Why Employment Contracts are important in Estate Agency and Lettings

Written by Martha Mitchell
24 February, 2021
Why employment contracts are important

When was the last time you read or updated your employees’ contracts?

Have you googled ‘Employee contract template’?  We know you have.

It’s especially important in Estate Agency and Lettings to get the contract right.  We’re sorry but a google template won’t cut it.

Let us tell you why.

The purpose of an employment contract is to ensure the relationship between an employer and employee is clearly understood as to what is expected during the term of employment. Employment contracts also serve to eliminate any disputes which may arise at a later date, as well as understanding what rights are covered under the law. Unfortunately, this cannot be replicated by getting the answer from the almighty Google and downloading the first template guide you come across.

Employment contracts are important and should be specific to your place of business and should be legally drafted to ensure no unsolicited breaches of the contractual terms. Whilst Google might be the answer to a lot of life’s problems, unfortunately employment contracts should not be one of them.

The importance of having each employee’s contract legally drafted is crucial.

In April 2020 the contents of an employee contract and handbook was expanded under the ‘Good Work Plan’ to help provide clarity of an employees rights and employers obligations. This can also  change annually every April meaning that you need to vary existing employee’s contracts…

As well as existing employees, it is important when recruiting to issue any new employees with the same or similar  contract and to not discriminate per employee.

Employment Law Solutions offer Employment Law advice and can assist with your contracts and handbooks. By offering a monthly retainer service you are able to benefit from legal advice and employment contract reviews 24/7, 365 days, all while spreading the cost over 12 monthly payments.

Our Top 5 Google danger warnings :

  • Terms of contract
  • Reliability upon the clauses
  • Restricted terms
  • Specific custom and practise
  • Wages, Bonus & Commission, deductions

Terms of a contract

It is important that an employment contract is made up of:

Express terms : such as the employee’s pay and working hours

This should also include the employee’s entitlement to use a Pool Car and protection for the Estate Agent to cover for any damages.  This should also set out the entitlement to a Company phone and any other benefits you offer your employees.

Statutory terms : terms that are part of employment law 

Statutory terms are inferred by the law and imply certain rights and minimum standards in favour of the employee, for instance paying the national minimum wage.  If the contract of employment doesn’t meet the minimum statutory terms, or is not issued on or before day 1 of employment, the employee can bring an employment tribunal claim for between 2 – 4 weeks pay.

Implied terms : terms too obvious to be written

Implied terms are used to deal with the employer and employee’s respective rights and duties.  The question arises over when an implied term should be added to a contract of employment.   For example, is it implied that the employee has a responsibility to hold confidentiality over documents and customer information?  Sadly – no, this should be a written express term in the contract.

Incorporated terms : terms put into the contract from other sources, such as a   staff handbook or an agreement affecting many employees

It’s unlikely in estate agency that there would be a collective agreement through a union but it’s important that the contract states this. However, some incorporated terms may be present  if having merged two or more  estate agencies. Inconsistency is likely to be an issue and you need to be careful  not to change terms illegally where there has been a TUPE transfer.

Reliability upon the clauses

As an employer you should feel confident that you can rely upon the clauses in every section of the contract. A contract of employment, when drafted properly can protect your business profits, goals and aims..

A clause drafted poorly may not be reliable.

For example, where an employee continuously arranges their appointments to allow them a later start, you may be able to deduct payment for any time not spent working prior to the first appointment.

If the clause is drafted wrongly and is a “penalty clause” rather than a “non-payment for time not worked” clause, it might be that the employer cannot rely on it.

The ability to rely on a clause also includes being able to take action against an employee who is not  working within the bounds of their contract. This could be a member of staff writing their own tenancy agreement, using your templates. If you do not have the reliability on your confidentiality provision written in the contract you will be unable to take action. Even if it’s forbidden in the contract  you will need to ensure it’s worded to protect your business properly.

Restricted terms

In an employee’s contract, employers might want to state that an employee cannot take certain actions during their employment or once it ends. These terms are known as ‘restrictive covenants’. It is important to be clear, specific and time restricted for them to be legal, however this area of law can be complex and is important to seek legal advice.

