What’s in an employment contract?

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Employment main termsEvery employee in every firm in the land must be issued with the terms and conditions of their employment by their employer. There are specific things the T’s and C’s must contain and the statement must be offered to the employee within 2 months of the start of the employment. The terms and conditions (or formally the ‘statement of main terms of employment’) are the bare minimum of details that form the basis of the employment contract between the two parties.

In reality most employers send a document containing the T’s and C’s out with the employment offer. Mostly too, they are discussed to some degree at interview.

Employment Contract

But what’s in an employment contract? Why does an employment contract matter and is it really any more than a piece of paper that is only relied on when the parties fall out?

A contract of employment need not be written. A verbal agreement is reached when offer and acceptance is made following an interview. Both parties have expectations of the other. There are actually two parts to an employment contract: an expressed contract that sets out the facts and a psychological contract that describes all the un-said and unwritten aspects of the relationship. The expressed contract sets the tone for the psychological contract. The expressed contract is therefore key.

There are several ways that a contract can be created. We have already mentioned the verbal agreement. A written document will include contractual terms and the staff handbook may include further contractual elements. Some of the contractual content created is based on the legal requirements placed on the employer by statute, for example minimum notice periods.

The expressed or written contract must cover the legal minimum terms and conditions comprising 16 clauses, and it should frame the relationship between employer and employee. No aspect of the contractual agreement can, once agreed, be changed without the agreement of the employee.

Psychological Contract

The most interesting aspect of the employment relationship between employer and employee is the psychological contract. It can’t really be written down easily and is generally not contractual. It involves the perception each has of the other. A simple example is where the employee expects the employer to provide work whilst the employer expects the employee to focus on the tasks in hand. There is tacit mutual understanding about the obligations each bestows on the other.

The psychological contract is far more powerful than the written terms and conditions. Whilst the T’s & C’s specify hours of work, location and salary for example, the implied contract goes far beyond. A strong psychological contract develops employee motivation, a desire to ‘go the extra mile’ and a feeling of satisfaction in work. The psychological contract is a powerful tool which has major impact on the firm’s bottom line. To find out more about this visit our blog on improvement in business outcomes.

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