ESM0506 | Guide to employment status: contracts

A contract is an agreement between two or more parties which is intended to be legally binding.

It can be written, oral, implied or a combination of these. Always ask for a copy of a written contract and, if appropriate, any other documentation which sets out the terms and conditions of the engagement.

The main elements of a valid contract of service or for services are:

• the intention to enter into legal relations

• an offer of work and its acceptance i.e. an agreement

• consideration e.g. in return for performing work the worker receives payment

The contract is an important factor in considering status and is of crucial value to a worker because it determines the worker’s rights and obligations. It can cover such matters as

• statutory rights such as redundancy pay, sick pay and maternity pay

• the obligations placed on the worker

• the worker’s other rights

It is necessary to establish the full terms and conditions of the contract. This includes any practices or conventions which exist in certain trades and industries which, although not expressly agreed between the parties, still form part of the agreement. Once you have all the information, check that the terms of the contract have been kept by comparing what is supposed to have happened with the actual working arrangements.

It is important to recognise the difference between a framework document and an actual contract (of employment or for services). The former will usually set out the terms and conditions of engagements, which may be offered in the future. A contract will only be effected when work is offered and accepted. It is often the case that the framework document covers workers generally and, when considering separate engagements for an individual worker, you should examine that document in detail in order to determine which clauses apply and which do not.