Staff employment contracts — are they really necessary?

A contract of employment sets out the obligations of both the employer and the employee. These obligations can be set out in a formal contract of employment, in some other form, such as in an email or a letter, or even verbally.

However, certain information must be clearly expressed to the employee by the employer in writing.

When are contracts needed?

Employers often believe that if nothing has been written down then they have no contract of employment with their employees. This is incorrect.

Contracts can be made verbally so employers need to be careful about making statements to employees. For example, it has been held that, in certain circumstances, a comment to an employee that he or she will receive a pay rise at the next pay review could amount to a term of the contract of employment.

For a contract to be formed there need only be an offer of employment and acceptance of that offer, an intention to create a legal relationship and sufficiently clear terms. All employers should have a written contract of employment so that they can be certain about the terms on which their employees operate.

Most pharmacy employees will have a contract of employment. However, locum pharmacists are often brought in on a self-employed basis. There should still be some form of written contract in these circumstances.

Consultancy contracts

Consultancy contracts or contracts to provide services to the business at a particular rate are usually used when an employer does not wish a person to become an employee. However, it is quite common for such contracts actually to be contracts of employment, and for an employer to find that they owe employment rights to the consultant. Care must be taken when drafting such a contract for services.

Terms of the contract

Terms of the contract may be either express or implied. Express terms are terms which the employer and the employee specifically agree. These are usually the terms that are found to be written in an offer letter, contract of employment, or subsequent emails or letters (eg, confirming a pay rise).

Express terms will usually include salary or remuneration, hours of work, annual leave provision, pension arrangements, any restrictive covenants and any terms that are especially important to the employer or employee, such as the requirement for an employee to maintain a professional qualification.

With implied terms, the general rule is that a term will be implied in a contract if it is so obvious that both parties would regard it as a term even though it has not been expressly stated. Commonly implied terms are the employee’s duties of fidelity, obedience, working with due diligence and care and not using or disclosing confidential information.

Employer’s implied duties are not to destroy the relationship of trust between the employer and employee and to take care of the employee’s health and safety. There is also the implied duty upon both parties to give a reasonable period of notice of termination when no specific notice has been agreed.

Policies contained in staff manuals do not necessarily form part of any contract.

It is important for pharmacy employers to ensure that every employee receives a written statement of the necessary particulars, and that their employment contracts reflect the needs of the pharmacy.

It is also important that employees make sure that they are aware of their rights under their contracts. Pharmacy employers should ensure that contracts are professionally drawn up and comply with the relevant legislation and that the employers are adequately protected.

It is also sensible to review existing contracts periodically since employment laws within the UK are changing rapidly.