non-compete clauses: Preventing an employee from working at a competing company or from setting up a competing business in a particular location.
- Non-solicitation clauses: Preventing an employee from ‘poaching’ the clients, customers, or suppliers of their former employer.
- Non-dealing clauses: Preventing a former employee from engaging or dealing with former clients, customers, or suppliers.
- Non-poaching clauses: Preventing a former employee from enticing their ex-colleagues to leave and join them elsewhere.
Restrictive covenants will only be deemed enforceable if they go no further than reasonably necessary to protect legitimate business interests and are proportionate in their duration and scope.
The restriction and any restrictive period should, therefore, be tailored to an employee’s job role, level of seniority, and the risk the employee poses to the company if they should leave.
Employees will need to consider whether the restrictions contained in an employment contract are too onerous and whether they effectively stop them from being able to work.
It is important to seek legal advice on the impact of the restrictions before agreeing to them, as it is difficult to negotiate these later down the line.
Contact Our Employment Solicitors
If you need any assistance regarding your rights and obligations under the employment contract, please contact our specialist Employment Team.
0161 941 4000
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James Banks
Trainee Solicitor
James joined as a Trainee Solicitor at Myerson in 2024. Prior to joining the firm, James graduated from Durham University with a First Class Honours LLB. He is currently completing the SQE qualification with BPP University in Manchester.
About James Banks