How to Read an Employment Contract Before You Sign

You may view contacts as lengthy pages of elusive legalese that bore you to tears. You're not alone! Believe it or not, less than half of prospective employees don't peruse the fine print on their employment contract before accepting a job offer. Mind-blowing, right?

The majority of them pass it off as boilerplate or a formality and if the company was embroiled in a contract scandal, then past or current staff would have made a huge fuss over it. However, contracts of employment may vary, even within the same corporation depending on job position and seniority.

Your contract is not the heap of buzzwords you think it is; it's, what I call, “a cumulation of gems” and additional perks beyond wage (retirement, holiday allowance, sick pay, benefits, bonus scheme, etc), which become known to you only if you thoroughly read the contract. That said, you better review and fully understand all the terms and conditions. If there are any discrepancies with any clauses (or you think they're open to negotiation), then you should voice your concerns to the hiring manager before you put pen to paper and sign on the dotted lines.

If contracts are still gibberish to you, rely on me! I've broken them down into digestible increments to make your life easier.

Understanding the gamut of existing contracts

Before anything, you need to ensure that you know the type of contract you're about to sign. (Sounds simple, but it can get tricky at times). Below are the 6 most common types:

1. Fixed-term contract

Fixed-term contract staff are entitled to the same rights as full-time permanent employees. In fixed-term contractual arrangements, both parties (employer and employee) cooperate for a definitive, agreed-upon period. The payment or the payout is decided beforehand and should remain as such until the term expires.

This kind of employment may also terminate at the completion of a particular task. Note that an individual who works for an agency instead of the organisation itself cannot be considered as an employee. Also, if they have had a fixed-term contract for two years and above, they can claim redundancy payments as full-time permanent workers.

2. Full-time and part-time contracts

A permanent contract of job for an indefinite duration of time entails your long-term commitment. Employers must provide a written statement of employment listing the terms of work, including your rights, responsibilities, bonuses, and at least a statutory minimum of paid holiday.

Both parties have the right to end the contract by an employer or employee giving notice or by an employee being dismissed.

3. Agency staff / temporary employment contract

Employers can recruit temporary staff from an agency to fulfil an urgent need or a fleeting, mainly seasonal, surge in demand for a product or service (e.g. Christmas). To avert potential disputes, employers have to inform the agency about the business guidelines in advance. Temporary agency workers become eligible for the same rights and conditions as permanent employees after 12 weeks.

4. Zero-hour Contract

A zero hours employment contract is designed for work that takes place sporadically, i.e., employees are ‘on-call’ to come in when they're available, while an employer doesn't have a predetermined amount of hours to offer. Also, zero hours workers are entitled to statutory annual leave, but they aren't registered on the payroll of the business.

5. Self-employment contract

A self-employed employee isn't tied to the company they provide services to. In fact, they work for themselves, define their own professional activities and are liable for the success or failure of their business. Most of the times, they get to use their own tools and assets, and they're free to undertake work whenever.

6. An internship employment contract

An intern could be three things: a volunteer, a worker, or an employee. If interns carry out regular work, they could be deemed as employees and be granted employment rights. If they’re seen as a worker, they'll be entitled to the National Minimum Wage. It's worth noting that voluntary workers don't get paid. Similarly, students required to do an internship as an extension of their higher education degree don't have a minimum wage right.

Job title and duties

Ensure that the role you're offered matches the description on the initial job posting — both nominally and narratively. Not all contracts feature a description about the inner workings of the job... But if yours does, get suspicious if it's either too vague or too general. Very broad job specifications (what an oxymoron!) can give your boss the leeway to delegate workload to you that you haven't discussed or anticipated, or to alter the original goalposts for career growth and recognition.

For example, you might interview for a managerial role only to find out that the job title has been demoted to a supervisor when signing the contract. While you might not want to quibble over what seems like a slight tweak in wording, the change can impact your employment status and other aspects like compensation and in-work benefits.

Terms

If there's a term on the contract, it's imperative to be aware of the specifics of that term, including the grounds for termination upon the contract's expiration. What's more, be sure you understand the mechanisms available for extending the contract.

