Business owners not having clear contract terms of agreement with their staff can lead to significant problems for employers at a later date, specialist SME lawyer warns.
It’s a particularly pertinent question for smaller businesses, as the rate of change in job roles can be much greater as the business grows and evolves.
According to lawyer Mark Gardiner of Teddington Legal, it is wise from a legal perspective to update employment contracts, but there is no need to be tweaking this on a weekly or monthly basis.
“I think you should avoid rewriting contracts and going back to them again and again. But having them updated from time to time, having a job description updated and stuck in the employee’s personnel file, is not a bad idea,” he says on the My Business Podcast.
“[But] you don’t want to go back to the job description [and] have a discussion with the employee that says, ‘Well item three says you should be doing X, in fact you’re doing Y’. You don’t want to get down to that level of argument about job descriptions and you don’t want the employee every [week] coming to you and saying ‘Well, that’s not my job’.
“Ideally, you’ll have this wonderful, collaborative teamwork approach in any employment role, but it’s important to have a record so people understand what broadly we’re talking about.”
How often should you update contracts?
Mark suggests that there is no ideal frequency with which to update a contract, as it largely depends on the role and the level and frequency of change within that job function.
“If there was a substantial change, if someone had a significant promotion for example, and they’re doing a very different job than what they’re employed to do, then you might revisit the employment agreement altogether. If there’s just some subtle changes, you might not. It’s a matter of degree,” he explains.
How you update a contract is also open-ended. Mark says that business owners have the option of issuing an entirely new employment contract, or alternatively issuing a dated addendum that focuses on the job description – the latter being the simplest.
Why is it even important to keep employment contracts updated?
As Mark explains, not having clear terms of agreement between yourself as an employer and your employees can lead to sizeable headaches down the line.
“We had an instance recently where we had a client who was selling his business and wasn’t able to easily quantify the leave liability of his employees. It caused some significant delays in settling the sales transaction. So it’s important to have good records,” he says.
“And things like what is someone’s job description, how much are they getting paid, what leave have they taken, how much sick leave have they taken – should be in a nice file somewhere. There’s really good online HR software packages which can bolt onto people’s accounting systems or can a standalone PR program. But they can help with that kind of record keeping.”
Hear more insights on the legal vagaries around employment contracts, unfair dismissal, 457 visas and more on the My Business Podcast below:
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