Why contracts of employment are a must for any serious business

I been asked in the past why it’s important to have written contract of employment in place and if they are really necessary?

Well the answer is YES! But why?

Firstly, there are legal requirements relating to the information you need to provide employees, but this is not what I want to talk about. 

I do want to talk about some very practical reasons for having good contracts of employment (and there are good and bad contracts of employment – but that’s for another time).

Let’s take the example of the company who ended up with a dispute on their hands because they tried to do the right thing and be a nice employer – but had no written contracts.

Our case study (which is based on a real situation that arose with a company) involved an employee who was off sick. The company chose to pay the employee because they wanted to be nice and decided to exercise their discretion.

But when the employee went off sick for a second time and the employer decided they would not pay them, the employee then shouted “breach of contract”… they had been paid before so why had they not been paid this time?

Had there been a written contract saying the company did not pay sick pay and only SSP (but may exercise its discretion), the dispute would not have arisen. More than this, the reaction from the employee may have been one of gratitude (they paid me when they did not have to), rather than resentment, which caused damage to the ongoing relationship!

This ‘misunderstanding’ took a long time to resolve and caused permanent damage to the employment relationship. It could have been avoided if the company had written contracts of employment in place.

Think about other areas where ‘misunderstandings’ can happen and could be avoided if you were clear about your terms of employment and your rules and policies?

This is one example. There are many others where the lack of a written contract has cost the employer money…for example, you cannot make a deduction from pay without a clear deductions clause, so if you have an employee who damages company property, loses the office keys or does not return company property when they leave, you cannot make a deduction.

If you don’t have written contracts of employment or you have not reviewed yours in some time. Please give us a call. We can provide you with a FREE review of your current contract and will let you know if it provides flexibility and protection that can be achieved.

Paula Fisher.

You can contact Paula on

If you feel that you need guidance or advice on this matter, please call Practical HR on 01702 216573 or email Paula on the above.