Employers | What are your employment contracts missing?

When an employee resigns or is dismissed, having the right clauses in your employment contracts can ensure as an employer you are protected and have the flexibility you need to manage your workforce. But which clauses are important to consider reviewing or adding to your employment contracts?

Employer notice period clause

Notice periods should be clearly outlined within an employment contract, and it is important to note that the notice period for resigning or terminating do not have to be the same. The legal minimum notice periods are:

• less than one month’s service – no notice.
• after that, one week’s notice for each complete year of service up to a maximum of 12 weeks’ notice.

Payment in lieu of notice (PILON) clause

A PILON clause means paying an employee for the period of notice they would have been required to work if you would like them to leave immediately rather than working their notice. Although employers can pay employees in lieu of notice without a PILON clause in the contract, it is always preferably, for clarity, to have one that expressly permits it.

Lay-off clause

A lay-off clause is often used in industries such as manufacturing and covers unexpected downturns in work. If there is a temporary shortage of work, such as experienced by many companies during the pandemic, a lay-off clause allows an employer to send employees home unpaid (lay them off) temporarily. However, the employee may be entitled to a small statutory payment of up to £30 per day for five days. It is not possible to lay employees off without an employment contract that permits this.

Deductions from salary clause

Should an employer wish to recoup monies from an employee such as to cover the cost of damaged company property or an overpayment in holiday pay, this clause allows an employer to make deductions directly from the employee’s salary. However, this is only possible where a contract permits it.

Post-termination restrictions (restrictive covenants)

If employees leaving your business have the potential to poach clients, contacts or staff members, having a clause that prevents this is valuable. Most restrictive covenants fall into the following categories:

• Non-competition – prevents the employee from working for a competitor for a set period, usually between 3-12 months.
• Non-solicitation/non-dealing - aim to stop the employee having contact with clients/customers/contacts, usually for a set period.
• Non-poaching of key employees – this clause prevents employees from engaging employees with their new business.

To be effective, non-poaching restrictive covenants need to protect the legitimate interests of the protected company, and go no further, as they cannot be used as “an unreasonable restraint of trade” and usually last for a period of no more than six months after the end of employment.

Garden leave clause

A garden leave clause allows the employer to ask that the employee does not to come into work, work at home or another location or have contact with customers, suppliers, and colleagues during their notice period. This clause is useful in situations where an employee may be leaving to working for a competitor or for senior employees who have greater access to restricted or confidential information.

Mobility clause

A mobility clause allows an employer to move employees to another location within reason. For example, when relocating a business, an employer could rely on the mobility clause to require the employee to relocate to the new premises. If the employee refuses, they could be dismissed, provided the request to relocate was reasonable and in this case the employer would avoid a redundancy pay out.

We always recommend seeking advice from an employment law specialist to draft or review the contents of employment law contracts, to ensure they are worded correctly.