Restrictive covenants

I ring the alarm here! DO NOT brush off these jargon-y bits of post-employment restraint, as they'll probably trip you up further down the road. In an attempt to protect themselves and their investments, businesses enforce restrictive covenants, such as non-compete, non-solicitation, and confidentiality, or nondisclosure. Each of them aim to restrict an employee after or during their employment. So, be cautious!

Non-compete

Noncompete clauses may limit your ability to work for a competitor of your former employer or launch your business for a set period of time after your employment term terminates. You may not want to seek recruitment at a workplace where you wouldn't be able to work for a large chunk of time after leaving the job if your previous company does not provide compensation during that period.

Non-solicitation

Non-solicitation clauses prevent you from poaching clients and suppliers of your former employer. Adherence to the rules will wind up the relationship with your (former) employer in a predictable and orderly fashion.

Confidentiality / nondisclosure

With a confidentiality clause, employees are forbidden from sharing the company’s trade secrets, private database, and intellectual property to unauthorised third-parties.

Employees are expected to carefully read the above restrictive clauses and comply with the regulations when pivoting careers and changing employers. Failure to do so may result in them being issued with a lawsuit. If you have any concerns, get in touch with Citizens Advice.

Salary and benefits pack

Triple check with the recruiter or human resource agent that the salary figure stated on your contract is the one you've settled for. It should also be clearly spelled out how and when you will be paid, i.e., biweekly or monthly. Likewise, your agreement should contain all the details regarding the concession and coverage of other remuneration, such as:

• Workplace Pension

• Vehicle provision

• Private health care

• Emergency, holiday and sick leave and pay

• Parking space

• Flexible working

• Equity awards

• Travel expense reimbursements

• Bonuses and commission structures

• Statutory Maternity, Paternity and Adoption Leave and Pay

• Statutory Redundancy Pay

• Legal protection against unfair dismissal. That should involve the employer's disciplinary procedures, grievance and appeal rules, as well as information about any agreements the company may share with Trade Unions proceedings, which will affect your employment.

The additional incentive of bonuses can be fixed or discretionary: if yours are linked to performance measures, learn what targets need to be attained in order to receive them. If some conditions appear as separate policies, feel free to request a copy of these documents prior to signing a legally binding agreement. Do not buy into an answer that goes “We'll figure it all out down the line.”

Paid leave is a statutory requirement and subject to local law, meaning that there are regional policies established about it. When you reach the section of holidays, get to know:

• How many weeks worth of holiday you're allowed.

• How you can accrue paid time off.

• If you can roll unused holidays over to the next year.

• When the holiday season commences and ends, including the compulsory holiday dates on occasions like Bank Holidays, festivals, Christmas or Easter Day, etc).

Working hours (+overtime) and location of work

Strapping yourself up to working hours that clash with your personal life will make you hate your new job in the long run. So, make sure you get a firm grasp of the hours and days you’re expected to work, and whether you’re required to do night and/or weekend shifts.

Seek clarity on the overtime clause too (ideally in written format), and watch out for the evasive 'will be expected to work the necessary hours to complete the tasks assigned' policy. In most cases, this implies that your boss will expect early starts and late finishes without monetary compensation!

Then, make sure the office location/s and means of commute correspond to your circumstances. Your right to redundancy pay could be taken from you if you refuse to relocate, having already agreed in your contract to do so. Finally, look at the start date (and end date, if applicable) to confirm they're correct, which should also involve the terms of your notice period.

Final thoughts

A contract of employment helps automate the hiring process by outlining any preconditions for new employees. Remember that it's a two-way deal, as it stipulates the expectations for both parties and opens a window of opportunity for both. So, be careful before finalising it. If there is anything in the contract you're unsure of, you may want to check it with a solicitor. Jeffrey Scolaro, an attorney at Daley Mohan Groble PC and a Legal Services Link member contends that

Each [solicitor] will approach agreements differently and advise ways, but the important thing is following that advice and asking questions when you are confused by something [...] Failing to ask about something that does not appear clear can lead to misunderstandings and larger problems in the future.

Having a written agreement in place fosters liaison going forward, as the terms or conditions cannot be revoked or changed thereafter — once your pen's ink stains the paper. So, before you sign and pop the champagne, make sure you're in line with the ins-and-outs of what you’re signing. Take your precautions and scrutinise the damn sheet!

What would you add on the list? Leave a comment!

---