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Commercial Angles' Newsletter - August 2001

UK contracts of employment

Governing law

There is no requirement that employees based in UK should have a contract of employment governed by English or Scottish law. The parties to the contract can choose the the legal system that they wish to govern the contract. However, if English law is not chosen it will still apply to a limited extent because mandatory rules protecting all UK employees can not be derogated from by contract. Mandatory rules include the right to statutory sick pay, maternity pay, redundancy pay and protect UK employees from unfair dismissal. If no choice has been made as to the system of law applying to the contract, the law of the country in which the employee is normally required to work will usually be applied.

Employment Rights Act 1996

Under English law the contract of employment does not have to be in writing but the Employment Rights Act requires employers to provide their employees with a statement in writing of certain details about their employment. This statement must be given to new employees within two months of their starting employment with the employer and must be updated within one month of a change in any of the details. Details which must be included in the written statement are:

the name of the employee and the name of the employer,
the date on which the employment commenced,
the date on which the employee's period of continuous employment began taking into account any employment with a previous employer which counts towards that period,
the rate of pay or the method of calculating gross pay in a specified period,
the length of the interval between pay periods,
the normal hours of work and terms and conditions applying to those working hours, and if enhanced payments are made for overtime or shift working details of those enhancements,
the terms relating to an entitlement to holiday pay and pay for public holidays together with details of how the monetary value will be calculated or accrued,
the terms and conditions relating to any pay during periods of sickness or injury, or a note as to where these details may be found,
the terms and conditions relating to membership of any pension scheme administered by the company or made available to employees, or a note as to where these details may be found,
the length of notice the employee must give to the employer or the employer must give to the employee to terminate the employment,
the title of the job or a brief description of the work the employee is to do,
whether or not the employment is permanent and if not the expected duration of the contract of employment or, for a fixed term contract, the termination date,
the place of work or, if the employee has no fixed place of work, an indication of this fact and the address of the employer,
any collective agreements directly affecting the terms and conditions of employment, or a note as to where these details may be found,
for employees required to work outside UK for periods greater than one month details of the terms of their employment whilst abroad and on their return to UK,
details about the disciplinary rules applicable to the employee and the grievance procedure or a reference to where these details may be found,
a statement as to whether the employer holds a contracting out certificate in relation to any pension scheme operated by the employer.

Mandatory provisions for UK based employees

Notice of termination of employment
An employer is required to give at least the following periods of notice to an employee:

Period of Continuous Employment	Statutory Minimum Notice Period
1 month < Employment < 2 years	One week
2 years < Employment < 12 years	One week for each year of continuous employment
12 years < Employment	12 weeks

