Guide

The employment contract

What a contract of employment is

The terms of a contract of employment may be oral, written, implied or a mixture of all three.

Where to find terms of a contract of employment

The terms of a contract of employment can be found in a variety of places, such as:

  • the original job advertisement
  • written correspondence, eg letters and emails, between you and the employee
  • the principal statement
  • the written statement
  • other written agreements
  • oral agreements
  • your company policies
  • an employee/company handbook
  • legislation and case law

Terms through custom and practice

Certain terms of employment may become established or implied into the contract of employment by custom and practice. In the absence of any express or written terms of employment this is often the only way that an employee can establish their entitlement to important contractual rights. For a term to be implied by custom and practice it must be:

  • reasonable – it is the norm within the industry in which the employee works
  • certain – clear to all and not capable of being interpreted in different ways by different people
  • notorious – well known to all to whom it relates and should have been in existence for a considerably lengthy period of time

Terms which could be viewed as implied by custom and practice could include the provision of transport to work, rest breaks, finishing times, commissions, entitlements to overtime payments etc, where these terms are not clearly expressed elsewhere. An oral contract is as binding as a written one, though its terms may be more difficult to prove.

If you want to include provisions specific to the individual, you can state these either orally or in writing. However, stating them in writing may prevent disagreements in future.

If you issue a written contract, it should reflect those terms and conditions that are currently in place on the date of issue, unless you have agreed changes. If you have agreed changes, you should include a term in the written contract stating that it replaces all previous discussions/correspondence in relation to terms of employment.

If you do not have any kind of written contract of employment with an employee, you must - at the very least - issue them with a written statement.

If you have some kind of written contract of employment with an employee, you do not need to issue a written statement as well - but only as long as the contract contains all the items required in a written statement.

Read more on the written statement and putting together an employee's written statement.

Part of My New Business
Start your business checklist Show all