The usual rounds of bonuses and promotions are coming up in the new year. Is there anything I should consider from an employment contract perspective in conjunction with this?
Good question! It is great that you are thinking ahead. It is worth using this opportunity to take stock and do some house-keeping.
Changing contractual terms
Now is the time to consider whether you need to update contracts and/or make changes. Things like reducing the level of benefits or introducing mobility clauses are best done in conjunction with a promotion or bonus. This acts as an incentive for employees to sign up to a new contract particularly if you make the promotion/bonus conditional upon its signature. Click here for more details regarding the making of contractual changes.
You might wish to update contracts to reflect recent changes to legislation and case law, such as the recent cases, which have indicated that notice periods can be enforced against employees. In relation to this development in the case law, we would suggest an express clause allowing an employee to be given different duties during their notice period (such as not being able to contact clients and effecting a handover).
Check whether there are any employees in relation to whom you do not have a signed employment contract on file. Again – now is the time to ensure that they sign up as you can make the bonus/pay-rise conditional upon them doing so.
Promotion and bonus time is also great for making sure that your Company is protected by appropriate post-termination restrictions. There are a number of reasons for this:
If you are trying to introduce or up-date an employee’s restrictions, without “consideration” from the employer, which broadly means “something in return” (e.g. a pay-rise, bonus or promotion) those restrictions will not be enforceable. This was the issue in a recent case: Re-Use Collections Ltd v Sendall & Anor. In this case, Mr Sendall had worked for Re-Use (a glass recycling business) for some time. He had no written contract of employment, and no post-termination restrictions. After some time he was asked to sign a new contract of employment which included a number of post-termination restrictions. The High Court found that the restrictions were unenforceable since Mr Sendall had not received “some real monetary or other benefit” for the change in his contractual terms.
As a consequence, the best time to introduce such post-termination restrictions are when you are already providing a bonus, pay-rise or promotion, all of which can be expressed to be “consideration”.
There are a number reasons for considering restrictions on promotion:
Please let us know if you need help drafting enforceable restrictions.
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