The Custodian Insurance Industry Blog

April 11, 2019

Employment: Heads of agreement – what are they and are they needed?

A common misconception is that the only document an employee is entitled to when taking up employment is an employment contract. In fact most employees are also entitled to a written statement of terms (sometimes known as ‘heads of terms’) no later than two months after they start work.

What is a written statement?

A written statement is not a contract of employment as such but is evidence of one. It is a legally binding agreement between an employer and employee that sets out the main terms of the employment contract.

Although it is not conclusive of the entire employment contract it sets out the basis of the most important terms.

When do you need to give one?

Ideally you should give your employee a written statement on their first day. However, legally you have two months in which to do so. You can issue the written statement in instalments if you wish.

What should be included in a written statement?

Pretty much all the key terms of the employment that one is expected to know when they start work!

This includes:

  • Name of the employer and employee.
  • The date the employment and continuous employment began.
  • Pay and whether it is weekly, monthly etc.
  • Place of work.
  • Hours of work.
  • Holiday pay, sick pay and pension schemes.
  • Notice period required to end the contract.
  • Job title/job description.
  • Details of any collective agreement that directly affect the employee’s conditions of employment.
  • Details of the disciplinary and dismissal rules and grievance procedures (this can be set out in the body of the written statement itself or reference can be made to another easily accessible document).
  • Whether a contracting out certificate is in force.

(For more detail on what should be included for non permanent workers and workers and employees who work outside the UK see s1 Employment Rights Act 1996)

     What happens if they are not given?

Where a written statement has not been given, unless as an employer you can demonstrate that there are exceptional circumstances, your employee could be entitled to an award of between two and four weeks’ pay.

The starting position is two weeks pay. However, if it can be shown that it is just and equitable your employee could be awarded 4 weeks pay; for example, if you made no attempt whatsoever to provide your employee with a written statement.

This will only apply if your employee has successfully brought another substantive claim. They cannot bring a claim for failure to receive a statement  alone.

What is another substantive claim? This may include:

  • Wrongful dismissal
  • Equal pay
  • Discrimination claims
  • Redundancy

These claims can be insured against by employment dispute insurance.

Although you may not think providing a written statement is necessary, as it is unlikely another claim will arise, it is always best to provide one. The risk of having to pay an additional 4 weeks pay is not worth taking.

If you have not provided your employee with a written statement then its worth getting this done as soon as possible!

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