Contracts may bore you to tears, but they are crucial to establish the basis of your employment relationship.
You may be feeling elated because you’ve been offered a new job. When the contract arrives you may be tempted to simply check that the salary is what you’ve discussed and the job title is correct, however you shouldn’t you just skim the more detailed aspects of your employment contract and simply sign up.
It’s always best to read and understand what you are signing. These documents usually contain legal jargon and difficult-to-understand information, so read on for our simplified list of things you should look out for.
If there are any terms you don’t understand in your contract, make sure you get it checked by a solicitor before signing. Your contact may even state that you have had the opportunity to do so, particularly in respect of post termination restrictions.
Check the basics:
Start and end dates
You must have a beginning date and an end date for your employment—otherwise it’s just an offer letter. Check that these are correct as they may be important at the end of your employment, particularly if there is a dispute and you wish to assert your rights to e.g. unfair dismissal (two years for unfair dismissal claims).
Compensation and benefits
What’s your base salary? Is the bonus guaranteed or discretionary? Who decides whether you’ve met the criteria for a performance-based bonus? How objective are those criteria? Are benefits guaranteed or changeable at the whim of the employer? Does your employer have the right not to pay a bonus if you are on notice at the time the bonus is due to be paid?
Your contract should tell you how and when your salary will be paid, and what the stipulations are for any bonuses, incentives and travel expenses.
Make sure all types of compensation, including car allowance, pension, health insurances, equity or share options, bonuses and commission payments etc are detailed in the contract and are as you have discussed with your new employer.
Job description and responsibilities
If you’re agreeing to be locked into a job for a period of years, be sure it’s the job you think it is. The job description is important because it defines the scope of what your exact role is, and what duties your employer can or cannot require you to do. Check the job description if attached, and ask for one if not. Where there is a provision for you to take on an additional roles and responsibilities discuss this to ensure you don’t end up with a total different job to the one you agreed to.
Place of work
If you have agreed to work in a wide geographical area, for example other offices, locations in the UK or even abroad, your employer will be in a strong position if you object to a move at a later stage. Also, your rights to a redundancy payment could be adversely affected if you refuse to work in a new location, having previously agreed in your contract to do so.
If working remotely at home is a possibility and something you have discussed, then the contract should reflect this.
Hours of work
Don’t agree a working pattern that you will later regret. It’s best to negotiate a variation at the outset if necessary, including the possibility of flexible working if this is the only way you can get the job done.
As well as hours of work, check whether there are any shift patterns, including whether you are required to work weekends or evenings, and if so, for what days and for how long?
Also check if you are being asked to “work all the necessary hours that the job entails”, and if so what is expected.
Also check if you’re required to do overtime, and if you will be paid for this.
The tougher clauses
The most ‘employee unfriendly clauses’ of your contract are normally in the middle to end of the contract so don’t stop half way through. These clauses will normally contain extremely boring technical legal jargon so it’s understandable that employees simply scan these, but it is these clauses which cause the most issues for employees when they wish to leave.
Cause for dismissal or termination of your employment
Check your notice periods, are they acceptable or are they too short or even too long. A notice period that is too long could hamper you being able to take up a new job, and too short a notice period may not give you enough stability.
What are the grounds for dismissing you with, and without notice, are they acceptable? If you have been found guilty of gross misconduct, your employer can terminate your contract without giving a notice period. However, the terms that constitute gross misconduct should be written into your contract.
Is there a probationary period? How long for? Can your employer extend the probationary period if they choose to? You should resist excessively long probationary periods of more than 6 months. It shouldn’t take your employer longer than this to determine your suitability and capabilities in the role. If you’ve been asked to carry out a probationary period, the notice will be much shorter during the probationary period.
Restrictive covenants or post termination restrictions
These provisions are not uncommon and are often standard in most industries and certainly at the more senior levels, but it is important to make sure that you understand the breadth of the restrictions and if you are unable to negotiate them out or down, that you are getting enough in return to make it worthwhile
It’s easy to brush over ‘restrictive covenants’ or ‘post termination restrictions’ when signing a new contract because they are only relevant after you have left.
But future job prospects or business development could be hindered if they are too restrictive, especially if you are expected to transfer your clients to your new employer when you leave. Any personal clients or customers you introduce to your new employer may become integrated into your employer’s own client base and form part of your restrictive covenants when you leave, unless your contract says otherwise.
Beware of signing any agreement that bars you from working for a competitor for a considerable period after the end of your employment. Non-compete clauses and Non-solicitation of clients and employees clauses (see below) can be included in a contract to protect the legitimate interest of your employers business but must be reasonable and not overly restrictive or they would amount to a restrict of trade meaning they prevent you from developing your career in your chosen field.
Non-solicitation of clients and employees
Look for post-employment restrictions on your ability to do business with people you’ve worked with during your employment.
Copyrights and inventions
Your employer may make a claim to output of your creative efforts, even if you work on a side project off your employer’s premises and outside of work hours. If you invent anything during your employment, the intellectual property generally belongs to the employer. If you are working on something before you start employment you many want to notify of them of that and carve it out so it is not included and the company right to intellectual property.
If you plan to do any freelance work or have a home based project, be sure the contract doesn’t prohibit you from doing so. We are in the ‘gig economy’ age and many people have multiply sources of income from various other job and personal projects this is prohibited where there is an exclusive employment provision in the contract.
What if all is not what it should be? Can you really challenge the terms of an employment contract? Yes, and a reputable company should respect you for it. It’s worth asking about terms you have doubts about, before you sign on the dotted line.
If you’d like a review of your contract and some expert advice on the scope of the covenants set out in your contract or any other aspect of your contract or need guidance on negotiating terms then contact our employment team on 0333 4004499.