I Wonder What Benefits I Need To State In A Contract Of Employment?

Many employers, often wonder which benefits need to be included in a contract of employment. In this article, we’ll explore which benefits employers are legally required to include in a contract of employment, which benefits are discretionary, and offer practical tips for employers when reviewing or implementing employee benefits.

What Is A Contract Of Employment?

It is important to distinguish between statement of terms and conditions, which is required under s 1 of the Employment Rights Act 1996 and the contract of employment:

• Section 1 Statement– The Employment Rights Act 1996 (ERA) requires that an employee be provided with a written statement of particulars by their start date. This includes specific terms and conditions of employment as listed in section 1 of the ERA, such as job title, hours of work, pay, and place of work.
   
• Contract of Employment –This is the legally binding agreement between the employer and employee, containing all the terms and conditions of the working relationship. Where a written contract of employment includes all the terms required under s 1 of the ERA, the contract may also serve as the section 1 statement. For the purposes of this article, we assume that the contract of employment is also serving as the section 1 statement.  

Statutory Benefits That Must Be Included

Section 1 of the ERA requires details of each of these benefits to be set out in the contract of employment:

• Statutory Holiday Entitlement – The statutory minimum is 5.6 weeks of paid holiday per year, equivalent to 28 days for a full-time worker (pro-rata for part-time workers).
• Statutory Sick Pay (SSP) – Eligible employees are entitled to receive Statutory Sick Pay.
• Pensions – Employers must ensure they comply with their auto-enrolment obligations.
• Other Paid Leave – This includes all forms of paid statutory family leave, such as maternity leave, paternity leave, adoption leave, shared parental leave, parental bereavement leave and neonatal care leave, among others to which the employee is entitled.

The contract of employment must accurately reflect these entitlements. If the employer will only offer the statutory minimum, this should be clear in the contract. If the employer offers enhanced benefits, such as additional holiday or company sick pay, this should be stated. The employer may also want to include conditions which an employee must satisfy to qualify for the enhanced benefits or refer employees to a separate policy.  

Discretionary Benefits to Consider Including

Details of any benefits that are not already included elsewhere in the contract must be included in the contract of employment. This means that discretionary benefits should also be referenced in the contract of employment.

Some examples of discretionary benefits include:

• Private medical insurance or life assurance;
• Company car;
• Cycle to work scheme;
• Staff discounts.

If an employer wants to offer discretionary benefits, they must make it clear in the contract that this is the case and that the particular benefit can be amended, withdrawn, or replaced by the employer at any time.

If the employer will not offer any additional benefits, this must also be stated in the contact.

Best Practice Tips for Employers

Employers should carefully review their contracts of employment to ensure they accurately reflect both legal requirements and the practical realities of their workplace practices.

To ensure best practice, employers should consider the following tips:

• Have template contracts reviewed by a legal professional – A legal professional can identify any missing elements and suggest amendments to improve clarity and compliance.
• Ensure consistency across contracts and policies – Terms relating to benefits should be consistent across all contracts of employment and supporting policies, so that employee rights are clearly and accurately reflected.
• Pay close attention to contract wording – Discretionary benefits should be clearly labelled as such, with wording that reserves the employer’s right to amend, withdraw or replace these benefits at any time.

Further Advice

If you have any queries about how to approach employee requests to work remotely from abroad, or if you would like assistance in updating your policies, our Peace of Mind Team is here to provide expert guidance. Our Document Audit Team can also assist in drafting relevant workplace policies.

Contact our Employment Team by emailing employment@warnergoodman.co.uk or calling 02380 717 717.

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