Do we really need employment contracts and policies?

Or perhaps the question should be: “Do these contracts and policies need to be so complicated? and who should draft them? HR or legal?” I have had several conversations recently (and more regularly) fuelling the ongoing debate about the best way to approach employment contracts and policies. It’s a hot topic these days, and I’m sure you’ve heard the arguments, but I’ll recap just in case you haven’t.

The main issue is that many people say that employment contracts (and policies) are too long, or too complicated, or they cover things that don’t need to be covered and employees don’t read them. Many of those observations are justified, but there is more to it than that.

Typically, on one side of the heated debate, are progressively inclined HR professionals, and business leaders, who feel that employment contracts are too long and complicated. They suggest that you can cover the legal requirements (and yes there is a legal requirement to provide basic written terms of employment to employees) using far less text, and that wordy legalistic contracts get in the way of the culture of the organisation.

On the other side of the debate, are the lawyers drafting intricate contracts and policies with the intention of protecting their employer clients against pretty much every conceivable risk. While employees derive their rights from legislation, employers need to rely on the contracts… so the more detailed the contract, the better the legal protection for the employer.

The client is often somewhere in the middle. They may have a strong preference for one approach over the other, but more often they are faced with two contradictory professional viewpoints on what is the best approach to drafting their contracts and policies. When both of these opinions come from experienced professionals… how can they hope to know who is right?

Well, they are both right, and the decision over what your business needs comes down to your own perspective and objectives.

Employers are constantly being told to think about their brand and style; to identify and communicate their “purpose”; and to focus on their “culture”, which is all good stuff.

Some employers want to be funky and progressive, or “people-centric”, or simply not tied up in bureaucracy and red-tape. So, in the interests of living their brand, they want to overhaul their contracts and policies to make them simple and easy to read, while still covering the basic minimum legal requirements. They can do this, having faith in their culture, on the basis that they will rely on trust, communication and good management to lessen the legal risk.

But here’s the thing – Trust, communication and good management are not always found where you want them to be.

As lawyers, we constantly see the aftermath of such misplaced faith. As a result, lawyers will always tend to fall back on a massive raft of legalistic policies and contracts, because… guess what… they protect your business.

Lawyers are sometimes then accused of over-engineering the solution, by drafting a fifteen-page contract when a five-page contract would do. And so the debate rages on.

Now, there are occasions when some lawyers can be fairly accused of over-engineering solutions. It has been known to happen. But this is not one of those situations.

The reality is that it will be quicker and more cost-effective for a lawyer to produce a longer and more detailed employment contract or policy. This is because they will start from a tried, tested and updated precedent document, based on standardised and generally accepted principles.

The more you want to take out of that contract to cut down the size, and move away from that relatively standard starting position, then the more risk-based advice a lawyer will need to give to make you aware of the protection you are giving up. This will take them time, and cost you money.

So, if you want a short and funky employment contract, and you want it to be produced cheaply, then don’t ask a lawyer to produce it.

An HR consultant may well be able to provide you with a contract (or policy) that ticks those boxes, but don’t expect to be fully protected against legal risks; or to be advised fully on the legal risks you are taking by leaving things out.

If, on the other hand, you want contracts and policies that give you the best possible legal protection, and you aren’t worried about your organisational culture and brand being reflected in these documents, then a lawyer is the right person to draft them for you (but still don’t expect it to be cheap).

Of course, there are free resources available, which will give you neither of these things, but will ensure that you comply with minimum legal requirements.

If you want the best of best of both worlds, then that is a huge project. The solution will involve both HR and legal professionals, and possibly also branding and marketing consultants. It needs to be a solution that is bespoke to your business, otherwise it just won’t work.

Such a project would typically flow as follows:

  1. Style guidelines are set (e.g. by branding consultant).
  2. HR produce the initial draft policies and contracts.
  3. Lawyers review and advise on gaps and risks, and suggest improvements.
  4. Followed by various cycles including all of the above to create documents that meet the right balance of cultural fit and legal protection.

Then, you must do all the hard work around culture and good management to make sure that your chosen approach is properly implemented and adhered to. This is essential to manage the risk in areas where you are not contractually protected.

Anyone who tells you that there is a right or wrong way to approach this issue, is wrong. It’s all about your business’ self-awareness and what you are trying to achieve. How important are these various opposing factors to your business?

So, ask yourself, are you following the trend because it’s the progressive thing to do? or are you really ready to invest in doing something differently, properly? Are you relaxed about taking the legal risk and not protecting the business? Or would you rather have strong legal protection, even if it isn’t fashionable at the moment?

In the end, these are all your choices to make. You just need to make sure you make the right choice for you.


The content of this article is not intended to be specific legal advice.  If you require any assistance in relation to this area of law, please contact Matt Huddleson.