When do I need Contracts of Employment?

This is an important question as family run businesses make up a large proportion of small businesses in the UK, writes Peter Done, managing director of Peninsula. The law states that all employees are entitled to a written statement of the most important aspects of their contract within two months of starting employment.

The written statement however does not cover all the terms of a contract of employment, although there are several pieces of information that must, by law, be contained in a single document. An employment relationship is a legal relationship therefore a contract of employment will always exist, whether written or unwritten.

Unwritten contracts are dangerous for employers as they provide fertile ground for disputes and disagreements over exactly what the terms and conditions of employment are. Workplace disputes are even more unpleasant when the relationship is not just professional but also extends into family life. In order to avoid this and the accompanying threat of tribunal, clear and unambiguous contractual terms are vital.

In any successful business, growth is the key factor. If there is a need to recruit extra staff a written contract of employment will provide confidence and reassurance that your employees know what is expected from them and what they in turn are entitled to. The contract should also allow you to retain sufficient control over your staff so that your business can be managed effectively.

There are many aspects of employment legislation that need to be complied with. The Equality Act provides a range of anti-discrimination law that all firms should be conscious of. National minimum wage legislation contains special provisions in relation to family members – someone who is a member of the employer's family, participates in the running of the family business and lives in the family home is not entitled to minimum wage.

Working time regulations apply unless you agree an opt-out policy with your employees. Finally, the ACAS Code of Practice sets out guidelines for operating disciplinary and grievance procedures for effective and legally compliant dispute resolution.