In today’s fast-moving markets, businesses need maximum flexibility when it comes to selecting and managing the people working for them.

Whether you employ people directly or indirectly, you need to do so through clearly defined and legally sound contracts, if you want to protect your business interests.

Taking a risk with seemingly convenient, casual employment arrangements or poorly drafted contracts that aren’t suitable for your business, or don’t meet current employment law, can prove a costly, disruptive and time-consuming mistake.

“There’s a wide range of different ways to get the right people on board on the right terms,” explains Kathryn Morse, Human Resources Manager of branded product specialist Innovation 1st. “You can take on full-time and part-time permanent staff, workers supplied via agencies, self-employed freelance consultants and specialists, fixed-term and zero hours contracts.

Your options

“Bearing in mind you’ll need to identify, manage and potentially remove poor performers, I always recommend getting advice from lawyers or HR specialists when drawing up contracts to ensure they meet your specific requirements and are legally compliant. Develop a good relationship with a reputable firm. It’s always money well spent and smaller businesses can also get free advice and support from organisations like ACAS.”

She adds: “Obviously, contracts should include as many relevant details as possible about the job itself, benefits, remuneration, length of contract, key performance indicators and probation periods. You need to ensure your company policies are available in writing, current, and legally compliant.”

A smart contract usually includes necessary restrictive covenants to protect intellectual property or prevent people leaving and joining a competitor within a set period of time.

“While this is sensible, it must be reasonable and it must be designed to protect the business’s legitimate interests,” adds Kathryn. “For example, you cannot reasonably prevent someone working for a competitor for five years – six months however, is justifiable and enforceable.

“It’s also possible to include a ‘gardening leave’ clause, where practical, so that if someone with access to highly sensitive information wishes to leave the business and join a competitor, they’re required to stay at home ‘off work’ and are unable to access that information during their notice period.”

Service contracts

Martin Brown of business advisor Elephants Child also points out that providing smart ‘service contracts’ with freelancers, contractors or agencies, supplying people to work for you, are just as important as ‘employee’ contracts.

“These people are all part of the mix today, and they need to be thought about in a very similar way to PAYE employees to drive the right behaviours and performance. So appropriate service contracts also need to be drawn up to enable you to review, appraise and manage anyone working for your business, in any capacity.”

That’s a lesson that Fergus Harrington, entrepreneur and Chief Financial Officer of the Harrix Group of marketing and advertising businesses, says his company learned the hard way.

“A guy working for our StreetPR promotional company who’d spent two years doing promotional work, stepped up to join our head office under a new staff contract.

“Two months later he left attempting to take a major client with him. Even though he’d worked with us a long time and restrictive covenants were in place for staffers he was still in his trial period under the new contract, so they couldn’t be enforced.” He adds: “Ultimately we prevailed, but we had all our employee contracts rewritten by good lawyers, having learned that the terms of restrictive covenants need to be applied across all your business, not just part of it. As always, the devil is in the detail.”