An employment contract is a binding agreement between an employer and an employee which sets out each party’s rights and obligations.

To a degree – but there are certain mandatory statutory provisions that will override the terms of the contract. For example, an employer is obliged to give a minimum period of notice depending on the length of the employee’s service. A contractual clause that is shorter will be invalid – the employee will be entitled to insist upon the statutory notice period.

A contract of service is an employment contract. Among other things, the employee will not usually be permitted to provide services to another employer at the same time. The employee is also required to provide the services personally.

An employee will be able to avail of all of the mandatory statutory provisions in law (by way of example, once an employee has 52 weeks of continuous service, their dismissal is automatically deemed unfair by law).

A contract for services, on the other hand, does not create an employment relationship. The service provider does not necessarily have to provide the services personally and may provide similar services to other parties at the same time.

Importantly, a genuine independent contractor cannot benefit from any of the statutory protections in law. An independent contractor, for example, has no entitlement to notice (unless notice is provided for independently in the contract in place with the client). An independent contractor cannot argue that they have been unfairly dismissed, unlike an employee.

Is there an obligation to provide an employee with a written contract of employment?

Technically, no – there is no legal requirement to enter into a written contract.

Even if there is no written document, a contract still exists – the difference is that the terms are not recorded in writing.

There is an obligation, however, on all employers to provide certain information in writing. Core terms of employment (including the rate of pay and working hours) must be provided in writing within 5 days of starting employment.

If I am not legally obliged to provide a written contract, should I do so?

A prudent employer will put a written contract in place. This is for three main reasons:-

1.  It precludes ambiguity – it will be near-impossible for an employee to dispute any of the terms/conditions governing the relationship if they are set out clearly in writing;
2. It should automatically comply with the employer’s obligation to provide information in writing (see previous question); and
3.  It allows the employer to build in certain protections for themselves. These are referred to later in this note.

When should I provide an employee with a contract of employment?

Ideally the contract should be signed before the employee begins work. An offer of employment can be made “subject to contract”. If the employee objects to certain provisions of the draft contract and the employer isn’t willing to concede, the relationship goes no further.

How long will the contract last?

Employment contracts are often referred to as “Contracts of Indefinite Duration” and the description is accurate. Generally speaking, a contract of employment will continue in existence until either party terminates it.

Irish employment law recognises the concept of both fixed-term and fixed-purpose contracts.

• A fixed-term contract lasts for a defined period and the relationship comes to an end at the end of that period;
• A fixed-purpose contract lasts until the purpose has been achieved and, again, the relationship then comes to an end.

It’s important to note that there are quite tight restrictions on the use of fixed-term and fixed-purpose contracts. Generally speaking, an employer will only be able to make use of repeated contracts of this nature for an aggregate period of four years – after that, the law automatically converts the relationship to have the status of indefinite duration (in other words, the employee no longer has fixed-term/fixed-purpose status).

What are the main clauses within a contact?

A well–drafted employment contract will deal with the following, among other things:-

Probation

The contract should provide for a defined probationary period and allow for an extension. Ideally it will allow for shorter notice during probation and it should also stipulate that the dismissal can be for any reason or no reason and the company's disciplinary procedure will not apply.

Remuneration

It's important to specify the exact remuneration that the employee is entitled to and when it will be paid.

Bonus

If an employer intends to pay a bonus, they should be careful to draft the bonus clause to permit only an entitlement to participate in a bonus scheme (and should also make clear that any bonus scheme can be altered or removed entirely on reasonable notice).The bonus scheme itself can be set out in detail in a stand-alone discretionary policy.

Annual leave

The contract should state the annual leave that the employee is entitled to and, where necessary, stipulate that the employee must take annual leave at certain times of the year (over Christmas, for example).

Deductions from remuneration

The contract should make it clear that the employer is entitled to deduct from remuneration any sums due to the company – and that by signing the contract of employment, the employee consents to this.

Intellectual property

A clause that protects intellectual property created in the course of employment should always be included in a contract of employment.

Confidentiality

Employers should consider what constitutes their "confidential information" and tailor the definition accordingly. The clause should make clear that the obligation to observe confidentiality applies both during and after employment.

Exclusive service

The contract should stipulate that an employee may not take up additional employment without the employer's consent.

Adherence to employer’s policies

It’s wise to insert a clause in the contract making it clear that the employee is obliged to abide by the provisions of any policies that the employer has in place from time to time. It's also wise to make the distinction between the contract and discretionary policies clear (the contract contains binding terms and conditions; the policies are discretionary and may be changed from time to time at the employer's discretion on reasonable notice).