A Quick Tour of Our Employment Contract

We’ve been busy over the past couple of weeks working on a new employment contract with support from our HR consultant, Sue Pardy of Face2FaceHR.

Our mission as a social enterprise is to look at, ultimately, changing the way that the IT industry recruits. Every social enterprise has their own impact area or areas that they’re interested in, and ours is ostensibly around creating kinder and fairer working environments. We also have a 20 year plan – I’ve got a very clear idea in my head where I want the business to be by the time I retire, and both those things have collided to make the contract very important.

Specifically, we’ve needed to tune our employment contract in order to put our money where our mouth is. To couch this discussion, it’s important to realise four things. Firstly, we have a fixed bias to employees who are – at least when they join the business – significantly emotionally vulnerable. Secondly, that vulnerability leads to behaviours, thoughts, and actions that are very opaque in nature and difficult to detect. Thirdly, the employee is likely to have experienced significant emotional distress and ill-treatment personally and professionally because of that vulnerability. And fourthly, the most important one, is that in your own organisation you likely have employees that fit this description, which is why we’re opening up what we’ve done for debate.

What we’ve looked to do is adjust the standard employment contract approach to one that gives more power to the employee, and creates more tighter obligations on us as an employer. Although we’re slightly odd in being a social enterprise, I believe these are lessons that can be taken into any sort of business. Employment contracts have an inherent bias to the employer because, simply, the employer is structurally more powerful than the employee.

Starting off, we have a collective pay arrangement. What this means is that, a) everyone in the business sets everyone’s pay (actually done via a panel), and b) everyone can see what everyone is paid. The intent of this is to remove bias, whether intentional or accidental. The intent of this is to address gender bias in pay. In 2020, the mean gender pay gap within the UK was 6.5%. Our hope is that buy having collective pay and transparent pay, we can guarantee that we can eliminate any pay gaps, gender-based or otherwise, from the business.

We added six days annual leave and apportioned them to “duvet days”. Whilst we look to employ people who are vulnerable, every one of us leads complex, involved lives and from time-to-time it’s important to be empowered to just take a no-notice break from the pressures of work without having to fudge pretending to be unwell.

Getting family leave right for us was tricky because – frankly – we don’t want to be in a position of asking an employee which gender they are and that question is part and parcel of structuring family leave. (HMRC in particular has forms that ask for a binary gender.) We added a clause to say that we are committed to support the employee achieve the family leave that’s right for the individual employee.

In terms of sick pay, we removed clauses that create an obligation to the employee to recover costs from a third-party if that third-party caused the employee to be absent (and as such created a loss for us to cover sick pay, etc). The reason why we did this is that because we felt could harm the individual’s recovery. For example, imagine an employee who is in a serious car accident, is off work for a long period of time. It seems ludicrous to ask that employee to put time and energy into pushing their insurance company to recover costs from the third-party so that we as the business might be reimbursed – they should obviously be focusing on their own recovery for their own reasons, and solely that.

Linked into our collective pay arrangement, we removed any pension matching and agreed a fixed contribution. The rationale here was that one member of staff may be able to pay more into their pension because they, for example, don’t pay childcare costs, and their colleague on the same salary may not be able to pay as much into their pension because they do have to cover childcare costs. Flexible employer matching effectively allows employees to draw different flows of money from the business, and this could give rise to structural, “pay gap”-type bias – as such, we don’t allow it.

We changed the training and development clauses to clearly state that we would never seek to recover costs from employees who had received training and development. This can set-up anxiety about money and thus either stopping an employee from engaging in training and development, or creating difficult situations for employees who have engaged but feel they are accruing a debt they may have to pay back. We clearly state in our contract that under no circumstances will we seek to recover training and development costs.

Our notice period is bilateral from day one – it’s one month notice to the employee, or one month’s notice from the employee. It also doesn’t increase to ensure that the employee has maximum freedom to move on when they feel the time is right for them to do so. (Plus making someone work out a three month notice period when just desperately want to get out of the business risks creating toxicity.)

The next two points I suspect are controversial.

We removed all restrictive covenants. One reason for doing so is that anyone who would break a restrictive covenant would do so regardless of whether they’d signed an agreement that they would not. (We’ve all seen salespeople bring their contact list with them from their old employer when they join a new one – trying to stop people doing this is like pushing water uphill.)

The other reason for doing this is that these causes enable bullying. Imaging an employee who has to leave a company because they are being bullied – restrictive covenants allow bullying behaviour to exist after the end of an employment contract because it creates a mechanism by which the perpetrator can keep their “claws” into the victim, especially if the perpetrator is the business owner or senior within the business.

For example, that bullied employee sets up their own business, only to find the perpetrator/ex-employer/business owner makes an application to the court to injunct them from operating that business. It risks allowing a power balance to persist, and also risks stopping an employee from earning a living to support themselves and their family, so we removed it.

The last set of clauses we removed were about conflict of interest in terms of other employment. This treads, for us, into tricky areas about privacy and control. Any contract is meaningless without enforcement, and enforcement cannot happen without discovering information – how do you know if an employee has taken a second job that involves “contact with suppliers, clients, or potential clients”, without asking them and/or making them feel like they have to tell you?

To us, that’s an obvious breach of privacy, because what an employee does when they’re not actively doing a job for us isn’t any of our business. Yes, it would be obviously inappropriate (and more than a bit frustrating, to be honest) for a member of staff to work a second job for a direct competitor – we assume the people who work for us are first and foremost sensible.

I would love to hear from you if you have any thoughts about how employment contracts can be moulded to give more power to employees and bind employers into tougher commitments – do get in touch over email or at LinkedIn.

By Matthew Reynolds