Updated 2017.

An area of huge concern and confusion is what paperwork you need to give your staff (we’re using the term ‘staff’ loosely here to include all those mentioned below) to ensure your working relationship is clear and unambiguous.

We hear on a daily basis how employer-staff relationships have broken down because it had not been described clearly on paper – if it had been it would have saved both parties wasted time and headaches later on.

The types of documents you need to provide, whether a legal requirement or through your own prudence, will depend on what type of staff you hire, whether they are:

  • Permanent or fixed term contract employees (full or part-time)
  • Directly hired casual PAYE workers (on a casual or zero hours contract)
  • Casual workers or contractors employed via an agency (you are the ‘hiring’ employer)
  • Freelancers or contractors / consultants (whether sole-traders or limited companies – you are their ‘client’)

Employment status

Working out somebody’s employment status can be very complicated. If there is a dispute where you, the employer, believe you are employing someone as a self-employed person / contractor and the reality, decided by a Court, is that they are actually an employee, there may be tax liabilities for you and financial penalties, as well as the staff gaining the employment rights of permanent employees (see our Guide to employment rights).

The Court will essentially not just look at what is written on paper about the relationship between you and the staff (i.e. any contract that exists) but will look at the actual reality of the working relationship. Therefore you must make sure you have the correct paperwork to suit the actual circumstances.

If you are unsure of the best way to hire staff, or how to determine their employment status and what rights they have, and / or help with all types of staff documentation then please talk to The HR Kiosk, a Human Resources Consultancy for small businesses, run by the author of this article, Lesley Furber.

You can read more about employment status here.

In terms of the staff documents that you should provide – while it is not essential to provide a written contract (except for PAYE employees) as a verbal contract still stands as a legally binding contract, it is advised to have the main terms of the contract written down so everyone knows where they stand.  A contract is created when an employer agrees to pay a member of staff in return for them doing the work – for more information about see our piece on contract terms (express and implied).

For details of what documents you need to obtain from staff to prove they have the legal right to work in the UK see our Guide here.

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What documentation should you have in place?

For PAYE employees (on permanent or fixed term contracts) or directly employed PAYE ‘casual’ staff:

  • Give them an ‘Offer Letter’, before they start, setting out the basic terms of their engagement which also confirms that the offer of employment is conditional upon you receiving evidence of their legal right to work in the UK and confirming where the offer is subject to other conditions, for example you receiving satisfactory references for the employee, ensuring they have a valid driving licence and so on.
  • Employers should store recruitment records for 1 years for all types of staff, successful at the job interview or not!
  • All employees (not casual staff) must legally have a Written Statement of their terms and conditions of employment within 2 months of their start date (which must be kept for all the time they are employed and for a period after they leave). The earlier you give employees their written statement, the better, so there is no misunderstanding. There are minimum requirements of the types of details that a Statement must contain and it is usual to include these in a comprehensive written contract of employment.  See our Guide to Contracts of Employment. Contracts / statements are legally binding and therefore become terms the employee must follow and you must provide.
  • The Contract often refers to a company / employee handbook for further information, and these are a crucial tool for combining all the policies you need to have by law and include the details of key terms and conditions where there are minimum requirements set out in law. Although sounding tedious, policies are a good way to ensure your employees know the rules and procedures they need to follow and allow you to comply with legislation and deal consistently with issues in your business – this should help to avoid future time-consuming problems – and they do not have to be long or tedious or written in legalise!
  • Handbooks often contain a mixture of ‘contractual’ (binding) policies and those that are not contractual (not binding) – this can be a complicated area so you may want to take advice about what policies should be contractual and what should not.

Policies you should include in a Handbook

There are policies you should provide that are required by law for employees. They are:

  • Disciplinary and Dismissal Policy (you must legally outline to staff in their written statement your discipline and dismissal policy or where they can find it  – you must operate this policy fairly; allow staff to be accompanied at any meetings; not unfairly dismiss employees; and keep records of disciplinary action)
  • Grievance Policy
  • Health and Safety Policy (needed by law if you employ over 5 people) and you should keep records of accidents, injuries and dangerous occurences.

The policies you should provide because they have legal minimum requirements are:

There are other policies that are also recommended to ensure consistency for example personal e-mail / internet usage, alcohol/drugs in the workplace, dress and grooming codes, details of company benefits, data protection, workplace surveillance and intellectual property (if appropriate), travel expenses etc.

Many of the policies you may want to apply to casual staff and freelancers too, so you need to consider what they need to know and understand while working for you.

For comprehensive information about all of these obligations please talk to The HR Kiosk.

For casual workers or contractors employed via an agency

Before 1st October 2011 you could hire these staff, via an agreement with their Agency and agree the appropriate rate and terms and conditions for their job.  Since 1st October 2011, however, the Agency Workers Regulations have been introduced which require that agency workers are eligible to equal treatment with the permanent employees they work alongside in respect of basic and overtime pay, holiday entitlement/pay, rest breaks and working hours, paid time off for ante-natal treatment – after 12 weeks of them working in the same job at the same employers.

This therefore means that for any agency temps / contractors you hire you need to have a full discussion with the supplying agency about their applicable terms and conditions and the impact of the AWR on you. If you hire a lot of agency temps this means you will need to keep closer track of how long they work for you, what they do and be aware of their ‘comparable’ permanent employees terms and conditions.

For freelancers and contractors (sole traders or limited companies)

At The HR Kiosk we would say that contracts are an essential document for you the employer and for the freelancer / contractor you hire and it is crucial it details the exact and true relationship between both parties.  It is vital the ‘status’ of the freelancer is correct to avoid any future tax investigations – we’re not going into the details of IR35 here but you can read more information in our Guide to IR35  here – and to ensure that the Freelancer is not in scope of the Agency Workers Regulations; also that you as an Employer are not caught by the False Self-Employment legislation.

Freelancers, unlike employees and most workers have relatively few true ‘employment rights’, but they are covered by Health and Safety laws and will be covered by discrimination laws if they provide their services to you personally. They may also be covered by the rest break and holiday provisions of the Working Time Regulations in certain circumstances. Freelancers also may be eligible for Statutory Maternity Allowance in certain circumstances.

Other than these details the contract between you should determine the wants, needs and expectations of both parties, and it should act as a legal framework and provide a formal definition of the business relationship between the freelancer and you. They help to avoid any future confusion or conflict.

Finally, please make sure your freelancers/contractors see and AGREE the contract before they start work, so there are no arguments about their terms and conditions and contractual provisions later on.

Also see our guide to what you should include in your contracts.

If you are an Employer and need ongoing professional help with any staff/freelance issues then talk to Lesley at The HR Kiosk  – a Human Resources Consultancy for small businesses – our fees are low to reflect the pressures on small businesses and you can hire us for as much time as you need.

Please note that the advice given on this website and by our Advisors is guidance only and cannot be taken as an authoritative or current interpretation of the law. It can also not be seen as specific advice for individual cases. Please also note that there are differences in legislation in Northern Ireland.