If the employee has been continuously employed for more than one month, he/she is required to give the employer one week's notice to terminate the employment contract. If the employment contract does not specify the lengths of notice periods, a court will consider the duties performed by the employee and decide what a reasonable notice period should be. For a director of a medium-sized company this notice period would be six to twelve months.
Unfair dismissal
All employees with one or more year's continuous service have the right not to be unfairly dismissed. Unfair dismissal includes dismissal without good reason, constructive dismissal or dismissal followinging an unfair procedure. An employee who believes his/her dismissal was unfair may bring a claim before an employment tribunal. Employment tribunals can make the employer unfairly dismissing the employee pay a basic award equivalent to the statutory redundancy pay the employee would have received had he been made redundant and a compensatory award up to £51,700.
Statutory redundancy pay
Under the Employment Rights Act 1996 an employee with more than two years' continuous service is entitled to redundancy pay if the employment is terminated because either the employer ceases business in the place where the employee is employed or the needs of the business for work of the kind performed by the employee have diminished. Statutory redundancy pay is based on the age, average weekly earnings and length of continuous service of the employee. Average weekly earnings is capped at £240 and the length of service is capped at 20 years in calculating redundancy pay. For service performed whilst the employee was aged between 21 and 41, the employee is entitled to one week's pay and for service performed between the ages of 22 and 64, the employee is entitled to one and a half week's pay. The maximum statutory redundancy pay is £7,200.
Working Time Regulations 1998
The Working Time Regulations apply to all workers and specify maximum weekly worked hours, rest periods during the working day and minimum rest periods between working days and conditions for night shift workers. The entitlements may be excluded or modified by individually written agreements, collective agreements or workforce agreements.
Holiday pay
Under the Working Time Regulations employees with more than thirteen weeks' service are entitled to four weeks' paid leave per year. Under the regulations holiday pay entitlements can not be carried forward into the next year and holidays may not be replaced by payments in lieu.
National Minimum Wage
All workers are entitled to be paid not less than the national minimum wage which will be increased in October 2001 to £4.10 per hour for workers aged over 22 years not under training. Other minimum rates are set out for 18-22 year olds and for new starters under accredited training.
Statutory Sick Pay
Employers must pay Statutory Sick Pay, (SSP), to employees unable to work during sickness or injury for four days or more. Provided the employee's average gross earnings exceed, (August 2001), £72 per week and eligibility provisions are satisfied the rate of SSP is £62.20 per week. All employers are entitled to offset SSP payments against their National Insurance contributions under the Percentage Threshhold rules. The Percentage Threshhold rules mean that very small employers receive relief for most if not all the SSP they have to pay.
Transfer of Undertakings
Broadly, employees are transferred when an undertaking is transferred and their terms and conditions of employment are the same immediately after the transfer to the new employer as they were with their old employer. The Transfer of Undertakings (Protection of Employment) Regulations 1981 implement the European Acquired Rights Directive in UK. The regulations are complex and much case law has evolved.
Equal Opportunities
Employers must not discriminate against employees because of their race, sex, marital status or disabilities. The employer's duties are set out in the Equal Pay Act 1970, Sex Discrimination Act 1975, Race Relations Act 1976, Disability Discrimination Act 1995, Part-Time (Prevention of Less Favourable Treatment) Regulations 2000 and European Fixed-Term Workers Directive. Further measures to prevent age, sexual orientation and religious discrimination are due to appear in the coming years.
Maternity rights
Under the Employment Rights Act 1996, the Employment Relations Act 1999 and the Maternity and Parental Leave Regulations, female employees are entitled, (with no minimum service periods), to:
- paid time off to receive ante-natal care,
- protection from dismissal by reason of pregnancy or childbirth,
- ordinary maternity leave of up to 18 weeks,
- compulsory maternity leave whereby a woman is not allowed to return to work within two weeks of giving birth,
- the right to return to work after ordinary maternity leave.
If the employee has 26 weeks' continuous service with an employer fifteen weeks before the expected week of childbirth, she is entitled to Statutory Maternity Pay, (SMP). Subject to her average earnings exceeding £72 per week, SMP is payable for eighteen weeks. The first six weeks of SMP is payable at 90% of the employee's normal weekly earnings over the eight week period prior to the fourteenth week before confinement and at £62.20, (August 2001) per week for the remaining twelve weeks.
If the employee has at least one year's service by the eleventh week before her expected confinement, she is entitled to additional maternity leave which starts at the end of her ordinary maternity leave and lasts for 29 weeks commencing with the week of childbirth. If an employee is on additional maternity leave she has a right to return to work. But she will lose this right if she does not reply within three weeks of her employer writing to her to ask her to confirm the date of the child's birth and whether she wants to return to work.
Parental leave
Parents, including parents of adopted children, with one year's service or more are entitled not to be unreasonably refused up to thirteen weeks' unpaid parental leave to care for a child within five years of the child's birth or adoption provided the child was born or adopted after 15 December 1999. Various conditions apply to the taking of parental leave. Parents taking parental leave are protected from receiving detrimental treatment or dismissal because of the parental leave.
Domestic emergencies
Employees are entitled to take a reasonable amount of unpaid time off work for the purpose of looking after or making arrangements for a sick or injured dependant or to cope with the death of a dependant etc.

Employees also receive protection, in appropriate circumstances from the Public Interest Disclosure Act 1998, (the Whistleblower's Act), the Employment Relations Act 1999 in relation to trade union membership, and the European Works Council Directive.

Articles from previous newsletters