From April 2020 an obligation was placed on employers to issue a statement of main terms of employment (contract in lay terms) on the first day of employment. This carried some risk should a claim be made to a tribunal. Despite this, we are still aware that some businesses don’t issue contracts on the first day. However, we recently came across a case where this has actually led to additional costs for the business.
A client of ours dismissed somebody at the end of their probation as they were not suitable for the job. In the final pay packet they paid an additional amount for accrued untaken holiday (as they are required to do in law), but due to an admin error they mistakenly paid the full holiday entitlement of 5.6 weeks’ pay, when they only needed to pay 2 days.
Having discovered this they sought our advice as to how they could recover that money from somebody who no longer worked from them. It turned out that they had not issued a contract at all so the employee was not informed of the rules covering overpayments. This meant there was no contractual obligation on the employee to pay the money back. They are left with the option of seeking to suggest that this is a debt that the person owes the company through the county courts or accepting that that money is gone forever. The problem is they do not have a contract to show the court that the employee owes them money.
Terms in the contract of employment are there not only to advise the employee of how they are employed but also to give some protection to the employer when mistakes happen (and they inevitably do).