The basic premise is that you have to protect a legitimate business aim but you can’t stop a man from earning a living. This requires a tight balancing act of the two.

It is unlikely that you can stop a basic level employee from working for a competitor for more than 3 months but you can stop them taking your clients, confidential information and employees with you.

Or, in comparison, you can restrict a Senior Sales or Branch Manager from working for a competitor within a set mile radius who have multiple competitors with the same property base.

These restricted terms need to be specific per employee and cannot be copied from one to another.  They should not be deemed too restrictive to allow the employee to be faced with long term unemployment as this would be unenforceable and it must protect a legitimate business aim of yours.

Further, restricted covenants, unless signed on day 1 are only enforceable if some form of consideration is offered when signed.  A perfect opportunity to implement new restrictive covenants is also on confirmation of a promotion.

Specific custom and practise

It is important for employers to understand any specific custom and practices they implement over time per employee. This type of behaviour can become part of the contract if it’s generally well known in the business or industry, or per employee and it’s reasonable and it’s certain. It is important to have clarified terms rather than relying on acts of custom and practice  to prevent any misunderstandings in the workplace.  Here are a few basic specific custom and practise terms that you should watch out for and could be dangerous areas:

  • The employee may assume they will receive a Christmas bonus, however as they were only employed on 1 November a term can be written that to qualify for the bonus you must be employed for 12 months.
  • The employer pays full pay when sick but the employee has no contractual right, this can bring a question mark over whether the employee becomes entitled to full pay when they’re sick. There is no set timeline but having paid is 3 times over 3 months (for example) may create an expectation to full pay in the future from that employee.   It could also  imply more favourable treatment over one member of staff which can result in staff fallouts/ grievances.
  • Time off for child care reasons should be unpaid, if employers decide to pay it you enter the same grey area of customer practise and the question of whether it should be paid every time?  Further, it can leave other members of staff who don’t have children feeling disgruntled that they are not being paid for time off.

Wages : Bonus and commission

Bonus and commission schemes ALWAYS lead to staff fall outs and it’s important to have a correctly drafted legal contract for each employee that is able to clearly identify how the bonus and commission scheme works. Or else you will be left with some or all for these questions:

  • When is commission paid?
  • What happens if the sale falls through?
  • How do you know who is responsible for that sale?
  • What if someone is off sick?
  • Do you pay commission in an employee’s notice period?
  • Is there a sliding scale of commission due to house price?
  • Is commission based on accepted offers or market price?
  • Do you pay commission if someone is facing disciplinary procedures?
  • Is it based on Net or Gross revenue?
  • Who has the final decision over disputes?
  • A bonus and commission scheme should have the right to vary to enable you to change the entitlement in the future.  If you don’t have the answers to all of the above written down then there’s scope for argument. Each individual commission scheme can be a different rate so long as it’s not based on a protected characteristic such as age.

Deduction of wages

An employer may want to make a deduction from wages for many reasons and often think they can do so if they have an express contractual right (see terms of contracts) or it is obliged by a statutory order.

In order to make a deduction from wages you either need:

i)  the employees consent at the time you want to make the deduction (in reality, why would an employee agree to this?), or

ii) previous written consent in the employment contract (legally drafted of course).

If the employee agrees to the contract on day 1 and the deduction clause is worded properly you can make deductions for lots of claw-backs, including but not limited to:

  • Parking fines
  • Damage to property
  • Damage to vehicles
  • Overpayment of commission (fall through sale)
  • Cost of unreturned property such as uniform, company phone
  • Discretionary sick pay where the absence wasn’t genuine

All deductions MUST be organised adequately on an itemised pay statement.

Round Up

Unfortunately we would like to say they are the only 5 things that could possibly go wrong by googling your own employees contracts but boy we were only scratching the surface! We can’t express enough the importance of making sure that your contracts are drafted by a legal professional.

Employment Law Solutions offer Employment Law advice and can assist with your contracts and handbooks. By offering a monthly retainer service you are able to benefit from legal advice and employment contract reviews 24/7, 365 days.   Your contracts and handbooks will be provided in month 1 but you can spread the cost over 12 monthly payments.

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